New fund set to enhance SMEs’ access to finance
Cambodia’s government is allocating $50 million to support small and medium-sized enterprises (SMEs) in the agricultural sector. The funds can be accessed in the form of low-interest loans through the state-owned Rural Development Bank (RDB).
The initiative was revealed on Monday by Prime Minister Hun Sen, who said the goal is to increase the production capacity of local companies and make them more competitive on the international market. “Our agricultural products are not able to compete with those of our neighbours, particularly Vietnam and Thailand, due to high costs. The Rural Development Bank will now be providing low-interest loans to SMEs, particularly those in the vegetable, husbandry and fishing sub-sectors,” he said
Cambodia Chamber of Commerce vice-president Lim Heng said that the new fund is important because many SMEs have limited access to finance. “It is a good move, but we are still waiting to find out what the interest rate will likely be and what the collateral requirements will be,” he said.
An International Finance Corporation report released in August said Cambodia’s female entrepreneurs continue to struggle with limited access to finance for business expansion. Only three per cent have access to credit from microfinance institutions and banks. The report estimates that the unmet demand for credit from women entrepreneurs is currently $4.2 billion – equivalent to almost 63 per cent of Cambodia’s $6.7 billion national budget for 2019. A survey by the Ministry of Industry of 71 enterprises in the Kingdom found they needed assistance in market research, service development, packaging, technology adoption, human resources, access to labour, access to finance, business registration, taxation and improving hygiene standards.
Prime Minister Hun Sen also called on SMEs to boost products to supply the domestic market and reduce the need to import finished products. He said the government is working to help the SME sector because it considers the sector to be the backbone driving economic growth in the Kingdom. “The government aims to convert small and medium enterprises as a catalyst force to drive economic growth, generate more jobs for Cambodians and produce more goods to replace the need to import finished goods,” Mr Hun Sen said.
In line with the call, the state-owned SME Bank is scheduled to begin operation this year, giving financial services to SMEs to expand their businesses. The bank is designed to facilitate low-interest loans for SME’s in agricultural processing and food processing. Mr Hun Sen also called upon the state-run Rural Development Bank, commercial banks and microfinance institutions to provide loans to SMEs in the sectors of manufacturing and handicraft.
Data from the Ministry of Industry and Handicraft shows that there are about half a million SMEs in Cambodia, but only 5 percent of them are registered with the ministry. Minister of Industry and Handicraft Cham Prasidh told Khmer Times in late January that the ministry is working to encourage those who run informal SMEs to register and become formal. This will allow these businesses to benefit from the government’s support programme and help SMEs, including through financial services.
Te Taing Por, president of the Federation of the Association of Small and Medium Enterprises of Cambodia, could not be reached for comment yesterday. In previous discussions, he urged the improvement local production, which he said now has been improved in terms of quality, and the modernisation of production chains. He said that local products are now competitive compared with imported products.