The government yesterday launched a $50million special fund for small and medium Enterprise (SMEs) to boost competitiveness, productivity and daily business operations amid the impact of the pandemic Covid-19 and a 20 percent withdrawal of zero tariffs under the EU’s Everything but Arms (EBA) trade deal.
The government’s special fund to SMEs will focus on agro-processing, food processing, agri-business, crops, vegetable, livestock and aquatic business and any enterprise that uses raw materials from agriculture.
The loss of a fifth of the EBA aid will cost Cambodia just over $1 billion but the government has been working to offset it with various measures.
SMEs can borrow up to $300,000 with an interest rate of 6 percent per year for working capital (for up to two years), and 6.5 percent per year for investment funds over a five-year payment period). The government will give a one year grace period payment because the SMEs can currently pay only the interest rate for the first year.
Eligible SMEs for the special fund are those SMEs working on processing agricultural products, are able to expand operations, can create jobs from five to 30 places and are registered SMEs regarding the taxation department, and relevant ministries, according to Kao Thach, director-general of Rural Development and Agriculture Bank (RDAB).
He said that this is a special package fund, so the bank will also provide training to them regarding business plans, financial statements, good governance, marketing plans, financial management and training on technical support.
Kao added that the bank will have to ask for collateral, but the bank can offer up to 80 percent of the asset. The bank will also receive the account receivable statement, machinery and equipment in the factory as collateral, he added.
This measurement is to absorb all the impact from the two crises and take action to stimulate the economy to work smoothly and stabilise business activities while expanding the business in the near future,” said Ros Seilava, undersecretary of state at the Ministry of Economy and Finance, and chairman of the Rural Development and Agriculture Bank (RDAB).
“We are in the critical situation so, with this measure, we hope that there will not be more challenges in the future, but it is an opportunity to start on cooperation between the government and private sector,” Ros said.
“We focus on enterprise companies that create from five to 30 jobs. We focus on existing businesses that can expand their production and operations and we want to see a positive result on the economy,” he said.
Kao, however, said that government has always considered the private sector as the engine for economic growth. Therefore, the government concentrates on the private sector.
He said that each enterprise can borrow up to $300,000. He hopes that if each enterprise borrows around $50,000, this loan can be delivered to up to 1,000 SMEs across the country.
“We want to deliver to all SMEs in the Kingdom,” Kao said. “It is the proper interest rate. The government is absorbing a loss of 2.5 to 3 percent per year on it. “We will give a one-year grace period for SMEs to pay only the interest rate and the payback can be flexible.
“From now on, all SMEs that are working on the agro-processing, food processing and agricultural sectors can apply for the special fund.”
Thyda Thaung, founder of Thaung Enterprise, a salt supplier in Kampot, told Khmer Times that the special fund will help her to scale up her salt business.
“This is a good loan from the government which is giving an opportunity to SMEs who really need funds to scale up. Plus we hope the RDB would consider and make life more convenient for us as SMEs, especially regarding the collateral part,” Thyda said.
“The interest rate is quite good compared with other banks but we are happy if they could consider lowering it more,” she added.
Thyda added that she found it a bit hard at the moment during COVID-19 because everyone is facing the crisis while our farmers and staff are really needing more help during this time. “To have funds to help for this moment is much appreciated by us. During this pandemic, everyone is so panicky,” she added. “Our exports are fine. It’s just maybe the client might be put off a bit.”