Logo of Phnom Penh Post newspaper Phnom Penh Post - Tourism loans take off, but all not rosy

Tourism loans take off, but all not rosy

Content image - Phnom Penh Post
Tourists on a boat trip on the Tonle Sap River in front of the Royal Palace in January. Hong Menea

Tourism loans take off, but all not rosy

A total of 19 tourism-affiliated businesses have received approval for loans under the $150 million Tourism Recovery Co-Financing Scheme (TRCS), the CEO of state-owned Small and Medium Enterprise Bank of Cambodia Plc (SME Bank) said on July 20.

However, many tourism-related businesses are calling on participating commercial banks to ease their conditions for loans under the scheme.

The TRCS was rolled out on May 17 to provide a lifeline for businesses involved in the tourism value chain that are deemed to have been significantly impacted by the Covid-19 crisis, and is currently implemented with the support of 19 participating financial institutions (PFI). The scheme’s lending rules and procedures were officially established on July 1, opening the door for loan applications.

The scheme was financed by a counterpart fund between the government and financial institutions, with $75 million of the national budget to be disbursed in the form of loans issued by SME Bank, and the other $75 million through loans made via the PFIs, which comprise commercial banks and microfinance institutions (MFI).

Key offerings of the TRCS include a maximum interest rate of 6.5 per cent per annum, a 16-month grace period on principal payments, loan term of up to seven years, loan amount of up to $400,000, and the option of receiving funds in either riel or US dollars, according to a July 1 notification letter addressed to tourism industry bodies and business owners in Cambodia.

SME Bank CEO Lim Aun told The Post that 21 business owners applied for loans under the TRCS from July 1-19, but that only 19 were approved for the equivalent of $3.9 million. The other two were rejected on the grounds that the purpose of the loans did not align with the objectives of the scheme, he said.

The July 1 letter had said that loans under the TRCS are “for the purpose of restoring business operations, or expansions or diversification of tourism services, to be ready to receive national and international tourists”.

Aun commented that the TRCS was set up in consideration that the current state of tourism has earned the sector the classification of “high-risk”, but acknowledged that banks would not easily depart from standard practices for loan approvals.

“We’ve advised SME Bank’s partner banks to find middle ground when it comes to the credit approval process for customers. However, they continue to adhere to internal policies that push for higher-quality loans, as [PFIs] have also set aside a $75 million counterpart fund to the $150 million financing scheme,” he explained.

Nonetheless, he added, SME Bank is keen to hear the opinions and challenges of tourism insiders, to discuss with the Ministry of Economy and Finance and PFIs, and hopefully make it easier for owners and operators to get the funds they need to restore their troubled businesses.

Citing people in the tourism trade, Thourn Sinan, chairman of IMCT Co Ltd and Pacific Asia Travel Association Cambodia chapter (PATACC), affirmed that there were discrepancies between the commercial bank PFIs’ actions and the words of the finance ministry and SME Bank.

Some operators are only able to access loans from commercial banks under the TRCS if they can show that business activity is at a desired level and can get other businesses to act as guarantors for the credit, he claimed.

“Such requirements differ from the idea of ‘lending to help revive the tourism sector’. Due to the Covid-19 crisis, tourism businesses cannot be as busy as they had been before. As we all know, before providing a loan, banks will only accept collateral that is worth more than the credit. This poses an obstacle for us as operators,” Sinan said.

According to the SME Bank CEO, the 19 PFIs have earmarked an exact total of $98.75 million, exceeding the allotted $75 million for the scheme.

The Ministry of Tourism listed the 19 current PFIs as Chip Mong Commercial Bank Plc, Hattha Bank Plc, ACLEDA Bank Plc, Advanced Bank of Asia Ltd (ABA), Sathapana Bank Plc, Cambodia Post Bank Plc (CP Bank), Wing Bank (Cambodia) Plc, Prince Bank Plc, Canadia Bank Plc, Phillip Bank Plc, Asia-Pacific Development Bank Plc (APD Bank), Phnom Penh Commercial Bank Plc, CIMB Bank Plc, Saigon Thuong Tin Bank (Cambodia) Plc (Sacombank Cambodia), RHB Bank (Cambodia) Plc, Foreign Trade Bank of Cambodia (FTB), LOLC (Cambodia) Plc, Prasac Microfinance Institution Plc and CAMMA Microfinance Ltd.

MOST VIEWED

  • Angkor lifetime pass, special Siem Reap travel offers planned

    The Ministry of Tourism plans to introduce a convenient, single lifetime pass for foreign travellers to visit Angkor Archaeological Park and potentially other areas. The move is designed to stimulate tourism to the culturally rich province of Siem Reap as the start of the “Visit

  • Ice cream, noodles flagged over carcinogen

    The General Department of Customs and Excise of Cambodia (GDCE) has identified three types of instant noodles and ice cream trademarks originating from Thailand, Vietnam and France that are suspected to contain ethylene oxide, which poses a cancer risk to consumers. The general department has

  • Exclusive interview with Josep Borrell Fontelles, High Representative of the EU

    CAMBODIA is hosting the 55th ASEAN Foreign Ministers’ Meeting (AMM) and Related Meetings this week with top officials from the US, China, and Russia and other countries in the region slated to attend and to meet with face-to-face with their counterparts on the sidelines. In

  • Rise in Thai air routes to Siem Reap fuels travel hopes

    Local tourism industry players are eager for regional airline Bangkok Airways Pcl’s resumption of direct flight services between the Thai capital and Siem Reap town on August 1 – home of Cambodia’s awe-inspiring Angkor Archaeological Park – which is expected to boost the growth rate of

  • ASEAN Foreign Ministers’ meet commences, Taiwan issue possibly on table

    The 55th ASEAN Foreign Ministers’ Meeting (AMM) and related meetings hosted by Cambodia kicks off in Phnom Penh on August 3, with progress, challenges, and the way forward for the ASEAN Community-building on the table. Issues on Taiwan, sparked by the visit of US House Speaker

  • Recap of this year’s ASEAN FM meet and look ahead

    This year’s edition of the ASEAN Foreign Ministers’ Meeting (AMM) hosted by Cambodia comes against the backdrop of heightened global tensions and increasing rivalry between major powers that have been compared to the animosity of the Cold War era. The following is The Post’