The government has pledged to provide an additional $100 million to Small and Medium Enterprise (SME) Bank to provide low interest loans to SMEs.
Phan Phalla, Secretary of State of the Ministry of Economy and Finance and Chairman of the Board of the Small and Medium Enterprise Bank (SME), said in 2023, the Cambodian government plans to provide an additional $100 million to SME Bank so they can offer low interest loans to SMEs to ensure they have enough capital to support and expand their business.
The Ministry of Economy and Finance made the remarks at a press conference on "Public Outreach on the Implementation of the Small and Medium Enterprise Support Financing Project and the Letter of Thanksgiving Ceremony" on December 5 at Le Royal Hotel.
He added that if the economy continues to struggle, there will be a need for additional government intervention to support the economic and business activities of SMEs. The SME Bank will launch the third phase of the Small and Medium Enterprise Co-operation (SCFS III) Co-financing Project after the previous phase was completed in September to help SMEs strengthen their business following the new normal trajectory after Covid 19.
"In case the economic situation continues to be difficult, the Royal Government will continue to examine the possibility of establishing new co-financing projects, but for the next year, we also have a direct lending program from SME Bank," he said. “Without going through financial institutions to participate in priority areas, such as programs related to women entrepreneurs, second priority areas such as agriculture, industry, and processing at a better utilization rate for them, and there is another program for start-up businesses,” he said.
"I sincerely hope that all private financial institutions as well as stakeholders will continue to actively support the government's financing policy," he added.
He observed that most SMEs in Cambodia still need a lot of financing to maintain their balance and expand their business. In addition to financing, he also wants the state-owned bank to help develop and promote businesses.
Chan Sokheang, President of Cambodia Rice Federation, said that providing more funds to SMEs is a good sign to help them improve their capital turnover.
“Right now, we are still in the process of working with the ministry and policy group of the Ministry of Finance in collaboration with ARDB bank (Agriculture Rural Development Bank) in order to learn more details. Then we can find out the specific amount [budget] that we need,” he mentioned.
He added that while Cambodia’s export situation is sufficient enough now, planning for the future budget is still being studied.
Ky Sereyvath, an economic analyst and the director of the Royal Academy of Cambodia's Center for China Studies, told Kiripost on Tuesday that financing $100 million to SME Bank is a significant move to provide SMEs with loans at a low interest rate. However, he noted that some SMEs miss the opportunity to get those loans, while others remain in debts from previous loans.
“Based on my research, the majority of SMEs face challenges to gain loans because SMEs haven’t registered properly and they don’t have financial systems, as well as lack a good specific business plan. This leads to difficulty for them [SMEs] to get funding from the government,” he said.
He added, “My second point, SMEs are already in debt with banks, and borrowing additional money from the bank can make them face more burdens of paying more debts.”
Despite the challenges, he still believes that the funding plays an important role to help SMEs in the country. He encourages SMEs to register online and believes that boosting industry and production is better than buying and selling services.
As of the end of October, SME Bank, a bank established by the government, has disbursed approximately $423 million in loans to 3,165 SMEs through three SME Bank projects after a number of enterprises were affected by Covid-19.