Local microfinance institution (MFI) First Finance Plc has reportedly found backers for its plans to extend access to affordable housing finance to low- or middle-income borrowers.

The MFI has received an approximately $7 million debt financing package from Mauritius-based GuarantCo Ltd, a member of the London-headquartered Private Infrastructure Development Group (PIDG), and the US’ Cargill Financial Services International Inc (“CFSI”), GuarantCo noted in a statement dated just “December, 2022”.

“This is GuarantCo’s first transaction in Cambodia and marks the debut social loan in Cambodia. First Finance has committed to ensuring the use of proceeds will be administered in line with its Social Financing Framework based on the Loan Market Association’s Social Loan Principles on which Moody’s provided a Second Party Opinion [SPO],” the statement said.

GuarantCo CEO Layth al-Falaki voiced confidence in First Finance’s plans to provide the Kingdom’s low- and middle-income households with affordable housing finance, and hinted that his company and CFSI would consider extending similar financing solutions to other financial institutions in the future.

“We are excited to have closed our first transaction in Cambodia and to support First Finance’s provision of affordable housing finance to low- and middle-income households in the country.

“We hope that this innovative transaction, will increase familiarity with loan guarantees and longer-term debt solutions for Cambodia, and ultimately lead to a greater willingness to extend debt financing to similar institutions, thereby further developing the local capital markets in Cambodia,” the statement quoted him as saying.

First Finance CEO Sim Senacheert said in the statement: “This loan guarantee not only demonstrates First Finance’s ability to expand its operations responding to market needs but also reveals the credibility and trustworthiness that we have established with members of the public, and local and international investors.

“First Finance is committed to utilising GuarantCo’s loan guarantee to provide financing for affordable housing to around 470 low- and middle-income households in Cambodia to improve the quality of their livelihood.

“The stability of homeownership allows a family to live in a more hygienic and healthier condition so that they can spend time and energy on other aspects of their lives. It allows children to have access to clean water and sanitation in order to remain healthy and [be] able to study whilst women can start their own business or job,” he said.

The statement added that the transaction “is expected to support around 470 new loans targeted mainly to low- and middle-income households” and “enable First Finance to access their first-ever longer-term financing with a seven-year tenor, on a scale and at a lower cost of funding than would otherwise have been the case without GuarantCo’s involvement”.

It noted that the overall size of the facility could be increased to around $22 million “over the next two years”, “subject to certain criteria including market conditions”.

By some estimates, some 7.9 million people will be living in urban areas by 2030, up roughly five-sixths from 4.3 million in 2014. To this end, officials in June 2017 announced ambitious plans to meet the demand for some 55,000 affordable new homes each year.

At the time, Minister of Land Management, Urban Planning and Construction Chea Sophara predicted that, by 2030, an estimated 800,000 urban homes will need to be added to the 2015 housing stock to meet the demand of an expected national population of 19 million.