High-Price Loans Are Stifling Small Businesses

Cambodia’s many thousands of small and medium-sized enterprises lack the tools they need to thrive, particularly their ability to present themselves as credible customers to commercial lenders, a business forum was told Sept 12.

Given prevailing high interest rates, borrowers would benefit from low-cost loans borrowed directly from development banks, business tycoon Te Taing Por told the forum hosted by the Small and Medium Enterprise secretariat and the Ministry of Industry, Mines and Energy.

“If the World Bank, ADB and other international aid organizations want to give loans to SMEs, they should lend directly…not through any banks,” said Te Taing Por, who is also co-chair of the Government-Private Sector For­um’s technical working group on man­ufacturing and SMEs.

Te Taing Por said interest rates of 9 percent per annum caused distress to business borrowers.

Veronique Salze-Lozac’h, regional director for economic programs at the Asia Foundation, said Cam­bo­dia’s small businesses are sometimes disorganized, lack business plans and accurate information when applying for loans. SMEs play a crucial role in generating jobs, but banks cannot lend to them cheaply if they are perceived as risky borrowers, she said.

“If the bank thinks it could face high risks…it could be translated into high interest rates,” she said.

In Channy, general manager of Acleda Bank, who did not participate in the forum, said his own bank had lent considerably to Cambodia’s SMEs. Of the $232 million loaned so far by Acleda, $87 million had been loaned to medium-sized enterprises while a further $54 million had gone to small enterprises.

Such loans came at a cost of 12 to 18 percent per annum, he said, but added that the high cost was needed to provide a margin on the 6 percent paid to the bank’s savings account holders. “If the risk is low, the rate is also low. If the risk is high, the rate is also high,” he said.

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