Lack of Finance Holding Back Enterprises: Experts

MSE meeting (Photo: CEN)

Chun Sakada, VOA Khmer
Phnom Penh Wednesday, 10 November 2010

"A lack of long-term financing can hold businesses back for years."

Owners of small and medium enterprises in Cambodia face a lack of capital and low-interest credit, which is hurting their ability to expand their businesses, a group of experts said Wednesday.

More than 300 participants gathered Wednesday for a national forum sponsored by the International Finance Corporation, the private sector arm of the World Bank, to find ways to make smaller businesses prosper.

“The challenges facing small and medium enterprises in Cambodia are lack of capital for expanding business operations, lack of access to credit with low interest rates and long-term credit, limited collateral to pledge for credit, and loans are small and service fees are as high as those of large loans,” said Te Taingpor, a co-chairman of a private-sector SME working group.

Small and medium enterprises, which play a key role in economic growth, cover sectors from agriculture to handicrafts and constitute a labor force of 1.4 million people, he said.

But the enterprises are hampered in getting loans by a lack of collateral, said Matthew Gamser, an IFC adviser for East Asia and the Pacific. A lack of long-term financing can hold businesses back for years, he said.

That means “companies are not growing fast enough to provide the jobs critically needed for Cambodia’s rapidly expanding labor force,” Gamser said. “Each year, an estimated 250,000 young Cambodians reach working age, ready to join the labor force and most of them are in rural areas.”

Ouk Maly, deputy governor of the National Bank of Cambodia, said that challenge for SMEs is a lack of trust of banking and financial establishments, reflecting a lack of information available to them.

In Slump, Officials Look to Small Businesses

By Chun Sakada, VOA Khmer
Original report from Phnom Penh
26 May 2009

With the global downturn slowing large-scale investment in Cambodia, commerce officials are hoping that small and medium enterprises can boost growth.

“SMEs play an important role in enhancing economic development and creating sustainable employment and income,” Commerce Minister Cham Prasidh told a seminar Tuesday. However, he said, about 80 percent of these enterprises never get loans from banks, he said.

Cambodia’s economy is expected to contract between half a percent and a full point, a drastic fall from the near double-digit growth it has experienced in recent years.

US and European demand for its exported garments has plummeted, while tourism numbers have dropped, but agriculture remains the top employer. Cambodia set up a new policy to help smaller businesses, especially in agriculture, pull the country along.

“This will include a new facility to provide loans to SMEs in agriculture and agribusiness to be launched tentatively in fall, 2009,” the government said in a joint statement with UNDP and the International Trade Center.

“Cambodian SMEs are suffering from a shortage of credit, coupled with relatively high interest rates applied by banks to small businesses, resulting in, often, a lack of sufficient working capital for the enterprises,” Cham Prasidh said. “Access to finance is one of the major impediments in Cambodia to producers and exporters of commodities.”

National Bank Director-General Tay Nay Im said local and international partners were giving training to smaller enterprises “by all means” to help produce “more reliable financial statements and applicable business plans” to help assess the risks of their businesses.

“This last task is very challenging and complicated and time consuming,” she said. “We need a lot of effort. By doing this, the obstacle to the small and medium enterprises in getting access to finance has been removed.”

The International Trade Center has negotiated with commercial banks to provide small loans, Roger Megelas, the center’s senior adviser for small and medium enterprises, told reporters Tuesday.

“We reached two commercial banks which will begin to provide loans in October 2009,” he said. “We will provide loans to 100 small and medium enterprises.”

Cambodia seeks effective ways to spread key information to SMEs

September 13, 2007

Participants from Cambodian public and private sectors Thursday discussed effective strategies to spread information about key developments in the business environment to small and medium enterprises (SMEs).

The Cambodian government is currently undertaking significant reform measures to improve the business environment and in particular creating a more enabling environment for SMEs, which constitute well over 90 percent of all of Cambodia's business enterprises, a press release said.

Discussions focused on how to get information about new commercial laws, the streamlined business registration process, the decentralized business registration initiative in Battambang, the SME Subcommittee's new business licensing hotline, and the financial accounting template for SMEs, it said.

The participants noted the different strategies required to disseminate information to SMEs and local government officials, and they exchanged experiences on what works well in Cambodia and elsewhere, it added.

"There have been extensive improvements made by the government to facilitate the development of SMEs over the past two years, but we need to improve awareness of these reforms among the small business community and local government officials," said Keo Rottanak, Secretary of the SME Subcommittee.

"By getting more information about the reforms out to SMEs and local government officials, enterprises will be able to take advantage of the improved legal and regulatory framework for business," he added.

The meeting was hosted by the SME Secretariat and the Cambodian Ministry of Industry, Mines and Energy (MIME) through support of the Asian development Bank's technical assistance under the Cambodia SME Development Program, the press release said.

Source: Xinhua

Cambodian products face somewhere between skepticism and curiosity

Monday, April 9, 2007
By Sarah Oliveira
Cambodge Soir
Unofficial translation from French by Tola Ek

Click here to read Cambodge Soir’s original article in French

A fair was organized this weekend in Phnom Penh to display made in Cambodia products. Cambodians place more confidence in local products, but some remain skeptical.

The Association of Small and Medium Enterprises (SME) in Phnom Penh organized last weekend the fifth fair named “Buy Cambodian” in order to promote products made in Cambodia to the city residents. Held in front of Wat Botum, about 30 entrepreneurs displayed artisan products, as well as books, ice, rice, “made in Cambodia” beverages. “Cambodians often say that local products are of bad quality, but in reality, it’s because they don’t know them, they never try them. Once they know them, they are satisfied with them, they will buy again,” En Buntha, an accountant, said.

Te Sophal, an employee of Angkor Coffee, noted that himself as well as numerous of his compatriots believe that anything produced in one’s own country is not good. “It’s to fight this misconception that I am participating in this fair,” he explained. Chuor Chheng, the owner of a SME which produces dried foods, said that he regrets that Cambodians are going in large number to fairs boasting foreign products, and that the crowd even creates traffic jams in front of these “World” exposition center, but when it comes to “Buy Cambodian” fair-type, the crowd is not coming. Protein Food, a company set up in 1998, succeeded in making itself a name on the local market, next to dried meat imported from China and neighboring countries. With $250 of profit per month, Chuor Chheng earns more than when he was a teacher or an employee of a private company. “It is my true pride to be on my own,” he boasted.

Displaying his interest in front a stand, Phene Phnaith said that he was already convinced about the good quality of Cambodian products. “When it is made locally, it is both beneficial for our economy and also for our wallet because it is cheaper!” he said.

Gathering the crowd in front of his stand, Em Sitha offered samples of palm beer. “We have too many orders from wholesalers in the province, and the production cannot catch up,” he confided. The beer which was created in 2001, has a good taste, however, the misconceptions on Cambodian products give them a hard time... With a cup of sample in his hand, a visitor obviously displayed his liking of this beverage which he just discovered. But when it comes to buying a bottle, at the same price as a regular beer, he hesitated: “I’m afraid to catch diarrhea tomorrow…” he said while walking to the next stand.

“A few years ago, Cambodians lack confidence in local products. Some still believe that we are not respecting the hygiene rules during the processing,” Kham Sophanary, an ice producer, explained. “But consumers like organic products, and this is the strong point of small Cambodian enterprises which followed this path.” The presence of several organic rice producers in the fair is the proof of such consumer taste.

Her hand filled with purchases, Pech Nhel was sold to the products displayed at the fair. “We must buy Khmer!” she stressed. “Even if the quality is somewhat lower than imported products, it is only by supporting local products that small Cambodian entrepreneurs will be able to invest and improve the quality of their products,” she said with true conviction.

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