The government has set aside $250 million for direct loans from two state-owned banks next year, to assist local small- and medium-sized enterprises (SME) in navigating through the “new normal”, according to Ministry of Economy and Finance secretary of state Phan Phalla.
These are the Small and Medium Enterprise Bank of Cambodia Plc (SME Bank) and the Agricultural and Rural Development Bank of Cambodia (ARDB).
Speaking at a press conference at the Council of Ministers, or Cabinet on December 14, Phalla noted that the two banks, along with other financial institutions, have supported a tonne of smaller businesses with loans at competitive interest rates, through two phases of the SME Co-Financing Scheme (SCFS) of SME Bank.
He said Phase II was launched earlier this year, following the successful subscription of the first phase that was rolled out last year, each of which was backed by a $50 million fund from SME Bank.
“[SCFS] has facilitated a lot of conditions for them [SMEs] to get these loans, because we know that they have been facing a lot of difficulties for more than a year.
“But the financing is not a gift without a repayment requirement, although we will do our best to facilitate the conditions to help the sector,” Phalla said.
Federation of Associations for Small and Medium Enterprises of Cambodia (Fasmec) president Te Taingpor said the $250 million would be a vital source of capital to prop up local SMEs, and could potentially cushion the private sector against Covid blows.
He said loans under the scheme would carry an interest rate of 6.5 per cent for SMEs in seven priority sectors, and 7.5 per cent for those in other areas, although Phalla notes that women-owned SMEs may receive a lower rate of 5.5 per cent.
Taingpor said that despite government efforts to provide cash-strapped SMEs with capital, business owners continue to report issues in the loan application process, chief of which is an inability to meet the requirements.
“Sometimes SMEs lose out on credit supply due to delays in repayment – some have unpaid debts or insufficient income, or lack clear financial statements, so they cannot get loans,” he said.
He also claimed that lending is also often not transparent.
“Banks should also provide fair loans, and avoid handing them out only to their cliques, as is sometimes the case.”
Similarly, the locally-owned Acleda Bank Plc, the Kingdom’s largest bank in terms of assets, has reserved a $79 million fund to support the growth of SMEs, president and group managing director In Channy recently told The Post.
Channy underscored that the fund will allow local SMEs to fuel economic activity for the upcoming year, as the Kingdom emerges from the Covid-19 pandemic.
“These strong growth [indicators] are more than enough to support short-term loan growth for small enterprises. Normally [SMEs] need longer-term” loans with three-to-five-year maturities, he said.
“As usual, Acleda Bank always plans ahead. To meet the long-term funding need for 2022 and the following years, and to support the need[s] of SMEs, Acleda Bank mobilises both domestic and international funds,” Channy said.