During an interview session on the sidelines of the seminar, held at the SME Bank of Cambodia head office in Phnom Penh, Hidetaka Tabata, Director, International Cooperation Division of PRI, who led the seminar, said that in June 2023, PRI and JFC-Micro launched a technical cooperation project on SME finance with SME Bank of Cambodia.

The project aims to develop SME Bank’s human resources and improve its credit operations by transferring JFC-Micro’s know-how to the SME Bank of Cambodia staff. The first seminar held in June was on debt management.

The second seminar yesterday about start-ups in Japan was held as part of the project and provided SME Bank’s staff with know-how on supporting start-ups, with themes such as ‘JFC-Micro’s Activities for supporting Start-up’ and ‘Points of Making a Business Plan.’

Tabata, meanwhile, said financing SMEs in Cambodia remained a challenge as most of them are in the informal sector with no financial statements to produce and no registration.

Despite this, SMEs are significant drivers of Cambodia’s economic growth with 99.8 of companies in the country belonging to this category, contributing to 70 percent of employment and 58 percent of GDP.

However, SMEs face several challenges including access to finance, access to markets, low productivity, lack of skilled labour, lack of innovation and complicated registration procedures.

While addressing the participants of the seminar, Tabata said that supporting business start-ups is one of the important roles for government financial institutions and JFC-Micro is a leading entity that plays this role in Japan.

The acquisition of know-how on supporting business start-ups will not only respond to the financial needs of the founders but also expand the possibility of providing cooperative support with private banks.

It was also revealed with the help of graphs that in Japan, supporting startups could boost job creation at a significant level.

About Japan’s policy-based financing, he said that when private financial institutions reduced their financial support due to economic crises such as the Covid-19 pandemic, government financial institutions actively provided financial support to curb the credit contraction.

Regarding Japan’s policy-based financing, Tabata explained that it is an effective tool that achieves public purposes in areas where private financial institutions alone cannot bear credit risk.

“Instead, the government bears the risk for medium to long-term projects through the Fiscal Investment and Loan Program (FILP),” he said.

FILP provides long-term, fixed, low-interest loans through government creditworthiness while avoiding taxes and other public burdens by raising funds from the market.

Meanwhile, SME Bank of Cambodia has two methods for financing SMEs in the country – direct financing and co-financing schemes. While the Bank focuses more on channel and people development to support priority areas in the direct financing scheme, in the co-financing scheme it collaborates with partner banks and financial institutions based on the government’s policy direction.

“SMEs are the crucial driver for economic growth, which is why the Royal Government of Cambodia initiated and established the SME Bank of Cambodia to address the financial needs of the target group. To achieve this direction, the SME Bank of Cambodia must focus on developing product suits distribution channels, especially human resources. We’re pleased and appreciative of the support from PRI and JFC-Micro in the area of capacity development. Thanks to PRI and JFC-Micro for their knowledge and experience sharing. We hope that this collaboration will further enhance the offer of better financial support to SMEs in Cambodia,” said Lim Aun, CEO of the SME Bank of Cambodia.