Cambodia: Credit guarantee system approved in principle
MINISTER of Economy and Finance Aun Pornmoniroth approved in principle the concept of strategic framework for establishing the Credit Guarantee Corp Cambodia, according to a statement from the Ministry of Economy and Finance (MEF).
MEF’s statement read that the initiative of the establishing corporation is to align with the government’s response mechanism for the fourth-round measures to mitigate the impact of COVID-19 on businesses and workers in Cambodia during the health crisis and to promote economic growth and help businesses rebound.
It said that the Credit Guarantee Corp Cambodia will play a role in providing a credit guarantee scheme (CGS) to companies and businesses in prioritised sectors that are severely affected by COVID-19 in order to enable them to increase the possibility of accessing financing for their working capital, ensuring a sustainable business and aligning with a new context for the business after coronavirus is beaten.
A meeting on the subject discussed the purpose on the establishment of the corporation. It noted challenges are expected to happen during its operation and an action plan to implement the project was prepared.
“The meeting has agreed in principle on the concept of strategic framework for establishing the Credit Guarantee Corporation Cambodia. For the next step, the MEF will proceed with the procedure for the regulation framework, deliver relevant documents, and cooperate with relevant stakeholders in order to make the Credit Guarantee Corporation Cambodia operational soon,” the statement read. “To ensure that the Credit Guarantee Corporation of Cambodia provides credit guarantees for the right targets and efficiency in the urgent stage of COVID-19, the MEF will set up a policy to provide the credit guarantees by determining the sectors, sorts of company, types of businesses that are potential for getting a credit guarantee from the Credit Guarantee Corporation of Cambodia,” said the MEF.
MEF spokesman Meas Soksensan, told the Khmer Times that the ministry continues working on the criteria and procedures on how to guarantee it gets to the next working phase, but we have reserved the budget to support this scheme.
“We [the government] have an initiative to help the private sector and facilitate the private sector. However, we have to make sure that the money is not lost. It is risk-sharing with the private financial sector,” he added.
“We have to be careful with this because we cannot just give guarantees, but we have to ensure it is not run at a loss because it is a lot of money.”
He said that the credit-guarantee scheme will guarantee loans that are drawn down from the SME Co-Financing Scheme.
On May 26, the government rolled out the fourth-round measures aimed at mitigating the impact of COVID-19 on businesses and workers in Cambodia. These latest measures consist of a combination of new measures and an extension of those measures already in place.
In addition to providing relief to businesses and workers amid the Covid-19 outbreak, this round of measures is also intended to promote economic growth and help businesses rebound after the COVID-19 crisis.
Additionally, the MEF will establish a $200 million credit guarantee fund to provide loan guarantees to ease the cash flow and working capital pressures of businesses in all sectors, which is expected to generate liquidity of at least $2,000 million.
The MEF will also provide additional financing of up to $300 million to promote growth in key sectors during and after the Covid-19 crisis.
On July 14, the MEF approved the following measures aimed at supporting small and medium enterprises (SMEs) for the immediate, short and medium term.
For immediate measures, it will reduce red tape for SMEs, promote financial support to SMEs through the SME Bank and Rural Development Bank.
For the measures in the short and medium term there will be a focus on regulatory framework reforms and implementation, business services, financial support, SME marketing, human resources, research and the development and promotion of an entrepreneurial mindset.