By Sarak Duong – Managing Partner at SME Frontier Partners
SMEs are central to Cambodia’s economic development, job creation and local value addition. Cambodia’s Economic Census 2022 recorded approximately 753,670 economic units employing around three million people, alongside many others engaged in informal businesses and self-employment.
Cambodia has developed a broad SME-support ecosystem involving government agencies, public financial institutions, business associations, development partners and private service providers. The priority now is not simply to introduce more policies, training or financing schemes, but to ensure that support reflects SME realities and delivers measurable improvements in productivity, management, market access, investment readiness and sustainability.
Working directly with SME owners has given me a closer view of both their potential and the practical challenges they face in building sustainable and competitive businesses.
The following areas deserve greater attention:
1.Move from a one-size-fits-all approach to targeted SME support
SMEs face common structural challenges, including limited access to finance, weak management systems, skills shortages and difficulty entering formal markets. However, their needs vary substantially by sector, size, location, maturity and business model.
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A rice mill or cashew processor may need working capital, quality-control systems, export certification and stronger sourcing arrangements. A food processor may require product testing, better packaging, food-safety certification and access to modern retail. A technology start-up may instead need seed capital, product-development support and investor networks. Meanwhile, a tourism business in Siem Reap may need financing to renovate its facilities, reposition its services and respond to changes in visitor demand.
These businesses should not receive identical interventions simply because they are classified as SMEs. Support should begin with proper segmentation and enterprise-level diagnosis, considering business stage, size, market orientation and growth potential.
Cambodia’s financing landscape already reflects some segmentation through schemes for general SMEs, microenterprises, women entrepreneurs, digital businesses and tourism enterprises. The same principle should be applied more systematically to technical assistance, skills development, market access and investment-readiness support.
2.Translate policies into practical and measurable support
Good policies provide direction, but policies alone do not improve SME operations. Businesses need interventions that resolve specific constraints and help them complete practical improvements.
Roundtables, networking events and policy dialogues remain valuable because they allow SMEs to raise concerns and build relationships with government agencies, banks and development partners. However, these activities should be linked to clear follow-up mechanisms.
When an SME struggles to obtain finance, the response should not end with another financial-literacy workshop. It may need help preparing reliable accounts, calculating its financing requirement, developing cash-flow projections and submitting a credible loan application. A food producer seeking supermarket or export access may need testing, certification, packaging improvements, production upgrades and direct buyer engagement.
Programs should therefore measure results beyond workshops delivered or participants trained. Relevant indicators include SMEs obtaining certification, adopting accounting systems, securing financing, improving productivity, entering formal supply chains, signing buyer contracts, increasing sales or exports, and creating sustainable employment.
3.Design support around the SME, not the program
SME-support initiatives are sometimes shaped more by the implementing organization’s budget, timeline and predetermined activities than by the actual needs of participating enterprises. Consequently, SMEs may attend repeated workshops but receive limited support to implement what they learn.
An owner may complete training in business planning, digital marketing and financial management yet still lack a practical business plan, monthly management accounts, an effective online sales channel or clearly assigned staff responsibilities. Knowledge has been delivered, but the business has not made the organizational changes required for results.
A more effective model would begin with an assessment of each enterprise or SME group, followed by an appropriate mix of technical training, on-site coaching, professional services and implementation follow-up. Instead of offering only a short financial-management course, a program could help an SME establish a chart of accounts, prepare monthly reporting templates, separate personal and business transactions, and review its initial financial reports.
The SME’s problem—not the availability of a standard course—should determine the support package.
4.Strengthen coordination and reduce duplication
Cambodia has many institutions supporting SMEs, including government agencies, private-sector organizations, business associations and bilateral and multilateral development programs. This diversity creates valuable resources, but it can also fragment implementation.
Programs often use separate application processes, databases, consultants and beneficiary-selection systems. Some visible or well-connected SMEs may join several programs, while less visible enterprises, particularly outside Phnom Penh, receive little support.
Stronger coordination, information sharing and referral mechanisms are therefore needed.
Cambodia could develop a more integrated SME-support system comprising a common enterprise profile, diagnostic results, a record of assistance received and referrals to relevant institutions.
Government agencies should take a stronger convening role by clarifying responsibilities, encouraging joint programming and ensuring that development partners build on one another’s interventions. Coordination should not centralize every activity; it should ensure that separate programs contribute to a coherent SME-development pathway.
5.Build stronger SME market intelligence
Many Cambodian SMEs make investment and production decisions with limited reliable information on market size, consumer trends, competitors, pricing, buyer requirements and export opportunities.
Market studies should focus on practical business decisions: which products and customer segments are growing, what standards buyers require, how distribution channels operate, what prices and margins are achievable, and where Cambodian producers have a realistic competitive advantage.
A cashew processor considering expansion needs more than national production figures; it also needs information on kernel prices, buyer specifications, processing yields, certification, competing countries, logistics costs and buyer commitment. A local personal-care manufacturer similarly needs evidence on imported brands, consumer preferences, retail margins, packaging expectations and distribution costs.
Market intelligence should also identify opportunities to link Cambodian SMEs with larger domestic and foreign-invested companies. Findings should be translated into short, practical sector briefs in Khmer and English, clearly outlining opportunities, requirements and risks. SMEs—not only officials, consultants and conference participants—should be able to use this information when deciding what to produce, where to invest and which markets to pursue.
6.Put greater responsibility on SME owners themselves
Government and development partners can improve the business environment and provide finance, training and technical assistance, but they cannot manage an enterprise on behalf of its owner. Sustainable SME development ultimately depends on owners investing in their own organizations.
Some Cambodian businesses grow through the founder’s energy and personal relationships. As the company expands, however, a founder-centered model can become a constraint: decisions remain concentrated, financial information is incomplete, employees lack authority and operational knowledge is undocumented.
Owners should strengthen management systems, financial discipline, governance and organizational capacity. Practical measures include separating personal and business finances, preparing monthly management accounts, maintaining reliable inventory records, defining staff responsibilities, introducing internal controls and setting a clear growth strategy.
They must also invest in qualified employees, professional advice, technology and business systems. An SME seeking a substantial bank loan or external investor cannot reasonably expect financing while withholding reliable financial information or refusing to establish basic governance and reporting arrangements.
Cambodia’s National Strategy on Informal Economy Development 2023–2028 recognizes that enterprises need not only simpler registration and lower compliance burdens, but also stronger skills, business capacity, productivity and resilience. Formalization should therefore be treated as a business-development process, not merely an administrative requirement.
7.Promote informed entrepreneurship
Entrepreneurship should be encouraged, but it should also be approached responsibly. Starting a business should not rely solely on enthusiasm generated by books, seminars, social media or inspirational speakers.
New cafés, restaurants, online shops, farms and consumer brands are often launched because a sector appears popular. Entrepreneurs may underestimate competition, rental costs, distribution margins, inventory needs, regulatory obligations and the working capital required before reaching break-even.
Before committing substantial resources, entrepreneurs should assess the market, test the product, calculate production and operating costs, prepare realistic sales scenarios, review regulatory requirements and identify major risks. A small pilot should normally precede major investment in premises, equipment or inventory.
For example, a food-processing start-up should confirm raw-material availability and seasonality, test the product, identify licensing and food-safety requirements, obtain distributor feedback, calculate retailer margins and estimate losses from unsold or expired inventory. Its business plan should test both an expected case and a downside case in which sales are lower, costs are higher or market entry takes longer.
8.Conclusion
Effective SME development in Cambodia requires a shift from broad-based activities to targeted, coordinated and outcome-driven support. Success should be measured not by policies issued, workshops conducted or attendance, but by whether enterprises become more productive, better managed, financially disciplined, connected to markets and capable of sustainable growth.
The Government should provide a coherent enabling environment and coordinate the SME-support ecosystem. Development partners should address identified capability and market gaps, while financial institutions should match financing with realistic assessments of SME readiness. SME owners must also strengthen their businesses. When these responsibilities are aligned, SME support can contribute more effectively to Cambodia’s competitiveness, diversification and long-term development.
Sarak Duong has 25+ years of experience in private-sector development, including 15 years with the International Finance Corporation (IFC) of the World Bank Group across Cambodia and the Mekong region, and got appointed as IFC Country Head for Cambodia in 2015.
Since 2023, he has served as Managing Partner of SME Frontier Partners, a corporate finance and investment advisory firm, and as Independent Board Director and Senior Corporate Advisor to several financial institutions and companies.
