Cambodian food hawker

Access To Finance For Small and Medium Enterprises (SMEs)

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Access To Finance For Small and Medium Enterprises (SMEs)

Country
Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Financials
Sub Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Corporate and Retail Banking
Indicative Return
Describes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
15% - 20% (in IRR)
Investment Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Medium Term (5–10 years)
Market Size
Describes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
> USD 1 billion
Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.
> USD 10 million
Direct Impact
Describes the primary SDG(s) the IOA addresses.
No Poverty (SDG 1) Industry, Innovation and Infrastructure (SDG 9)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
Gender Equality (SDG 5) Decent Work and Economic Growth (SDG 8) Reduced Inequalities (SDG 10)

Business Model Description

Invest in financial institutions in Cambodia offering innovative financing solutions for SMEs, particularly for those in the agriculture sector. Many players have emerged in this segment to provide financial services (including, loans, deposits, money transfers, micro-insurance, payment services, payroll services, and international remittance services) to low-income populations with an ambition to improve their livelihood options and to SMEs in the agriculture sector. Such players have been successful in attracting private investor interest, raising funds in the range of USD 3-25 mn.

Investments in the financial services sector in Cambodia require a cautious evaluation of the service providers that have been subject to criticism regarding excessive costs to customer, aggressive loan recovery practices and human rights violations. To combat such malpractices, relevant authorities have taken steps such as setting an annualized interest rate ceiling at 18 per cent and more recently a code of conduct for financial service providers. (24) (25) (28)

Following are some examples of companies that are active in this space as an illustration of the commercial viability of the investment opportunity: AMK Microfinance Institution Plc (AMK), formerly Angkor Mikroheranhvatho (Kampuchea) Co. Ltd., was founded in 2001 to provide microfinance services (including, loans, deposits, money transfers, micro-insurance, payment services, payroll services, and international remittance services) to low-income population to improve their livelihood options and to MSMEs in agriculture sector.

Chamroeun Microfinance Plc. (Chamroeun), formerly known as Chamroeun Microfinance Limited was founded in 2006. It is an MFI providing several types of loan products, including working capital for businesses, group loans and loans for social emergencies. It aims to serve Aquaculture farmers and is working with agri-cooperatives, providing not only finance, but also support in ensuring investment readiness of such enterprises.

Disclaimer: UNDP, the SDG Investment Platform, nor its affiliates (collectively “UNDP”) does not seek or solicit investment for programs, projects, or opportunities described on this site (collectively (“Programs”) or any other Programs, and nothing on this page should constitute a solicitation for investment. The descriptions on this page is provided for information value only, as examples of prior investment related work UNDP has conducted. UNDP assumes no liability for investment losses direct and indirectly resulting from recommendations made, implied, or inferred by its research. Likewise, UNDP assumes no claim to investment gains direct or indirectly resulting from trading profits, investment management or advisory fees obtained by following investment recommendations made, implied, or inferred by its research. Investment involves risk, and all investments should be made with the supervision of a professional investment manager or advisor. The materials on the Website are not an offer to sell or a solicitation of an offer to buy any investment, security or commodity, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction.

Expected Impact

Provision of affordable loans for SMEs using customer centric systems and processes that promote enterprise growth, financial inclusion of last mile businesses.

How is this information gathered?

Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.

Disclaimer

UNDP, the Private Finance for the SDGs, and their affiliates (collectively “UNDP”) do not seek or solicit investment for programmes, projects, or opportunities described on this site (collectively “Programmes”) or any other Programmes, and nothing on this page should constitute a solicitation for investment. The actors listed on this site are not partners of UNDP, and their inclusion should not be construed as an endorsement or recommendation by UNDP for any relationship or investment.

The descriptions on this page are provided for informational purposes only. Only companies and enterprises that appear under the case study tab have been validated and vetted through UNDP programmes such as the Growth Stage Impact Ventures (GSIV), Business Call to Action (BCtA), or through other UN agencies. Even then, under no circumstances should their appearance on this website be construed as an endorsement for any relationship or investment. UNDP assumes no liability for investment losses directly or indirectly resulting from recommendations made, implied, or inferred by its research. Likewise, UNDP assumes no claim to investment gains directly or indirectly resulting from trading profits, investment management, or advisory fees obtained by following investment recommendations made, implied, or inferred by its research.

Investment involves risk, and all investments should be made with the supervision of a professional investment manager or advisor. The materials on the website are not an offer to sell or a solicitation of an offer to buy any investment, security, or commodity, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction.

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Country & Regions

Explore the country and target locations of the investment opportunity.

Sector Classification

Situate the investment opportunity within sustainability focused sector, subsector and industry classifications.
Sector

Financials

Development need
71% adults have access to financial services, along with 59% of adults (60% females; 57% males) who have access through formal providers. 29% of adults remain excluded from access to any form of financial services (27% female; 31% males) due to an inability to fulfil the documentation requirements from formal institutions and the mismatch in return expectations of the customers. (1)

Policy priority
National Financial Inclusion Strategy (NFIS 2019-2025): aims to enhance financial inclusion by increasing access to quality formal financial services, reducing financial exclusion of women by half from 27% to 13%, and increasing usage of formal financial services from 59% to 70% by 2025, as well as improving household welfare and supporting economic growth.(2)

Gender and Marginalization issues
With ~12% of adults (12% males; 13% females) using only informal financial services, women are more likely than men to save and access credit from informal channels or family and friends.(1) Moreover, most Microfinance Institutions (MFIs) in the country do not offer unsecured loans to small businesses or entrepreneurs.

Although access to formal financial services among Cambodian men and women is almost equal, there is a significant gender gap in loans and savings mobilization. On average, men get larger loans and deposit higher savings amount than women. Women (70%) tend to have more passive saving accounts than men (56%). Issues regarding high non-interest related costs to customers such as commission fees have also been recorded leading to persistence of high levels of indebtedness among low income households. (3) (4) (10)

Investment opportunities introduction
The NFIS 2019-2025 provides guidance on the action plans to achieve the vision of the Royal Government of Cambodia (RGC) in enhancing financial inclusion in Cambodia as stated in the Financial Sector Development Strategy 2016-2025.(2)

Key bottlenecks
Financial sector is characterized by high dollarization (substitution of local currency by USD), foreign ownership and concentration. Access to finance in Cambodia is characterized by high interest rates and the need for collateral to de-risk lending. Limited development of financial markets prevents investors to divest /exit their investments through an IPO.

Sub Sector

Corporate and Retail Banking

Development need
SMEs account for 99% of total enterprises, and 66% enterprises state that access to finance is a challenge, specifically for funding working capital requirements. Lack of collateral restricts financial access for both men and women-owned business.

Other challenges include, high interest rate, information asymmetries and absence or limited financial products tailored to women who own 65% of all SMEs in the country.(4)

Policy priority
SME Development Framework 2006: aims to create a conducive business environment and make SMEs more competitive. It also aims to strengthen the role of banking sector to mobilize domestic financing, prepare policies and mechanisms to expand financial services coverage, and apply principles of financial consumer protection to promote people’s living standard and economic development. (5)

Gender and marginalization issues
Covid-19 adversely affected the social and economic growth in the past two years, specifically for SMEs and the banking system (banks’ assets, revenue, and growth).(6) 65% of all small and medium-sized businesses in the country were owned by women. 59% of women-owned businesses were affected by Covid-19, and 17% of the these closed shop. (7)

Farmers account for 3,282,829 individuals, or the largest target market at 33% of total adult population. Of these, 32% are subsistence farmers, and 68% both consume and sell their produce.

They operate with the second lowest median monthly income of USD 61 and majority (97% of total farmers) are based in rural areas. 55% of this target market primarily use formal financial services; 10% banked and 45% other formal, and 21% excluded. (1)

Investment opportunity introduction
In the agriculture sector, investment is needed to upgrade equipment and provide sustainable solutions that can improve farmers’ livelihoods. (8)

There is a need for financial service providers to create and deliver financial products that are better adapted to SMEs and farmers. SMEs play an essential role in building economic resilience, creating local jobs, contributing to poverty reduction and boosting national economic growth. (6)

As per IFC MSME Finance Gap Report (2017), the unmet financing demand of MSMEs in Cambodia is estimated to be USD 3.7 bn. (9)

Key bottlenecks
SMEs often lack the structure and governance needed to produce documents for loan applications, resulting in business owners resorting to personal loans carrying less preferential terms and conditions. Even though multiple players exist in this sector, there is little evidence of financial products with price points that are beneficial for SMEs.

Industry

Commercial Banks

Pipeline Opportunity

Discover the investment opportunity and its corresponding business model.
Investment Opportunity Area

Access To Finance For Small and Medium Enterprises (SMEs)

Business Model

Invest in financial institutions in Cambodia offering innovative financing solutions for SMEs, particularly for those in the agriculture sector. Many players have emerged in this segment to provide financial services (including, loans, deposits, money transfers, micro-insurance, payment services, payroll services, and international remittance services) to low-income populations with an ambition to improve their livelihood options and to SMEs in the agriculture sector. Such players have been successful in attracting private investor interest, raising funds in the range of USD 3-25 mn.

Investments in the financial services sector in Cambodia require a cautious evaluation of the service providers that have been subject to criticism regarding excessive costs to customer, aggressive loan recovery practices and human rights violations. To combat such malpractices, relevant authorities have taken steps such as setting an annualized interest rate ceiling at 18 per cent and more recently a code of conduct for financial service providers. (24) (25) (28)

Following are some examples of companies that are active in this space as an illustration of the commercial viability of the investment opportunity: AMK Microfinance Institution Plc (AMK), formerly Angkor Mikroheranhvatho (Kampuchea) Co. Ltd., was founded in 2001 to provide microfinance services (including, loans, deposits, money transfers, micro-insurance, payment services, payroll services, and international remittance services) to low-income population to improve their livelihood options and to MSMEs in agriculture sector.

Chamroeun Microfinance Plc. (Chamroeun), formerly known as Chamroeun Microfinance Limited was founded in 2006. It is an MFI providing several types of loan products, including working capital for businesses, group loans and loans for social emergencies. It aims to serve Aquaculture farmers and is working with agri-cooperatives, providing not only finance, but also support in ensuring investment readiness of such enterprises.

Disclaimer: UNDP, the SDG Investment Platform, nor its affiliates (collectively “UNDP”) does not seek or solicit investment for programs, projects, or opportunities described on this site (collectively (“Programs”) or any other Programs, and nothing on this page should constitute a solicitation for investment. The descriptions on this page is provided for information value only, as examples of prior investment related work UNDP has conducted. UNDP assumes no liability for investment losses direct and indirectly resulting from recommendations made, implied, or inferred by its research. Likewise, UNDP assumes no claim to investment gains direct or indirectly resulting from trading profits, investment management or advisory fees obtained by following investment recommendations made, implied, or inferred by its research. Investment involves risk, and all investments should be made with the supervision of a professional investment manager or advisor. The materials on the Website are not an offer to sell or a solicitation of an offer to buy any investment, security or commodity, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction.

Business Case

Learn about the investment opportunity’s business metrics and market risks.

Market Size and Environment

Market Size (USD)
Describes the value in USD of a potential addressable market of the IOA.

> USD 1 billion

Critical IOA Unit
Describes a complementary market sizing measure exemplifying the opportunities with the IOA.

>530,000 small and medium enterprises in Cambodia (6)

SMEs account for 99% of total enterprises, (4) while ~95% of SMEs are not appropriately registered.(13) They contributed 58% of Cambodia's GDP in 2018 (14) and are a key factor for both, industrial sector growth and achieving the Royal Government of Cambodia’s (RGC) ambition to attain upper-middle-income status by 2030 and high-income by 2050.(13)

In 2022, RGC provisioned a budget of USD 100 mn to promote a strategic framework and programs to rehabilitate and promote economic growth following the impact of Covid-19, along the new normal trajectory, which aims to revitalize and strengthen the economy.(12) In 2019, RGC allocated a budget of USD 100 mn to launch the SME Bank to serve financing need of SMEs and banks. (13)

Indicative Return

IRR
Describes an expected annual rate of growth of the IOA investment.

15% - 20%

GPM
Describes an expected percentage of revenue (that is actual profit before adjusting for operating cost) from the IOA investment.

> 25%

Microfinance Deposit-taking Institutions (MDIs) have large distribution networks and customer base, and generate an attractive return on equity (ROE) (15)

USD 2.1 bn or 31.2% of the total credit dispensed by financial service providers comprised household loans, followed by trade and commerce at USD 1.43 bn and agriculture USD 1.31 bn. Non-performing loan ratio was ~1.8% in 2020, up from 0.8% in 2019. (15)

Investment Timeframe

Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.

Medium Term (5–10 years)

As per experts, investments will turn profitable in small to medium term period. Businesses in this area are profitable and generating high IRRs for investors.

Ticket Size

Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.

> USD 10 million

Market Risks & Scale Obstacles

Market - Volatile

Risk of Non-performing assets is high as assessing creditworthiness of borrowers is difficult. With ~95% SMEs not appropriately registered (13), they operate informally and are therefore, unable to provide a history of accounting and other documentation.

Capital - Requires Subsidy

Even when financial services are accessible, low-level of income makes financial services unaffordable. 75% population earns <USD 245 per month, implying low disposable income for servicing costs of financial services. (1)

Low financial capability

Cambodia ranked lowest among 143 countries in S&P Global Financial Literacy with a financial literacy rate of 18%, indicating that a majority of the population has an impaired ability to engage in financial services (less likely to save and more likely to face issues in borrowing). (1)

Need for policy and regulatory strengthening

Despite policy decrees such as interest rate ceilings by the National Bank of Cambodia, a hike in non-interest fee rates has maintained the status quo with the loans continuing to be expensive. On the other hand, financial service providers have responded by innovative mobile-based payment solutions to bring down the costs of operations. (24)

Impact Case

Read about impact metrics and social and environmental risks of the investment opportunity.

Sustainable Development Need

Enhancement in access to financial services by promoting SMEs will strengthen the resilience of the financial sector. SMEs contributed 58% to GDP in 2018 (14), and are a key factor for both, industrial sector growth and attaining the upper-middle-income status by 2030 and high-income by 2050 for Cambodia.(13)

Financial inclusion should be promoted to achieve market-oriented financial sector development, enhancement of financial literacy, reduction of cost for using financial services, improvement of customer protection principles and code of conduct for financial service providers, and enable financial infrastructure and FinTech development to ensure efficient and accessible financial services. (2)

SMEs play a significant role in promoting export income. ~10% of Cambodia’s exports are generated by SMEs. Financial solutions (low-interest rate lending) can help boost local processing plants and strengthen export capacity.(13)

Gender & Marginalisation

The effectiveness of macroeconomic policy in terms of financial inclusion depends on the provision of affordable and appropriate financial instruments with reasonable interest rates to those who lack adequate financing, including unbanked households, SMEs, women entrepreneurs and farmers. (6)

Unavailability of innovative and tailor-made financial solutions for SMEs, including women-led enterprises is a challenge limiting the growth of SMEs in Cambodia. Strengthening the capacity of financial service providers by diversifying their product portfolios that are suited to the needs and service capacities of SMEs can help resolve this issue.(4)

Financial inclusion of the unserved population (including farmers) or SMEs can help address the challenges around poverty reduction in Cambodia, such that they get access to affordable financial services to create and broaden their economic activities across sectors. (2)

Levels of household level indebtedness among Cambodians is one of the highest in the region. Estimates based on consumption data and household surveys suggest a significant increase in household indebtedness with the debt-to-consumption ratio increasing from 24 per cent in 2010 to around 50-80 per cent in 2016 depending on income levels. This has been further exacerbated by COVID-19 where according to the National Institute of Statistics’ Cambodia Socio-Economic Survey, conducted between July 2019 and June 2020, an estimated 1.25 million households, just under 35 per cent of all households in Cambodia, were indebted at that time. (24) (27)

Adequate financing with avenues for market access will also enable farmers to be equipped to reach international markets.

Expected Development Outcome

Provide innovative financing solutions to encourage SMEs (farmers) to expand without bearing high interest and related fee costs of the banks. For example, players in this segment can work in value chain financing, whereby suppliers serve as the guarantor of the loan to the end-user (borrower).

Increase usage of formal financial services from 59% to 70% by 2025 to improve household welfare and support economic growth by offering innovative savings and credit products for SMEs that are affordable and serviceable, improved payment system capabilities, and broader access to insurance. (2)

Strengthen the capacity of the financial sector regulators, improve the regulatory room for innovative products, increase consumer empowerment and protection, and promote financial sector transparency, especially to weed out current concerns around consumer protection. (2) (24)

Gender & Marginalisation

Promote development of FinTech, especially for payment services, to enhance financial inclusion and expand financial access to under-served population in rural areas.(2) This will also help in supporting industry development in remote areas to promote exports by connecting to a seamless payments system.(10)

Provide tailor made financial products to reduce financial exclusion of women by half from 27% to 13% by 2025. (2) Women-led enterprises should be prioritized for financing to help promote women’s roles in agriculture. (8)

Support expansion of SMEs as these enterprises also absorb maximum labor. Work for uplifting the sector that employs >1.2 mn people (12), i.e. ~70% of all job creation.(13)

Improvement in systems and operations that are geared to offer need based, affordable and customer-centric financial products that benefit the growth aspirations of SMEs and are considerate towards the prevalent levels of household indebtedness in Cambodia. (24)

Primary SDGs addressed

No Poverty (SDG 1)
1 - No Poverty

1.2.1 Proportion of population living below the national poverty line, by sex and age

Current Value

17.8% in 2020 (19)

Target Value

6% in 2030 (18)

Industry, Innovation and Infrastructure (SDG 9)
9 - Industry, Innovation and Infrastructure

9.2.2 Manufacturing employment as a proportion of total employment

Current Value

10% in 2016 (18)

Target Value

25% in 2030 (18)

Secondary SDGs addressed

Gender Equality (SDG 5)
5 - Gender Equality
Decent Work and Economic Growth (SDG 8)
8 - Decent Work and Economic Growth
Reduced Inequalities (SDG 10)
10 - Reduced Inequalities

Directly impacted stakeholders

People

Population benefits from increased employment opportunities with the development of SMEs. SMEs absorb >1.2 mn people (12), contributing to ~70% of all job creation in Cambodia. (13)

Gender inequality and/or marginalization

Female-headed SMEs benefit from innovative and tailor made financial products which suit their needs.

Planet

With the development of FinTech, businesses can leverage technology, thereby reducing their carbon footprint and protecting the environment from degradation.

Corporates

SMEs benefit from easy access to affordable and innovative financial solutions which support their expansion. They also benefit from a potential reduction in exploitation by current sources of credit that charge high rates of interest and non-interest fees.

Public sector

Strengthening of SME community through affordable financial solution would result in growth in SME-exports, thereby resulting in sustainable local and national economic growth and increase in RGC's tax revenue.

Indirectly impacted stakeholders

People

Population benefits with higher quality of living derived from improved income and job opportunities closer to their hometowns.

Gender inequality and/or marginalization

As business owned by women expand, they become significant contributor to family income, thereby enhancing their role in society.

Planet

Promoting usage of FinTech solutions can reduce CO2 emissions as customers would not be required to travel to banks or financial institutions often.

Corporates

Banks and finance companies benefit from expand their customer base, and thereby their loan-book, contributing to their profitability.

Public sector

With greater number of registered SMEs, their contribution can be appropriately recorded to reflect the true picture of economic development of Cambodia, while also enabling RGC to resolve the challenges faced by SMEs in an efficient and fair manner.

Outcome Risks

Due to low financial literacy rate, Cambodians lack financial information, experience and competence to make financial decisions, thereby aggravating the reliance on informal finance providers and low access to recourse in case of adverse situations such as unwilful loan defaults.(1)

SMEs face various challenges which hinder their growth, including low technical skills and knowledge, insufficient facilitation and support and competition in national and global markets that may deter them from fully benefitting from businesses under this investment opportunity area.(13)

Covid-19 has increased challenges-financial risk associated with sustenance of SMEs, supply chain issues, and human resource concerns (inadequate staff or concerns about mental health) making the pathway to re-growth slower.(13)

Challenges that are outside the influence of current MFI offerings such as substandard products offered by SMEs and consumers’ low confidence in them, adds to the obstacles to growth for SMEs and has a bearing on the growth of lending portfolio to this segment.(13)

Marginalization risk: Considerable investment required for educating SMEs, particularly from low resource settings on the benefits of preparing themselves for borrowing from formal lenders.

Gender risk: If the products are not designed keeping women entrepreneurs and their needs in mind, women-owned businesses may continue to remain marginalized despite the growth of lending to SMEs generally.

Impact Risks

Lack of impact-focused financial service providers will increase dependency on predatory sources of finance, leading to negative outcomes due to the exploitation of consumers (illegal land grabbing or bonded labor).(1)

If SMEs are not registered, RGC would continue to be unaware of the full landscape of such businesses in the country, limiting their capacity to resolve challenges faced by MSMEs.(12)

SMEs stand to be indebted in the absence of any tangible documentation (enterprise records) or governance structure that can help FIs assess their creditworthiness. This will impact lender portfolios.

Absence of regulatory allowance for innovation burdens RGC with the cost of subsidies for SMEs (to enable them to overcome issues in human resource and production costs) and facilitating low-interest loans.(12)

Support in terms of capacity building and the presence of adequate support infrastructure (banks, digital-infra, MFI branches, grievance redressal system) will be required along with access to finance.

Cambodia requires microfinance borrowers to post collateral such as land titles and seizing asset collateral is the second-most common means of collecting delinquent loans after verbal reminders. Client protection regulations need substantial strengthening to ensure long-term market sustainability. (24) (26)

Climate vulnerability in Cambodia subjects farmers to extreme weather conditions that adversely impact farm incomes. Aggressive lending with vanilla loan products to such constituents can lead to further financial shocks and deeper indebtedness. (29)

Impact Classification

C—Contribute to Solutions

What

Microfinance institute providing credit with a focus on agriculture and MSMEs to address their working capital needs and improve their productivity.

Who

Underserved; SMEs (farmers) including women benefit from access to affordable financial solutions.

Risk

Due to inadequate knowledge and management capacity, funds borrowed may not be used in an optimized way.

Contribution

As of 2021, outstanding loans of MFIs stood at USD 6.7 bn or ~18% of the total outstanding loans of USD 37.7 bn. (15)

How Much

>530,000 small and medium enterprises in Cambodia can be potentially addressed by fueling investments to financial institutions catering to this segment. (6)

Impact Thesis

Provision of affordable loans for SMEs using customer centric systems and processes that promote enterprise growth, financial inclusion of last mile businesses.

Enabling Environment

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Policy Environment

Financial Sector Development Strategy 2016-2025 aims at achieving a sound, efficient, diversified and inclusive market-based financial system that can fulfill domestic demand for financial services and is able to support sustainable economic growth, raise people's income, reduce poverty. (20)

National Financial Inclusion Strategy 2019-2025 provides guidance on the action plans to achieve the vision of the Royal Government in enhancing financial inclusion in Cambodia as stated in FSDS 2016‐2025. (21)

Recovery Plan 2020-2023 monitors and evaluates the implementation of Sub-decree 124 on the Tax Incentives for Qualifying SMEs Operating in Defined Priority Sectors, and then examine the feasibility for revision if necessary.(22)

Cambodia Digital Economy and Society Policy Framework 2021-2035: prioritizes supporting infrastructure growth including financial technology infrastructure and digital payment system for the digital transformation. (23)

Financial Environment

Investment Law: Under article 24, tech industries involving in innovation, digital industries, SME in priority sectors & SME cluster are entitled to investment incentives under article 26 such as income tax exemption for 3 to 9 years, prepayment tax exemption and minimum tax exemption. (18)

In March 2017, the National Bank of Cambodia (NBC) introduced an 18 percent cap on the annual interest rate of microfinance loans denominated in local currency and US dollars. The cap was intended to alleviate borrowers’ repayment burden and further improve efficiency of the microfinance sector. The ceiling was imposed after a prolonged period of concerns on excessive interest rate which could undermine the poverty-reduction purpose and sustained healthy development of the microfinance sector. (24) Please note the outcomes of the implementation of the interest ceiling under the Business Case section of this IOA.

Investment Law: Under article 27, besides the basic incentives above, QIP will receive additional incentives such as VAT exemption for the purchase of locally made inputs, deduction of 150 % from tax base for activities such as research development and innovation. (18)

Other incentives: Government provides low interest rate loans to farmers and SME operators via Agricultural and Rural Development Bank and SME bank. (22)

Regulatory Environment

Regulation on Corporate Governance of Banking and Financial Institutions 2008: to strengthen governance of Banks and Financial Institutions. (23)

Marketplace Participants

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Private Sector

Corporates: Amret, Prasac Investors: The Shanghai Commercial & Savings Bank, Ltd., Agora Microfinance Partners LLP, Rural Impulse Fund II, Cambodia-Laos Development Fund L.P., RenetJapanGroup,Inc

Government

SME Bank, Ministry of Economy and Finance, Ministry of Industry, Science, Technology and Innovation is in charge of policy implementation for SMEs, Ministry of Commerce

Multilaterals

PROPARCO, Global Climate Partnership Fund, SWITCH to Solar Project, Waste to Energy, European Microfinance Platform, Asian Development Bank

Non-Profit

Cambodian Microfinance Association, Oxfam

Public-Private Partnership

Khmer Enterprise and Cambodia Microfinance Association Partnership

Target Locations

See what country regions are most suitable for the investment opportunity. All references to Kosovo shall be understood to be in the context of the Security Council Resolution 1244 (1999)
country static map

To ensure 100% financial inclusion, business models must have a last mile reach.

Phnom Penh

Phnom Penh is the capital of Cambodia, centralizing majority of MFI offices.

Kandal

Kandal is the biggest province in Cambodia with many SMEs.

References

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