The Credit Guarantee Corporation of Cambodia (CGCC) recently launched its Women Entrepreneur Guarantee Scheme (WEGS), which will see up to $30,000,000 provided as collateral against loans for women entrepreneurs to “enhance their access to formal loans for both working capital and business expansion.”
The initiative satisfies the Strategic Framework and Programs for Economic Recovery in the Context of Living with the Covid-19 in a New Normal 2021-2023 of the Government by encouraging commercial banks and microfinance institutions to increase additional lending by relaxing the credit guarantee requirements.
CGCC’s CEO Wong Keet Loong told Khmer Times that the credit guarantee is a financial instrument that mutually supports financial institutions (FI) and Small-Medium Enterprises (SMEs).
“To the FIs, it is a risk-sharing mechanism to offer loans to those customers who may be deemed higher risk but have potential to grow. It also supports providing additional security for the loan as it is part of the collateral for the loan. For SMEs, it improves financial inclusion.
It enables them to borrow without having the burden of providing additional collateral whenever the business capacity grows and has higher loan requirements.”
“Smaller/micro business owners will be able to obtain loans at affordable rates compared to informal means. By having access to borrowing, business owners will be able to scale up their business, thus, income growth and improved livelihoods. We hope to a certain extent to reduce poverty in certain segments.”
A study undertaken by the International Finance Corporation found that “90 percent of SMEs managed by women were found to be profitable”, yet amongst those businesses, there was an unmet demand for credit of an estimated $4.2 billion. Wong cited this research as the rationale for targeting women specifically under this scheme.
“Cambodian women-owned businesses have difficulty providing collateral to secure loans from FIs thus; many could not access traditional financing. About 60 percent of entrepreneurs are women. Based on similar research, women entrepreneurs have better repayment track records of their loan commitments.”
The CGCC is the first credit guarantee corporation in Cambodia, established by a sub-degree of the Royal Government of Cambodia in September 2020 as a state-owned enterprise under the technical and financial guidance of the Ministry of Economy and Finance.
Its mission is to ‘provide credit guarantees to lenders on loans made to businesses based on international standards to share the risk with lenders and improve financial inclusion.
The scheme is eligible for all types of loan facilities, including term loans, overdrafts and trade facilities, and the process is relatively straightforward.
“The business owner would need to apply for a loan from the FI. The FI will evaluate the business needs for the loan and assess its repayment capability. The credit guarantee acts as part of the collateral for the loan. Once the FI has approved the loan, FI will submit to apply the guarantee from CGCC. CGCC will ensure the FI has complied with the features and guidelines of the scheme and will issue a Letter of Guarantee for the loan,” Wong said.
Wong hopes WEGS can support SMEs on all levels of the business spectrum, “We hope that the commercial banks and MFIs will use the WEGS to reach out to more women entrepreneurs by extending loans to scale up their businesses. The institutions can include SMEs who may not have as many complete records, but just as much potential to grow.”
Credit to: Khmer Times, 20 April 2022
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