Financial Empowerment in Cambodia: Unveiling the Benefits of Responsible Wage Digitalization in the Garment Industry

“Digitizing wages can take time but the benefits for both business and workers are clear. Ensuring factory managers understand the gains from digitizing wages and making sure workers are well supported and receive the right training through the process is crucial.”

Sokha Yun | Senior Specialist Corporate Social Responsibility at Carter's Inc.

As Cambodia continues to embrace the move to a digital economy, wage payment is switching rapidly from cash to digital. For example, in Cambodia’s garment sector, 5 years ago, it was estimated that only 22% of factories paid digital wages, compared to 72% today (Better Factories Cambodia). This is more efficient, more convenient and brings large numbers of unbanked workers into the formal financial system.

RISE and Mastercard Center for Inclusive Growth have been supporting and scaling wage digitalization, that considers the needs of women, in the garment sector in Cambodia since 2019. Through the partnership, 17 garment factories, with over 25,000 workers (85% women), supplying to RISE members have been supported to transition from cash to digital wages, considering the needs of women workers. Workers received training to increase technical knowledge and confidence to use a range of financial products and services. They were also trained on money management skills including planning, budgeting, saving and financial decision making with families. The results show clear benefits to both employers and workers.

Employers are increasing payroll efficiency and saving production time

Following the transition from cash to digital wages, employers reported an 84 percent reduction in payroll admin costs, estimated to be a saving of USD 16,000 a year. The digital payroll also addresses the risk of having to transport and count significant amounts of cash on premises, twice a month on payday.

In addition, workers no longer need to leave the production line to collect their wages, which was estimated to take around 17 minutes per pay day. For an average factory of 1500 workers, this represents a saving of around 850 hours of production time every month.

“When it became mandatory to pay wages to workers twice a month, our admin time on payroll increased significantly. Now we have digitized our payroll it is much faster. We save 2-3 days a month that we would have spent on payroll admin and workers are now saving, buying goods online, transferring money, paying bills and buying insurance for the future of their children.”

Khin Chomnab, Compliance Officer, Sun Hsu

Workers are developing confidence in using financial products and services and managing their money better

Women and men workers reported increased access and usage of financial products and services and improved management of their expenses after the financial capability training. Most workers said they used their account to pay for goods and paying friends or family members.

“I prefer to be paid into an account [than cash wages]. It’s safer and more convenient. I can cash out whenever, pay bills online and top up airtime. I use a QR code to pay merchants. I used to keep my savings [in cash] at home in a cabinet. Now I would keep my savings in a savings account.”

Kam, Garment Worker, Phnom Penh

Workers are now planning for their financial future with their families. The programme has seen significant increases in workers reporting saving regularly, which correlates with workers having a bank account, and being able to keep monies safe. This is especially significant given the high levels of indebtedness in Cambodia.

A higher percentage of women reported making spending decisions with their family following the programme which is very positive given traditional patriarchal gender norms in Cambodia.

What support is needed to scale progress on responsible wage digitalization?

Multistakeholder collaboration that considers the needs of women is key to supporting the scale-up of responsible wage digitalization in Cambodia. Based on learning from five years of financial health programs, RISE has identified the following key considerations:

• Use the RISE Digital Wages Toolkit for Managers for advice on how to set up the factory for digital payroll, prepare your workforce for digitalization and coordinate payday and beyond.
• Promote responsible wage digitalization that considers the needs of women workers: provide support and incentives to encourage factories to digitalize payroll, including reaching non-brand facing factories. This needs to include advice on planning, preparing and delivering the transition from cash to digital wages, in a way that considers the needs of women workers.
• Provide gender responsive financial capability training for workers: The transition to digital wages needs to include gender responsive technical training to enable women and men workers to safely and confidently access and use a range of financial products and services. Take the opportunity to include training on financial planning, budgeting, saving and decision making to enable women and men workers to improve their money management skills and financial resilience. This will increase acceptance of digital payroll accounts by workers, a key part of the transition from cash to digital wages.
• Develop the financial ecosystem to increase opportunities to reduce the reliance on cash. Increasing opportunities to use digital payments will support the commercial viability of payroll accounts. Developing use cases for relevant, affordable and accessible financial products such as merchant payments, money transfers and saving products to increase active usage of accounts. Workers already have high levels of indebtedness so credit or loan products should be carefully considered to avoid exacerbating this.

To find out more about RISE Financial Health and supporting the garment sector in Cambodia to transition from cash to digital wages please contact us.