The state-owned Small and Medium Enterprise Bank of Cambodia Plc (SME Bank) plans to waive collateral requirements for new loans to qualifying local small- and medium-sized enterprises (SME) soon, to reduce the barriers and obstacles that limit their access to the necessary cash to fund business development and growth, according to its CEO.
Lim Aun was speaking at the 8th Annual Macroeconomic Conference on “Challenges and Policy Options for SMEs Development in Cambodia” hosted by the National Bank of Cambodia (NBC) on December 22.
He noted that unsecured loans, or those that don’t require any form of collateral, are fairly uncommon on the Cambodian market, and that “most banks” simply don’t offer them.
A council under SME Bank has recommended a feasibility study on non-collateral lending be carried out, he said.
He underlined that a working group was taking preliminary steps and that the state-owned lender would “study all the conditions” that would enable it to provide unsecured loans to SMEs “as soon as possible”.
He also pointed out that the government recently set up Credit Guarantee Corporation of Cambodia Plc (CGCC) to shore up SMEs that struggle to secure loans due to a lack of adequate collateral.
Lor Sathya, deputy director-general of the General Department of Small and Medium Enterprises and Handicraft under the Ministry of Industry, Science, Technology and Innovation, highlighted that the Covid-19 crisis has severely affected SMEs, especially those in tourism and manufacturing.
“Upgrading the quality of products on the market is an essential objective that SMEs themselves must intently fixate on, and build up human resources and other capacities, research and pursue additional information, to develop their businesses,” he said.
NBC assistant governor Chea Serey stressed that Cambodian SMEs are juggling a host of challenges in running their businesses, which pose major obstacles to sustainable development.
“These challenges include a lack of management skills and skilled labour, a lack of capital and access to official finance, a lack of market-related information at domestic and international levels, competition from large enterprises and from goods imports,” she said.
Given that most of the SMEs hardest hit by the Covid-driven economic downturn were in the informal sector, managing data to formulate policies that optimally support SME development has been a gruelling task for the government, she shared.
“The Covid-19 crisis had accelerated changes in the economic structure and modes of communication, including the increasingly pervasive use of technology in production and trade, which requires SMEs to strengthen their technological capabilities to respond to the new situation,” Serey said.
In October, the industry ministry launched the KhmerSME website to provide micro-, small- and medium-sized enterprises (MSME) access to comprehensive business information, as well as ASEAN and global markets.
This covers a wide range of topics such as laws and regulations; technical training; science, technology, and innovation transfer; access to finance and markets; starting a business; and incentives and mechanisms to cultivate more strategic, environmentally-friendly and inclusive business practices, boost efficiency and create a competitive advantage.
The Ministry of Economy and Finance recently announced that the government has set aside $250 million for direct loans from SME Bank and the Agricultural and Rural Development Bank of Cambodia (ARDB) next year, to support SMEs.