Low income households are faced with various types of risks increasing their vulnerability to
poverty. In Cambodia conditions of the rural poor - with the majority engaged in agriculture -
are characterized by low productivity limited capacities in terms of land and assets volatile
income sources fluctuating farm input and output prices debt and lack of credit worthiness. A
microfinance institution operating in rural Cambodia and aiming to offer financial products to
a large number of poor households is Angkor Mikroheranhvatho Kampuchea (AMK) Co. Ltd. Through
its internal Market and Social Research Department AMK staff annually collects socio-economic
information about selected loan clients (household profiles cash-flow analysis) as well as
non-clients as a control group. Their survey tool includes questions about household s food
consumption main risk sources and coping strategies. The present research study draws
information from this AMK survey database. The measures taken are applied to socio-economic
cross-sectional data as of 2006 07 and validated with panel data from 2008. A theoretical
framework is developed to examine the mechanisms through which the effects of the AMK services
on its clients influence the household s ability to manage risk. It includes measurement
aspects of a forward-looking concept of vulnerability to identify and capture its linkages to
risks shocks and risk strategies of rural households. Secondly it incorporates the dynamic
aspects of poverty by looking at temporal changes in absolute poverty levels. Moreover it
seeks to identify gaps and opportunities of microfinance services as a risk management strategy
to reduce vulnerability. The results show that the fraction of vulnerable households (85%)
facing a risk of poverty is considerably greater than what the static poverty assessment
suggests. Results further show that the majority of the sample households are poor (72%) as of
2006 and 2007. Among the non-clients the figure is substantially lower with 58% poor households
whereas 75% of the AMK microfinance clients fall below the poverty line. This particular
confirms the intended outreach targets of AMK. Furthermore it could be ascertained that those
clients who remained clients could significantly accumulate assets and became less dependent on
agricultural activities. This is a good indication that AMK clients have safety nets and more
strategic possibilities in case of future shocks.
