Venture capital firm OBOR and start up incubator Khmer Enterprise (KE) will aim to lower SMEs lending and investment risk for financial institutions under its recently launched SME Investment Readiness Program (SME IR Program).
The program has partnered with five leading financial institutions (ABA Bank, AMK, Wing Bank, SME Bank and ACLEDA Bank).
Cambodia Investment Review had previously reported on the project when it first launched and focuses on finding and upscaling mature SMEs in the country, so they can effectively raise capital.
Shivam Tripathi, Executive Director at OBOR said: “SME financing is a big challenge in Cambodia. We are very excited to be working with Khmer Enterprise to bring more SMEs to an investment-ready stage. With this program, we will aim to create a template which can then be used to make even more SMEs investment ready.”
Chhieng Vanmunin, CEO of Khmer Enterprise who said that: “Sponsorship from the banking institutions in this program demonstrates the endeavor of different stakeholders in the entrepreneurial ecosystem to enhance access to finance for startups and SMEs. Khmer Enterprise is pleased to be the platform to engage in such an effort.”
Improving SME access to capital
Some of the most common barriers for SMEs and Start-Ups receiving capital funding include lack of formalized accounting process, unproven track record and lack of collateral.
According to an IFC report of the 59% of enterprise owners with financial records, 84% record only profits and losses, and state that keeping more detailed records is too complicated and unnecessary. This lack of financial records hinders borrowing from financial institutions.
In the same report ninety percent of surveyed enterprises started up with the owner’s capital and/or money borrowed from family and friends, but as a business grows, owners would rather borrow from a financial institution so that family and friends are not aware of their need for financing.
The Royal Cambodian Government’s Financial Inclusion strategy local financial institutions can promote cash‐flow based lending for SMEs especially those with high potential but lack of financing. They added, banks could introduce products using movable collaterals and receivables such as the establishment of SME banks by the government will address the challenges in access to credit for SMEs.
SME lending sentiment was echoed by the banking institutions
Kea Borann, Chief Executive Officer at AMK, commented, “AMK is proud to support the growth of SMEs in Cambodia through this great initiative in addition to our wide range of financial services that we offer to SMEs in Cambodia.”
Igor Zimarev, Chief Marketing Officer at ABA Bank, commented, “Access to financial know-how is important for the sustainable growth of SMEs and startups. ABA is pleased to contribute to Khmer Enterprise which implements the program with OBOR to create opportunities and help SMEs, startups and entrepreneurs advance and thrive. Through this sponsorship, ABA continues to demonstrate its commitment to support the development of the SME sector in Cambodia, which is a vital component of the country’s long-term economic growth”.
Han Peng Kwang, CEO of Wing Bank said, “SMEs play an integral role in contributing to the economic growth of Cambodia. They create jobs for the community, support larger companies, and sort out the problems in the communities using their products and services. Investing in SMEs is supporting the growth of the community. I believe that this SME Investment Readiness Program will enrich the participating SMEs with the necessary knowledge to drive their business to greater success.”
Lim Aun, Chief Executive Officer at SME Bank of Cambodia, commented “SME Bank is pleased to be supporting the KE & OBOR SME Investment Readiness program, the first of its kind in Cambodia, that will focus on making SMEs better prepared to receiving funding from financial partners, in order to grow their businesses further.”
OBOR SME IR Program
Under the program, OBOR will work with SME business owners to improve their financial management, business projections and better understand investor requirements.
The training will be available to local companies that can show either $100,000 in historical revenue or $5,000 in monthly income – this revenue however must be officially recorded.
The half-day workshops conducted in English will be held on Saturdays at Khmer Enterprise Head Office, with the core program taking place from February to May 2022.
At the end of this group training, OBOR alongside the program partners will select top SMEs among the 25 SMEs to proceed to the final phase.
This final phase will run from April to May 2022, an intensive program where SMEs will have 1-on-1 support from market-leading SME business advisors and operators.