CGCC-guaranteed loans reach $92.7 million

CGCC-guaranteed loans reach $92.7 million

These numbers were disclosed by CGCC CEO Wong Keet Loong on January 17 at the state-owned enterprise’s annual seminar on the “Role of Credit Guarantee Schemes in SMEs Development in Cambodia and ASEAN”.

The Malaysian shared that, as of November 30, the outstanding guaranteed amount was $51.2 million out of the $70.9 million worth of loans covered by the LGs – remaining in the target 70-80 per cent range at just over 72 per cent.

He broke down the proportions of LGs by sectors and other categories: retail trade (29%), services (11.6%), industry (8.3%), agriculture (2.6%), other (48.4%); SMEs (96.45%), large firms (3.55%); unsecured (66.70%), secured (33.30%).

Speaking at the seminar, Ministry of Economy and Finance secretary of state Mey Vann hailed SMEs as drivers of employment as well as income for locals and hence key vehicles for socio-economic progress in Cambodia, largely crediting these smaller businesses for reducing the poverty rate from 50.2 per cent in 2003 to 17.8 per cent in 2020.

He highlighted SME development as a government priority, stressing that a raft of key strategies, policies and even institutions have been established to this end.

And that includes the CGCC, which was set up to share risk with financial institutions and improve the accessibility to formal loans for businesses, especially SMEs, he said.

Vann identified the “leverage effect” as a major advantage of the credit guarantee mechanism, explaining that funds from the state budget allocated to the CGCC to secure credit are only used up when borrowers default on loans.

“Therefore, $200 million budgeted by the state as capital for the CGCC will support the issuance of new guaranteed loans worth more than $200 million,” he said, adding that an underlying “countercyclical crisis tool” helps to maintain market confidence and stabilise economic activity, especially during times of crisis.

Effective policy allowed the Cambodian economy to grow by an estimated five per cent in 2022, which is expected to accelerate to about six per cent this year, reversing the 2020 contraction, according to Vann.

Nevertheless, Vann added, challenges remain that could dampen economic outlooks for the Kingdom, such as the protracted Russo-Ukrainian conflict, rising inflationary pressures and geopolitical competition in the region, which he stressed would require constant preparedness to respond in a timely and effective manner.

“In this context, SMEs are an indispensable driving force that ensures the sustainable, inclusive and resilient development of the Cambodian economy. The government will continue to implement supportive policies through credit guarantee mechanisms to ensure SME development.

“The CGCC is the first credit guarantee institution in Cambodia, which was established with a deep commitment by the government for short-term use during the Covid-19 crisis’ onslaught on Cambodia.

“[The CGCC was also] to launch a credit guarantee scheme in a timely manner to support the rehabilitation and sustainability of local businesses,” he said, commending the institution for its work over the past two years.

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.

The finance ministry has authorised the extension of the BRGS beyond December 31, 2022, until all funds have been utilised, the CGCC confirmed in a statement earlier this month, which noted that the terms of the scheme had also been updated, including the maximum guarantee amounts for differing categories of businesses.

The statement disclosed that loans, mostly unsecured, totalling about $89 million were guaranteed by the CGCC as of December 31 under the BRGS.

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