$150M in loans guaranteed for SMEs by CGCC
AS OF November 30, the state-owned Credit Guarantee Corporation of Cambodia Plc (CGCC) has issued a total of 1,880 Letters of Guarantee (LG) for loans worth $159.69 million. The guarantees were in support of small- and medium-sized enterprises (SMEs) affected by the Covid-19 pandemic.
According to figures released on December 22, the total of outstanding loans equal $113.96 million, with a non-performing loan (NPL) ratio of 5.41. Total claim payouts came to $123,336. The businesses supported included 1,731 micro, small and medium enterprises (MSMEs), and 149 larger firms.
Mey Vann, secretary of state at the Ministry of Economy and Finance, recently explained that SMEs have played an important role in supporting Cambodia’s socio-economic development. They contributed to the reduction of poverty by 50.2 per cent in 2003 to just 17.8 per cent in 2020, by increasing employment and income for Cambodians.
He said the CGCC was established to share risks with financial institutions, in order to increase the accessibility of loans to businesses, especially SMEs.
“The government considers that the use of the state budget to support financing through the credit guarantee mechanism has the first major advantage of a ‘Leverage Effect’.
By using the capital of the CGCC to secure rotating loans, the capital is used only when a secured loan is lost. The state budget of $200 million provided by the CGCC supports the issuance of loans with a far greater value,” he said.
“Second, it serves as a ‘Countercyclical Crisis Tool’ by maintaining market confidence, especially during a crisis, to balance economic activity,” he added.
Toch Chaochek, CEO of Cambodia Post Bank Plc (CPBank), a CGCC partner, explained that SMEs which are correctly registered and seek loans with the assistance of the CGCC are less risky creditors than their counterparts that do neither.
The National Bank of Cambodia expressed support for lending to smaller businesses, noting that the benchmark risk weight was reduced to 75 per cent for properly registered SMEs that could produce appropriate financial statements.
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.
In early January, the finance ministry announced the ongoing BRGS to MSMEs, as well as large enterprises. The project will continue until the initial capital of $200 million is gone.