Logo of Phnom Penh Post newspaper Phnom Penh Post - Gov’t approves credit guarantee unit to boost business loans in key sectors

Gov’t approves credit guarantee unit to boost business loans in key sectors

Content image - Phnom Penh Post
The CGCC would be under the Ministry of Economy and Finance and is set to be launched with $200 million in registered capital from the government. Heng Chivoan

Gov’t approves credit guarantee unit to boost business loans in key sectors

The government has approved the establishment of the Credit Guarantee Corporation of Cambodia (CGCC) in a bid to provide more funds and salvage businesses in key priority sectors.

According to a sub-decree that was signed by Prime Minister Hun Sen on September 1 and released to the public on Saturday, the CGCC will provide loans “in a professional manner” to tackle challenges in the lending market and promote financial inclusion.

“The CGCC will be tasked with providing credit services, evaluating and managing risks, cooperating with banks and financial institutions and development partners that also provide credit services, et cetera,” read the sub-decree.

It noted that the CGCC would be under the Ministry of Economy and Finance and is set to be launched with $200 million in registered capital from the government.

Ministry spokesman Meas Soksensan told The Post that the CGCC will be a vital tool in propping up businesses that seek funds from financial institutions which are guaranteed by the government through the initiative.

“The government will help bear risk-sharing with businesses to encourage the financial sector to disburse more loans,” he said.

Shin Chang-moo, the president of South Korea-owned Phnom Penh Commercial Bank Plc (PPCBank), recently told The Post that the ministry has been sharing ideas and seeking input from lending institutions on “credit guarantee” initiatives at several hearing sessions.

He said credit guarantee schemes (CGS) have been a popular means to ease funding hurdles for small and medium-sized enterprises (SMEs) in many countries.

In South Korea, the government has been running a partial 90 per cent CGS for SMEs damaged by Covid-19, he added.

“PPCBank has been also deploying a partial guarantee scheme called ‘Risk Sharing Facility’ since 2019 under the sponsorship of the [World Bank Group member] International Finance Corporation.

“The ministry’s CGS will help SMEs access credit that is limited due to a lack of collateral and mitigate risk of credit loss for lenders.

In the longer term, lenders should develop credit-assessment skills based more on business and financial feasibilities than collateral value to minimise avoidable loss from loans. Otherwise, CGSs won’t be a sustainable solution for SME financing promotion,” Shin said.

According to Shin, PPCBank’s loan portfolio grew more than five per cent from the beginning of the year and continues to disburse loans.

“I believe CGS will ease the dilemma of lenders between public and private value propositions,” he said.

The sub-decree said that additional funding for the CGCC will be provided by the government based on necessity and will come from, inter alia, the operation’s profits, development partners and the private sector, bond issuances and loans.

The tourism sector was the worst affected of all major economic sectors as international arrivals took a sharp 55 per cent plunge in the first half of this year on a yearly basis, the National Bank of Cambodia said in its Semi-Annual Report 2020 released on July 8.

The manufacturing sector also shrunk by 11 per cent year-on-year due to disruptions tightening basic raw material supply, it said.

MOST VIEWED

  • ‘Education’ a priority traffic-law penalty

    A top National Police official on June 21 neither rejected nor confirmed the authenticity of a leaked audio message, which has gone viral on social media, on a waiver of fines for a number of road traffic-related offences. General Him Yan, deputy National Police chief in

  • Siem Reap’s $18M zoo said to educate public, help wildlife

    Angkor Wildlife and Aquarium Co Ltd has invested $18 million in a zoo in Siem Reap province, which will be opened in October to educate and promote animal conservation as well as attract national and international tourists. Currently, the Angkor Wildlife and Aquarium is building the

  • Volunteer scheme to foster ‘virtuous’ humanitarian spirit

    A senior education official said volunteer work contributes to solidarity and promotes a virtuous humanitarian spirit among the youth and communities. Serei Chumneas, undersecretary of state at the Ministry of Education, Youth and Sport, made the comment during the opening of a training programme called “

  • Chinese firms unveil preliminary results on metro, monorail for capital

    Minister of Public Works and Transport Sun Chanthol and representatives from China Road and Bridge Corp (CRBC) and its parent company, the state-owned China Communications Construction Co Ltd (CCCC), met on June 24 for talks on results of the firms’ preliminary study on a potential metro

  • Nestle’s debut may spur dairy market

    Leading confectionery manufacturer Nestle plans to invest in Cambodia by setting up an operation in the near future, a move majorly hailed by local dairy farmers as a means of boosting the fresh milk market in the Kingdom. During a visit by a delegation led

  • ACLEDA, WU to enable global money transfers

    Cambodia's largest commercial bank by total assets ACLEDA Bank Plc and global money transfer firm Western Union (WU) have partnered to offer customers cross-border money transfers to 200 countries via “ACLEDA mobile” app. In Channy, president and group managing director of ACLEDA, said the June 22 agreement