ADB and FTB join forces for MSME growth
IN AN effort to bolster trade finance, particularly for supporting Cambodia’s micro, small and medium enterprises (MSMEs), the Foreign Trade Bank of Cambodia (FTB) and the Asian Development Bank (ADB) have collaborated through ADB’s Trade and Supply Chain Finance Programme (TSCFP).
The agreement was signed by ADB country director for Cambodia Jyotsana Varma and FTB CEO Dith Sochal at ADB’s Cambodia Resident Mission on February 6 in Phnom Penh.
As a partner bank of TSCFP, FTB will assist corporate and MSME clients by enabling trade finance instruments issued by FTB to be underwritten by TSCFP’s credit guarantees.
“This assistance is expected to help increase the number of international banks engaged in the Cambodian market,” stated ADB.
The bank said it recognises that trade plays a vital role in the country’s economic development and the new partnership will offer additional opportunities to enhance support for regional and international trade and commerce.
ADB is a major source of official development assistance (ODA) for the country, with average annual lending of $363.28 million from 2019 through 2023.
“To ensure the collaboration is as effective as possible, FTB has been actively working with TSCFP to enhance its trade facilitation expertise. TSCFP has supported FTB in developing report preparation skills, adopting good practices, implementing innovative strategies, designing training modules and establishing performance measurement criteria,” explained ADB.
Varma highlighted that the agreement signifies the bank’s commitment to private sector development, aiming to encourage broader sector participation in supporting MSMEs.
“The agreement is part of ADB’s private sector development initiative to encourage sector participation in Cambodia’s economic diversification,” she said.
“It aims to address market gaps by offering financing through partner banks to bolster trade and MSMEs, which represent about 99% of all businesses in Cambodia,” she added.
Minister of Industry, Science, Technology and Innovation Hem Vandy, speaking at a forum in late January, said Cambodia is actively seeking more direct investment to strengthen its small and medium-sized enterprise (SME) sector, a vital component of the nation’s economic growth.
Vandy underscored the government’s commitment to promoting domestic production, aiming to enhance the processing chain, reduce import dependence and increase exports to global markets.
He pointed out the growth in the number of factories registered with the ministry, which reached 2,125 in 2023, including 241 new listings that year.
The minister attributed the increase in filings to the country’s political and macroeconomic stability and economic growth.
He noted that following Prime Minister Hun Manet’s recent visit to Japan, there has been a notable increase in interest from Japanese investors in establishing industrial zones in Cambodia, fostering optimism for the industry and SMEs.
“I believe that with this support and these efforts, investors will gain more confidence and interest in Cambodia, especially during the seventh government mandate led by [Manet],” he said.
Vandy emphasised the importance of forming a community or federation to accelerate SME production. He mentioned that the collaboration would enable SMEs to compete with imported products, increase export capacity, enhance productivity and establish common quality standards, financial resources and skilled labour.
Backed by ADB’s AAA credit rating, TSCFP provides loans and guarantees to over 200 partner banks to support trade, thereby boosting imports and exports that contribute to growth. Since 2009, TSCFP has supported $57 billion in trade through more than 45,000 transactions in emerging markets, as per ADB.