On Friday, 12 May 2023, at the National Bank of Cambodia (NBC), Credit Guarantee Corporation of Cambodia (CGCC), led by Mr. Wong Keet Loong, CEO of CGCC, paid a courtesy visit to H.E. Rath Sovannorak, Assistant Governor and Director General of Banking Supervision of NBC.
CGCC’s CEO, Mr. KL Wong was very grateful for the warm welcome of H.E Sovannorak and his team and was very pleased to update on CGCC’s latest progress in providing credit guarantee and CGCC’s strategy that requires close cooperation and support from NBC.
In response, H.E. Sovannorak praised the progress made by CGCC and expressed his support for CGCC’s mission to provide guarantees on loans disbursed by banks and microfinance institutions (MFIs) to businesses that lack collaterals, especially SMEs, the backbone of the economy, and to raise SMEs awareness on financial literacy.
The meeting also discussed the latest development in the banking sector, new NBC regulations as well as ways to enhance cooperation to improve financial inclusion and access to finance.
Phnom Penh, 26 April 2023 – Credit Guarantee Corporation of Cambodia (CGCC) and Cambodia Chamber of Commerce (CCC) officially announced a strategic partnership through the Signing Ceremony on the Memorandum of Understanding (MoU) to promote access to guaranteed loans for the development of Micro, Small and Medium Enterprises (MSMEs) in Cambodia. This cooperation will provide support to MSMEs, mainly CCC members, for greater access to finance despite collateral challenges and to promote financial literacy, including credit guarantees to CCC members across the country.
Signing Ceremony on the Memorandum of Understanding (MoU) Between Credit Guarantee Corporation of Cambodia (CGCC) and Cambodia Chamber of Commerce (CCC)
Mr. Wong Keet Loong, Chief Executive Officer of CGCC said “This MoU signing with the Cambodia Chamber of Commerce (CCC) is an important milestone for CGCC as it enables CGCC to reach out to the members of CCC across the country. CCC, being an established business chamber with many SME members, will be a key partner to CGCC in promoting the understanding of the benefits of the credit guarantee. Together with CCC, we can support the development of SMEs in Cambodia by improving financial inclusion and financial literacy.”
Signing Ceremony on the Memorandum of Understanding (MoU) Between Credit Guarantee Corporation of Cambodia (CGCC) and Cambodia Chamber of Commerce (CCC)
H.E. Oknha Nguon Meng Tech, Director General of CCC mentioned that “The MSMEs play significant roles in economic development. However, they face a lot of challenges, particularly financial constraints. In this regard, the MOU signing CCC and CGCC today aimed specifically to promote access to guaranteed loans for the development of MSMEs. The MOU signing is also a positive sign that will help strengthen and deepen the cooperation between the two institutions.”
This partnership between CGCC and CCC demonstrates a shared commitment to promoting economic growth and development in Cambodia. By working together, the two organizations will help SMEs overcome financing challenges and unlock their potential to drive economic growth in the country.
Signing Ceremony on the Memorandum of Understanding (MoU) Between Credit Guarantee Corporation of Cambodia (CGCC) and Cambodia Chamber of Commerce (CCC)
On March 31, 2023, the Credit Guarantee Corporation of Cambodia (CGCC) organized a semanar on “Guaranteed Loans to Support the Development of Small and Medium Enterprises” in Svay Rieng Province in collaboration with Svay Rieng Chamber of Commerce with more than 50 participants from Management and staff of participating financial institutions (PFIs) and small and medium business owners in Svay Rieng. The seminar was also presided over by Mr. Sok Rado, President of Svay Rieng Provincial Chamber of Commerce, and Mr. No Lida, Deputy CEO of CGCC.
Dissemination Seminar on “Guaranteed Loans to Support the Development of Small and Medium Enterprises” in Svay Rieng Province
Through this seminar, small and medium business owners are informed about the benefits of guaranteed loans through CGCC’s participating financial institutions in response to the lack of collateral when applying for a loan to expand and rehabilitate their businesses.
Dissemination Seminar on “Guaranteed Loans to Support the Development of Small and Medium Enterprises” in Svay Rieng Province
The Credit Guarantee Corporation of Cambodia (CGCC) provided credit guarantees of $105 million as of February to businesses as their working capital for expansion.
In a factsheet issued on March 10, CGCC said that as of the end of February it has supported 1,155 businesses by providing credit guarantees for their loan applications, amounting to $104.9 million.
Large portions of the loan guarantee were used as working capital and other purposes of investment or business expansion, and capital expenditure, the report mentioned. As of January 2023, the outstanding guaranteed loan was $81.6 million while the outstanding guaranteed amount was $58.8 million.
Various credit guarantee schemes have played a crucial role in strengthening entrepreneurship and enhancing financial inclusion in Cambodia, especially during the Covid-19 pandemic, through the smooth disbursal of loans, CGCC said.
The CGCC has come up with three guarantee schemes so far — the Business Recovery Guarantee Scheme (BRGS) launched in March 2022, the Co-Financing Guarantee Scheme (CFGS) unveiled in September 2021 and the Women Entrepreneurs Guarantee Scheme launched in April 2022, besides the extension of the CFGS to tourism. The CGCC of the Ministry of Economy and Finance has extended the BRGS from January 1, 2023, until the $200-million scheme is fully utilised.
Updating some scheme features, including the scheme period, the definition of the micro, small and medium enterprises (MSMEs) and large firms, and the maximum loan amount for each guarantee are on the extension of BRGS.
BRGS aims to support businesses, including MSMEs and firms, to enhance their access to formal loans from Participating Financial Institutions for working capital, investment, and business expansion.
Credit Guarantee Corporation of Cambodia Plc (CGCC) reportedly issued a total of 1,155 Letters of Guarantee (LG) for loans worth $104.9 million equivalent as of February 28 – up 13 per cent year-to-date – as part of its mission to improve financial inclusion among small- and medium-sized enterprises (SME) and promote the sustainability and expansion of businesses worst hit by Covid-19.
As of January 31, the outstanding guaranteed amount was $58.9 million out of the $81.6 million worth of loans covered by the LGs, as noted by the state-owned enterprise in a new report, remaining in the 70-80 per cent target range at just over 72 per cent.
The CGCC was established by Sub-Decree No 140/ANKR/BK on September 1, 2020, and its $200 million Business Recovery Guarantee Scheme (BRGS) was launched on March 29, 2021 in a bid to widen access to formal loans from participating financial institutions (PFI) for working capital, investment and business expansions.
Cambodia Microfinance Association (CMA) chairman Sok Voeun lauded the CGCC’s credit guarantee arrangements as important tools for SMEs to access formal unsecured loans to keep their businesses afloat and expand in light of Covid-19 bruises.
He told The Post on March 13 that commercial banks accounted for 80 per cent of loans covered by the 1,155 LGs, while microfinance institutions (MFI) “partnering with the PFI” constituted the rest.
On the other hand, banking institutions accounted for about 95 per cent of the $104.9 million loan value, he said.
“We’ve provided credit to most of the priority sectors, including services, agriculture and manufacturing,” he affirmed.
“We are happy to join the CGCC because risks are guaranteed. We’ve noted that since the beginning of the project, the rate of bad loans has been minimal because the businesses have the potential to stimulate economic activity, although they may not have collateral.
“Hence the credit guarantee scheme has been a big help for them to expand their businesses,” he said.
The finance ministry has authorised the extension of the BRGS beyond December 31, 2022, until all funds have been utilised, an early-January CGCC statement confirmed, which noted that the terms of the scheme had also been updated, including the maximum guarantee amounts for differing categories of businesses.
The statement disclosed that loans, mostly unsecured, totalling about $89 million were guaranteed by the CGCC as of December 31 under the BRGS.
Cambodia Post Bank Plc, one of the PFIs, accounted for roughly $1 million of that, all of which went to SMEs, confirmed its CEO Toch Chaochek, telling The Post on March 13 that the plan is to increase that to $5-10 million in 2023.
To this end, the bank aims to shift its focus, from large SMEs with adequate collateral that are seeking to expand, to smaller ones without the assets needed for the secured loans to do the same, he revealed.
“The CGCC project is great for SMEs that do not have the collateral to obtain the loans – they have a shot at rehabilitating and expanding their businesses,” Chaochek said.
The 11th Give a Day has featured the Credit Guarantee Corporation of Cambodia as its keynote as well as enabled Cambodia’s entrepreneurial ecosystem to connect at the new Khmer Enterprise Headquarters for the first time in 2023.
Khmer Enterprise CEO Dr. Chhieng Vanmunin delivered the welcoming remarks highlighting the ongoing progression of the initiative which was first piloted in 2021 before receiving its full funding for monthly and quarterly meetings in 2022 and has now been renewed for 2023.
“The Give a Day monthly meetings and quarterly ecosystem builder events have been greatly welcomed by Cambodia’s entrepreneurial community – and have provided both learnings and networking opportunities between various sectors,” he told over 50 attendees from the ecosystem at KE headquarters.
Give a Day: Credit Guarantee Schemes & Its role in Enterprise DevelopmentSabine Joukes Pact Cambodia Country Director and WE Act Chief of Party, Khmer Enterprise CEO Dr. Chhieng Vanmunin, Rajiv Pradhan Country Director at Swisscontact in Cambodia.
“We also wanted to welcome everyone to our new headquarters at the Business Development Center in Chroy Changvar, Phnom Penh, and advise that our open working space is available to everyone in the ecosystem as well as both our meetings’ rooms and event space,” he added.
Rajiv Pradhan Country Director at Swisscontact in Cambodia and Sabine Joukes Pact Cambodia Country Director and WE Act Chief of Party echoed this statement adding it was fantastic to reconnect the ecosystem for the first time in 2023.
Increase credit guarantee issuance by 50% in 2023
Delivering the keynote CGCC CEO, Wong Keet Loong commented the scheme was looking to increase the number of transactions it underwrites by 50% in 2023 as the organization looks to increase its outreach to the country’s micro and small and medium businesses, (MSMEs).
CGCC received its sub-decree on September 2020 and was fully incorporated in November 2020 its guarantees are intended to expand the availability of credit to smaller enterprises that may not have the collateral which banks typically require to advance working capital loans.
Give a Day: Credit Guarantee Schemes & Its role in Enterprise DevelopmentConversations after the keynote presentation.
Initially launched as a tool to close the credit gap that emerged between small businesses during the pandemic, the CGCC issued its first guarantee in April 2021 and has since given a total of 985 Letters of Guarantee (LG) for loans worth $92.7. Mr Loong said that the CGCC had even more ambitious targets for 2023.
“My biggest goal for this year is to increase the outreach of our guarantees. The CGCC wants to provide guarantees to 1500 SMEs this year. We want to guarantee $100 million of loans in 2023. I know that is optimistic but I believe it can be done,” he said in response to a question from Cambodia Investment Review.
Rising interest rates may impact growth
Mr Loong said that the main barrier to reaching this target was the global macro picture, particularly the impact of rising US interest rates.
“The main issue right now is that external factors are affecting the cost of funding, which is going up as US interest rates rise and this is affecting a number of financial institutions (FIs). They see that fixed deposit rates are going crazy which is good for depositors, but not FIs and this impacts their lending,” he added.
Give a Day: Credit Guarantee Schemes & Its role in Enterprise DevelopmentAttendees at the 11th Give a Day.
Global factors may act as a drag on the CGCC’s work in the near term, but fellow speaker H.E. Dr. Chhieng Vanmunin, CEO of Khmer Enterprise, said that if credit guarantees become more widely used in Cambodia it would make it much easier for firms to do business internationally.
“In their current state, a lot of Cambodian companies are unable to demonstrate a track record of success, however, if they run through the credit guarantee program with CGCC it provides a history of how well they managed issues such as shipping and cash flow.
So this is one of the things that we support them to expand their market internationally,” he said.
40% of its guarantees go to female-owned businesses
The CGCC currently offers four different guarantee products and in April last year, it launched it’s third the Women Entrepreneurs Guarantee Scheme (WEGS), a $50m capped fund that is aimed at supporting women and female-owned businesses.
According to the CGCC’s data up to 40% of its guarantees go to female-owned businesses, whereas Mr Loong said that up to 65% of Cambodian MSMEs were run by women. An audience member, who didn’t identify herself, suggested that this gap was partly due to issues over lack of financial knowledge.
“One reason is that we know most women entrepreneur’s businesses are not registered and one way to improve that is via financial literacy, and this will have many benefits. If financial literacy is growing then entrepreneurs are more confident, more informed, and able to negotiate good loans,” she said.
Give a Day: Credit Guarantee Schemes & Its role in Enterprise DevelopmentQuestions and answer session.
Mr Loong responded that the CGCC did support unregistered businesses, for the first year at least and that expanding awareness of credit guarantees should in turn increase the number of registrations by female business owners.
“However, we tell customers that you need to be registered after a year, because when the anniversary comes, if you’re not registered, then we charge you an additional 0.5%. So, in a way, it incentivizes businesses to be registered. But when they come on board, they can be unregistered,” he said.
The Give a Day program returns in 2023
Give a Day is an initiative within the Entrepreneurship Ecosystem Building Project (EEB) which is jointly funded by Khmer Enterprise, USAID’s WE Act Project through Pact Cambodia and Swisscontact.
In addition, to monthly meetings, the initiative also included a quarterly Ecosystem Builders Network (EBN) event that focused on mapping the six pillars of Isenberg’s Model of the Entrepreneurial Ecosystem.
Give a Day: Credit Guarantee Schemes & Its role in Enterprise DevelopmentThe 11th Give a Day program at Khmer Enterprise Head Office on February 10, 2023.
The quarterly meetings created a space through which ecosystem builders and government agencies can share information, foster best practices, identify market gaps and opportunities, and explore collaboration or complementarity to strengthen the ecosystem.
Cambodia’s ESO ecosystem, broadly defined as groups that support, train, and fund entrepreneurs is still in the nascent stage with many new organizations launched to help nature and develop the sector.
Canadia Bank has partnered with Young Entrepreneurs Association of Cambodia and Cambodia Women Entrepreneurs Association to provide special loan offers to members of both associations.
Canadia Bank provide special loan offers to:
1. Young Entrepreneurs Association of Cambodia
Unsecured Loan Under CGCC Scheme from Canadia Bank
2. Cambodia Women Entrepreneurs Association
Unsecured Loan Under CGCC Scheme from Canadia Bank
Interest Rate as low as 13.20% p.a
Loan Size: Up to $100,000
Loan Term: Up to 5 Years without collateral
Terms & Conditions
Be a member of Young Entrepreneur Association of Cambodia (YEAC) or Cambodia Women Association (CWA).
Business must be validly registered prior to loan approval (at least by district level/delegation authorities). For expired registered, shall renewed within 3 months upon loan drawdown.
Business length shall be greater than 2 years as of application date.
Borrower must be owner of business and represent name on business registration.
Loan request for the purpose of working capital or Investment/Business Expansion.
*** Note: The original content on this page is produced and owned by Canadia Bank
As one of the first banks who become CGCC’s PFIs, what motivates Canadia Bank to utilize the credit guarantee schemes with the existing loan products of Canadia?
One of the main reasons that motivates us to use credit guarantee schemes is that we believe that the CGCC credit guarantee scheme can help potential business owners who need loans to for their businesses but do not have enough collaterals to access more capitals to meet the financial needs of their businesses, especially to recover and expand the businesses after the COVID crisis has been eased.
After adopting CGCC’s credit guarantee schemes for more than a year, how do those schemes benefit the bank and your customers?
We have provided loans under the CGCC credit guarantee schemes to more than 200 clients with a total loan size of nearly $ 20 million over the past year. Through these guaranteed loans, clients are able to expand their business in various sectors that generate more employment and contributed significantly to the country’s economic recovery.
How does Canadia Bank structure loans with credit guarantee?
We have CGCC’s guaranteed loan programs for potential clients with good credit histories and clear business plans. It can be provided to both existing customers and new customers.
Recently, both Canadia Bank and CGCC have each launched products supporting women entrepreneurs. How will the “Smart Lady Loan” and CGCC’s “Women Entrepreneurs Guarantee Scheme” (WEGS) impact women-owned SMEs in greater access to finance regarding unsecured loans?
“Smart Lady” of Canadia Bank and “Women Entrepreneur Guarantee Scheme (WEGS)” of CGCC are making a significant contribution to support women entrepreneurs to access to the finance for their business needs, avoiding high-risk and risky loans. Through these two projects, women entrepreneurs have not only been able to access their loans more easily and conveniently but have significantly reduced their financial costs, especially in the first year, which included lower interest rates and guarantee fees. In addition, women entrepreneurs will receive many other benefits through the Smart Women Lady loan program from Canadia Bank.
Canadia Bank is currently the top performer of using CGCC’s scheme, what is Canadia Bank’s strategy of further expanding the usage of credit guarantees, especially to the rural area SMEs?
We continue to reach out to our target customers, especially those who have potential businesses but do not have sufficient collateral to secure a loan. We will also continue to link credit guarantee schemes with our new loan products to provide a wider range of options for our customers.
As the credit guarantee topic is a new topic in Cambodia, how should Canadia Bank and CGCC do to raise awareness of credit guarantee to the borrowers?
In order to raise awareness about credit guarantee, we should continue to promote it more comprehensively, especially reach out to more business owners through social media, workshops, business associations, etc.
Lack of collateral is the main challenge for businesses in Cambodia to get loans. The Royal Government of Cambodia established the Credit Guarantee Corporation of Cambodia (CGCC) to address this challenge. With credit guarantees, borrowing without collateral is no longer impossible. For CGCC to yield the benefits requires a good understanding from relevant stakeholders about how it works.
Simply put, CGCC provides credit guarantees to share the credit risk with the banks on loans made to businesses. In other words, the banks can claim from CGCC if the guaranteed loan defaults. There are two main types of credit guarantee – individual guarantee whereby the guarantee covers individual loans and portfolio guarantee whereby the guarantee covers a portfolio consisting of multiple loans. Since CGCC itself is not a lending institution, it currently collaborates with banks and micro-finance institutions (MFIs) that are the participating financial institutions (PFIs) to provide guaranteed loans to businesses. As a government-backed institution with adequate capital in its account, CGCC is set to provide a wide range of guarantees on loans disbursed to Cambodian-owned businesses across the country.
Why should the lender need the credit guarantee?
Give Non-Collateral a chance! Credit Guarantee Mechanisms and Benefits for Banks, MFIs and Businesses
When lending, banks normally protect themselves by requiring collateral from the borrowers. When the borrower cannot repay the loan, the banks liquidate the collaterals to cover the loss. If the required collateral is not sufficient, the bank is unlikely to lend. The collateral requirement becomes more stringent, especially during times of uncertainty such as the COVID-19 Pandemic, because businesses are perceived to be riskier, and banks become more risk-averse. Now with CGCC, the banks can protect themselves with the credit guarantee instead of the collaterals. Currently, CGCC provides credit guarantees up to 80% of the outstanding loan principal which means that the bank bears the remaining 20% of the loss if the loan defaults. The credit guarantee empowers banks to remain competitive in the market and to lend out more to underserved borrowers who lack collaterals, what is referred to as “credit additionality.”
Why should the borrower need the credit guarantee?
Give Non-Collateral a chance! Credit Guarantee Mechanisms and Benefits for Banks, MFIs and Businesses
Credit guarantees increase the borrowing capacity. CGCC provides guarantees that act as collateral on the borrower’s behalf. Needless to say, CGCC cannot be beneficial for every business. By all means, if the business has sufficient collateral and the ability to repay the loan, the chance is that such a business does not need a credit guarantee, and the bank would also be happy to lend even without CGCC’s guarantee. However, it is common that a potential business with the ability to repay the loan is unable to borrow because of insufficient collateral. Businesses simply cannot pledge the collateral on every loan they wish to borrow. The collateral is limited. This is a huge loss to the business and the economy as a whole. With the required loan, the business could have generated more income, employed more workers, and produced goods or services that contribute to the economic growth of the country. When CGCC provides guarantees to the banks, the borrowers now have easier access to loans from the banks because the banks are willing to lend more with less collateral requirement.
Credit guarantees are used by many countries as a policy tool to improve access to finance and financial inclusion. However, never before has a credit guarantee corporation been incorporated in Cambodia. According to the World Bank, “Public credit guarantee schemes (CGSs) are a common form of government intervention to unlock finance for small and medium enterprises (SMEs). More than half of all countries in the world have a CGS for SMEs and the number is growing.” While many credit guarantee schemes have proved successful in supporting the SMEs, many have also failed.
It is still early to assess how far and how fast CGCC can support the businesses. CGCC must continue to strengthen credibility, efficiency, and transparency and adhere to the best practices including the World Bank’s principles for public credit guarantee schemes for SMEs to gain trust and support from all relevant stakeholders. What is also important at this stage is that all the players understand and start to utilize the credit guarantees for the right purposes.
