The Ministry of Economy and Finance (MEF) and Credit Guarantee Corporation of Cambodia Plc (CGCC) are encouraging banks and microfinance institutions (MFI) to use credit guarantee mechanisms to boost financial inclusion and help expand small- and medium-sized enterprises (SME) by issuing loans to businesses that lack collateral.

In an August 18 workshop on the potential of credit guarantee projects to enhance financial inclusion for SMEs in Cambodia, MEF secretary of state Ros Seilava, who is also CGCC chairman, touched on a business recovery guarantee scheme (BRGC) that was launched by the government via CGCC in March last year.

As of July 2022, the scheme, which has been running for more than a year, has supported the issuance of about $57 million new loans to businesses or companies that lack collateral through participating financial institutions.

Although $57 million might seem like a small amount, he said it was the beginning of a change in lending habits without relying on collateral in Cambodia’s credit market.

Not only in Cambodia, Seilava said credit guarantee mechanisms are an intervention policy tool used to support financing in economies in countries around the world.

“I hope that the National Bank of Cambodia [NBC] will set out a relevant regulatory framework and policy to drive and encourage banks and MFIs to use credit guarantee mechanisms to boost the financial inclusion and development of small- and medium-sized enterprises,” he said.

Seilava urged stakeholders to discuss challenges, especially banking and financial institutions and business owners, to find solutions to the comprehensive use of credit guarantee mechanisms.

In addition, a study on the terms and procedures of CGCC is necessary to consider adjustments and secure opportunities to cooperate between CGCC and development partners, as well as other stakeholders to develop credit guarantee projects to support specific priority sectors such as agriculture, industry and tourism, he stressed.

Meanwhile, NBC assistant governor Chea Serey said that in order to encourage banks or MFIs to use this credit guarantee mechanism to the maximum, SMEs themselves must strive to strengthen their businesses after obtaining a loan, especially through proper registration, so that they can get a credit guarantee from CGCC.

“What I see in Cambodia is that the challenges for SMEs in accessing financial services is that they are out of the system. Most SMEs in Cambodia are not yet properly registered, which makes it difficult for them to get a bank loan,” she said.

CGCC CEO Wong Keet Loong said that from the beginning of the third quarter of 2022, CGCC has expanded its credit guarantee to the whole country, even in remote provinces, thanks to the extensive branch network of participating financial institutions (PFI) nationwide.

“However, the CGCC still needs to do more to ensure that financial inclusion is further improved for the benefit of businesses across the country,” he said.

Song Kheng Lay, executive vice-president and chief operating officer of Canadia Bank Plc, believes that there is a need for credit guarantees to support banks to provide more loans to businesses or companies, especially those that lack collateral.

“Canadia Bank has developed a guaranteed lending strategy as well as procedures to apply for loans from SME banks to come to banks in order to obtain effective loans,” she said.

Data from the Department of SMEs of the Ministry of Industry, Science, Technology and Innovation showed that as of July 31, 2022, a total of 43,813 SMEs were properly registered out of “more than 520,000” SMEs.

Credit to: The Phnom Penh Post, August 18, 2022