Harrison White
Over 200 stakeholders have gathered to share practices and learnings on the access to finance and formalization support at the Women Entrepreneurs Forum on “Financial and Market Access for Women Businesses’ Growth”.
The forum offered the opportunity for women business owners to access information and solutions addressing business issues, on products and services development while stimulating the opportunities for establishing a business network.
H.E. Koung Sorita, Under Secretary of State from the Ministry of Women Affairs, said during her opening remarks that the forum was an opportunity for women entrepreneurs to strengthen their ability especially, to get clear information on the loan process for MSMEs, product supply chain, and business registration,”
“The involvement from all stakeholders including associations, NGOs, especially women entrepreneurs themselves is needed to tackle those challenges,” she added.
More access to non-secured lending
Launching in 2020, SME co-financing facility dubbed SME Bank was designed to work with women entrepreneurs by providing loans of up to $500,000 for working capital or expenditure with interest rates starting from 5.5% a year.
Loans currently have collateral requirements based upon the partner financial institution, proof of a minimum turnover of $61,500 annually as well as formal registration with the Ministry of Commerce.
H.E Rath Sovannorak, Assistant Governor and Director General of Banking Supervision of National Bank Cambodia mentioned that entrepreneurs need access to finance to sustain and grow their business, however, it is required to have the financial literacy to use the loan effectively.
“I encourage all financial institutions to provide loans with attention to the ability to pay back rather than collateral by using the information from the Credit Bureau Cambodia,” he added.
In December, the SME Bank said it was creating a working group to evaluate waiving the collateral requirements for new loans to qualifying local small- and medium-sized enterprises.
According to a 2019 IFC study, challenges around access to finance include entrepreneurs being unable or discouraged from taking out loans due to high collateral requirements, high-interest rates, and delays in processing loans.
“Despite high liquidity in Cambodia’s banking system, banks find it difficult to lend to SMEs due to their poor financial records and lack of information on whether would-be borrowers have repaid loans and have too much debt now,” the report found.
“Also, a weak judicial system makes enforcing loan agreements and liquidating collateral rather uncertain,” it added.
Pact Cambodia assists women entrepreneurs to formalize
Ms. Sabine Joukes Pact Cambodia Country Director emphasized that Women entrepreneurs need continuous support ranging from information to the market for them to exercise their business knowledge and participate in a fast-growing and competitive market.
“Having access to safe and responsive financial products, digital knowledge, and wider markets for their products and services thrives a business path for them to do the betterment of their business. While young women entrepreneurs are empowered economically, they will influence their community and contribute to the country’s economy,” she added.
The United States Agency for International Development (USAID) and Pact Cambodia launched In Her Hands, a publication that provides women entrepreneurs in Cambodia with the tools to build a thriving business.
By offering practical resources and case studies, In Her Hands acts as a how-to guide that can enable any entrepreneur to address challenges they encounter in their business, such as how to register with the National Social Security fund.
To read more about the ‘In Her Hands’ booklet click here.
However, for many business owners, it is not a lack of understanding, but burdensome requirements of monthly tax filings, expensive annual licensing fees and uncompetitive tax requirements that remain the real reasons for not registering their companies.
A report by the International Labour Organization estimates approximately 90% of those who are employed in Cambodia are part of the informal economy as Cambodia’s General Department Of Taxation continues to advocate for more formalization under its strong drive to increase revenue collection.
