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Understanding Credit Guarantee-Interview with Participating Financial Institution (Acleda Bank)

Posted on by Sorn Chhorvyvatey

Read and Download in PDF: Interview with Participating Financial Institution (ACLEDA Bank)

 

1. What is ACLEDA Bank’s perspective towards the credit guarantee schemes and why does your bank partner with CGCC?

Credit guarantee schemes of Credit Guarantee Corporation of Cambodia “CGCC” are good and essential schemes contributing to the development of the country’s national economy by providing credit guarantees to Small-sized and Medium-sized Enterprises (SMEs), and Large Enterprises which are financially viable but with insufficient or no collateral to enable them to get official loans from ACLEDA Bank as well as other PFIs. Through the credit guarantee from CGCC, the Bank could expand credit market, promote financial inclusion and manage credit risks effectively.

ACLEDA Bank has joined and become one of the participating financial institutions (PFIs) for the following main reasons:

  • Participate with the Royal Government’s initiatives and schemes to support the country’s socio-economic development.
  • Support and encourage SMEs and Large Firms to obtain formal loans from the licensed financial institutions for both working capital and business expansion.
  • Contribute to creating employment opportunities for people through the growth of businesses obtaining the formal loans under CGCC’s credit guarantee.

 

2. How do the credit guarantee schemes benefit ACLEDA Bank and your customers?

The credit guarantee schemes offer many benefits to both ACLEDA Bank and the customers as follows:

  • For ACLEDA Bank:
    • Diversify the credit products in line with the Bank’s strategic plan.
    • Manage credit risks effectively.
    • Maintain the existing customers and attract new potential ones.

  • For the customers:

    • Offer choices to the customers and be able to get formal loans for the expansion of their business activities.
    • Improve their living conditions through the growth of businesses.
    • Have a chance to create employment opportunities for their communities and promote innovation in their products and services.

3. So far, which type of loans does ACLEDA Bank use the credit guarantees to support SMEs?

So far, ACLEDA Bank uses the credit guarantees to provide business loans, revolving facility, and overdraft facility to our customers as SMEs and Large Enterprises in both priority and non-priority sectors to meet their business needs.

 

4. How should the borrowers prepare themselves to get guaranteed loans from ACLEDA Bank?

To obtain the guaranteed loans from ACLEDA Bank, the borrowers both individuals and legal entities shall meet the following criteria:

  • Business activities operate in Cambodia and majority Cambodian-owned businesses (shareholding of more than 50%)
  • Business registration issued by the appropriate government authorities
  • Financially viable businesses and accurate financial statements
  • Have owner equity and specific business plan
  • Loan utilization in accordance with the purposes as mentioned in the credit proposal
  • Willingness to comply with the loan obligations etc.

 

5. What is the ACLEDA Bank’s strategy/plan to further expand the disbursement of guaranteed loans in 2024?

ACLEDA Bank still continues to stimulate the disbursement of guaranteed loans in 2024 through promoting credit guarantees to both existing and new customers who need financing as well as  providing the trainings and refresher courses on the knowledge of credit guarantees to all the credit-related staffs of all branches nationwide, providing technical support for credit guarantees, especially having a good collaboration with CGCC to support and enhance the growth of guaranteed loans in a sustainable manner.

 

Extension of Request for Proposal “Legal Counsel”

Posted on by Sorn Chhorvyvatey

CGCC is a state-owned enterprise, established under the technical and financial guidance of the Ministry of Economy and Finance (MEF) to provide credit guarantees based on international standards to improve financial inclusion and support the growth of SMEs in Cambodia. CGCC obtained the accreditation from the Securities and Exchange Regulator of Cambodia (“SERC”) to become the bond guarantor on 22 August 2023 (“Bond Guarantor” or “Guarantor”).

CGCC wishes to provide guarantee on bonds to be listed on the Cambodia Securities Exchange.

CGCC is seeking to engage a Cambodian legal counsel (“Legal Counsel”) to perform the services as described in the scope of work.

 

High-ticket Loans of $50,000 Issued as Credit Guarantee Scheme Kicks off

Posted on by Sorn Chhorvyvatey

To boost startups and SME entrepreneurs, more high-ticket (above $50,000) loans without property collateral are now being issued by microfinance institutions (MFIs).

The main reason behind this is the take-off of the Credit Guarantee Corporation of Cambodia (CGCC) for SMEs. Normally, MFIs would only give small-ticket loans between $1,000-$3,000 without property collateral.

In the last decade, the higher the loan amount more would be the property collateral asked for. So looking at data from the fourth quarter of 2024 from the Cambodia Microfinance Association (CMA), for tier-1 loans less than $3,000 — 85 percent of these loans were issued without property backing it as collateral. Then for tier-2 loans between $3,001-$10,000 – 22 percent of loans were issued without collateral. And for tier-3 loans between $10,001-$50,000 – only 19 percent of such loans were issued without property collateral.

So far the data is following the expected trend as in past years. But if one were to look at tier-4 loans – which are above $50,000 – as high as 40 percent of loans were issued without property collateral.

And this is primarily because the CGCC in a bid to promote new ideas and new businesses has stepped forward to guarantee loans amounting to $164 million to 1,928 micro, small and medium enterprises (MSMEs) in the last three years. CGCC CEO KL Wong told Khmer Times that guaranteeing such loans has resulted in SMEs creating jobs. “The loans we’ve guaranteed have resulted in more than 52,000 new jobs in Cambodia from the SMEs we support,” he said.

Heng Bombakara, First Deputy Director General of Banking Supervision, National Bank of Cambodia (NBC), also said that the creation of CGCC is an acknowledgement of the vital role SMEs play in the economy. “SMEs represent 70 percent of employment opportunities in the country and contribute 58 percent to our country’s GDP. And these SMEs operate in diverse fields like agriculture, industry and services; and CGCC has been created to give a boost to this sector,” he said at a recent event.

Mindful of the diversity of SMEs in the country, CGCC guaranteed as much as 50 percent of loans for SMEs in services and trade, 3 percent from agriculture, 7 percent from industry and the remaining 40 percent to other miscellaneous SMEs.

CMA said that many of its members, including LOLC Microfinance and AMK Microfinance are participating financial institutions in the CGCC’s scheme. CGCC saw its highest loan guarantee activity in March 2022 – when it guaranteed as much as 91 businesses for $8.3 million in loan.

CGCC CEO Wong said that this pace of lending was maintained in 2023 where the state-owned enterprise guaranteed $72 million in loan amount for 943 accounts.

Credit to: Khmer Times, Published on 24 April 2024

CGCC Provides $181 Million Credit Guarantees to 2,143 Businesses as of March

Posted on by Sorn Chhorvyvatey

The Credit Guarantee Corporation of Cambodia (CGCC) has provided credit guarantees of US$181 million as of March this year to 2,143 businesses as their working capital for expansion.

In a factsheet issued on April 11, CGCC said as of March, the outstanding guaranteed loan was US$121.32 million while the outstanding guaranteed amount was $87.63 million.

There are 1,988 micro, small and medium enterprises (MSMEs) and 155 large businesses in Cambodia, the report said, adding that 881 of businesses were women-owned.

The CGCC scheme involves 27 participating financial institutions (PFIs) to extend credit as working capital investment and business expansion to SMEs.

Established in November 2020 with a state budget of $200 million, the CGCC is the preferred credit guarantee institution in Cambodia set up to improve financial inclusion and develop the growth of SMEs.

Smooth loan distribution has boosted entrepreneurship and financial inclusion, said Mey Vann, Secretary of State at the Ministry of Economy and Finance.

“The CGCC has played a key role in serving the needs of SMEs in Cambodia, which are struggling in the wake of the Covid-19 pandemic and the inflation crisis, and need credits from banks for their businesses,” he said.

Credit to: Khmer Times, Published on 13 April 2024

CGCC participating in UNDP Cambodia Investor Convening

Posted on by Sorn Chhorvyvatey

On 08 April 2024, Mr. Wong Keet Loong, CEO of CGCC was invited to be a panelist at the “Investor Convening Event for the Growth Stage Impact Venture Program in Cambodia” to share CGCC’s initiative in enabling the financing environment for private sector development Cambodia in the panel discussion focusing on “Investment landscape in Cambodia Specifically in Climate Adaptation”.

Through this panel discussion, Mr. Wong shared the government’s support mechanism for the private sector in access to finance through CGCC credit guarantee for businesses, especially green sector businesses. He also highlighted the Sustainable Green Financing Facility of CGCC, which is a blended financing model developed with support from UNDP to increase CGCC’s guarantee capacity for the green sector.

This UNDP Cambodia Investor Convening event aims to raise public and private sector interest and awareness around climate-anchored market solutions and investments, and also serve as a platform to mobilize and channel private sector capital and blended financing towards climate change adaptation and to diversify sources of climate financing by capitalizing on existing market opportunities.

CGCC Provides $174 million Credit Guarantees to 2,070 Businesses as of February

Posted on by Sorn Chhorvyvatey

The Credit Guarantee Corporation of Cambodia (CGCC) has provided credit guarantees of $174 million as of February this year to 2,070 businesses as their working capital for expansion.

In a factsheet issued on Monday, CGCC said as of February 29, 2024, the outstanding guaranteed loan was $120 million while the outstanding guaranteed amount was $86.9 million.

There are 1,918 micro, small and medium enterprises (MSMEs) and 152 large businesses in Cambodia, the report said, adding that 881 of businesses were women-owned.

The CGCC scheme involves 27 participating financial institutions (PFIs) to extend credit as working capital investment and business expansion to SMEs.

Established in November 2020 with a state budget of $200 million, the CGCC is the preferred credit guarantee institution in Cambodia set up to improve financial inclusion and develop the growth of SMEs.

Smooth loan distribution has boosted entrepreneurship and financial inclusion, said Mey Vann, Secretary of State at the Ministry of Economy and Finance.

“The CGCC has played a key role in serving the needs of SMEs in Cambodia, which are struggling in the wake of the Covid-19 pandemic and the inflation crisis, and need credits from banks for their businesses,” he said.AKP

Credit to: Khmer Times, Published on 19 March 2024

CGCC Celebrating International Women’s Day

Posted on by Sorn Chhorvyvatey

On 06 March 2024, CGCC management and staff celebrated International Women’s Day to appreciate all CGCC female staff who have played vital roles in advancing CGCC’s development in various operational areas.

To express this appreciation, CGCC’s management presented souvenirs and organized a lunch gathering with all CGCC’s staff.

Out of 51 staff, CGCC has 21 women (41%) who work in different departments and positions.

Understanding CGCC’s Bond Guarantee

Posted on by Sorn Chhorvyvatey

In April 2022, the Ministry of Economy and Finance provided a policy direction to CGCC to diversify our guarantee service to bond guarantees. CGCC was then accredited by the Securities and Exchange Regulator of Cambodia (SERC) in August 2023 as a local bond guarantor and completed its rating procedure, and was rated “khAAA” with a Stable Outlook, the highest rating on a local scale by the Rating Agency of Cambodia. With all these set, CGCC will embark on a new journey to provide guarantees on bond issuance to support Cambodia’s capital market and the small and medium enterprises (SMEs) looking to enter the bond market for their sources of funding.

What is a bond?

A bond is a debt instrument, one of the alternatives to a bank loan. The bond issuer is a borrower, and the bond investor is a lender. Bond investors buy bonds from the issuer, who promises to pay interest (coupons) and bond principal during the bond maturity. Compared to a bank loan, a bond gives more flexibility in terms of structure, size, maturity, and interest payment. While just about any SME and individual can raise funds with bank loans as long as they can prove their repayment capacity, raising funds with bonds requires the issuer to be a more well-established and matured SME that can demonstrate good governance and business operation, reliable financial records, concrete future business plan and so on. In short, compared to bank loans, the requirements to issue bonds are stricter and more extensive. The table below gives a brief general comparison between a bank loan and a bond.

Indeed, issuing bonds is a common way for Governments and businesses to raise capital in many developed countries to finance their projects. It is not yet so much so in Cambodia. The bond market in Cambodia is still in the developing stage, facing challenges such as low liquidity, high-interest rates, and a low investor base. However, we have seen positive breakthroughs in recent years, especially in the issuance of government bonds, guaranteed bonds, and sustainable bonds. Currently, there are 9 listed corporate bond on the Cambodia Securities Exchange (CSX) raising funds between 1.5 to 30 million USD equivalent per issuance.

Read more: Understanding CGCC’s Bond Guarantee

Meet the Business Owner Who Received a Loan Guaranteed by CGCC

Posted on by Sorn Chhorvyvatey

Solar Green Energy (SOGE), established in 2008, is a company providing green energy solutions using solar energy to irrigate the crops of Cambodian farmers. Shortly after the establishment, customers began to recognize SOGE and trust our services. I saw the opportunity to expand our business. We have the technology but lack human resources and capital.

I consulted with some banks and microfinance institutions to get additional capital. Because I  didn’t have enough  collateral for the loans, J Trust Royal Bank introduced me CGCC’s credit guarantee service which can guarantee my loan so that the bank can lend me without requiring my collateral. With the credit guarantee, I could get additional capital to build new pumping stations.

SOGE used the loans guaranteed by CGCC to expand the construction of pumping stations in some provinces such as Pursat, Kampong Cham, Kampong Chhnang and Kampong Thom. The stations can irrigate about 1,600 hectares and benefit about 1,000 families.

I think that CGCC’s credit guarantees can really support my business as well as other potential SMEs that lack collateral to get necessary capital from banks or microfinance institutions for their business expansion.

Read more: Meet the Business Owner Who Received a Loan Guaranteed by CGCC

CGCC Provides $170M Credit Guarantees to nearly 2,000 Businesses

Posted on by Sorn Chhorvyvatey

The Credit Guarantee Corporation of Cambodia (CGCC) has provided credit guarantees of $170 million as of January this year to 1,977 businesses as their working capital for expansion.

In a factsheet issued on Feb. 20, CGCC said as of January 2024, the outstanding guaranteed loan was $119 million while the outstanding guaranteed amount was $85.8 million.

There are 1,854 micro, small and medium enterprises (MSMEs) and 154 large businesses in Cambodia, the report said, adding that 833 of businesses were women-owned.

The CGCC scheme involves 27 participating financial institutions (PFIs) to extend credit as working capital investment and business expansion to SMEs.

Established in November 2020 with a state budget of $200 million, the CGCC is the preferred credit guarantee institution in Cambodia set up to improve financial inclusion and develop the growth of SMEs.

Smooth loan distribution has boosted entrepreneurship and financial inclusion, said Mey Vann, Secretary of State at the Ministry of Economy and Finance.

“The CGCC has played a key role in serving the needs of SMEs in Cambodia, which are struggling in the wake of the Covid-19 pandemic and the inflation crisis, and need credits from banks for their businesses,” Mey Vann said.AKP

Credit to: Khmer Times, Published on 21 February 2024