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Credit guarantee reinforces mission

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National Bank of Cambodia (NBC) deputy governor Chea Serey (second left) during an SME workshop in Phnom Penh on August 18, last year. MAFF

Credit guarantee reinforces mission

The state-owned Credit Guarantee Corporation of Cambodia Plc (CGCC) on July 4 reaffirmed its “main mission” of offering high-quality credit guarantees to lenders, sharing risks with them and promoting financial inclusion, following the central bank’s issuance of a key decree on credit risk and capital adequacy.

The NBC on June 29 issued a “Prakas on Credit Risk for Capital Adequacy Ratios in Deposit-Taking Banks and Financial Institutions”, the CGCC recapped in a statement.

The document’s main objective, according to the central bank, is “to develop a comprehensive credit risk weight, which varies according to the type of credit, borrowers, or counterparties and reflect the level of risk that the institution may actually face in order to strengthen the effectiveness of risk management”, the statement noted.

“[The] NBC also mentioned the implementation of prudent and well-balanced measures and careful consideration to promoting the development of the banking and financial sector and national economic growth, as well as to support the Royal Government of Cambodia [RGC] in implementing relevant policies,” it added.

This, it said, includes supporting the CGCC and other RGC-backed credit guarantee schemes, “with a zero per cent risk weight on the part of the exposure that is guaranteed in order to facilitate micro-, small- and medium[-sized] enterprises [SMEs] in access to more sources of fund[s]”.

The statement noted that the CGCC is the first-of-its-kind in the Kingdom, established by a legal instrument issued by Prime Minister Hun Sen as a state-owned enterprise under the “technical and financial guidance” of the Ministry of Economy and Finance.

“CGCC’s main mission is to provide credit guarantees to lenders on loans made to businesses based on international standards to share the risk with lenders and to improve financial inclusion,” it said.

In a July 2 interview with The Post, Toch Chaochek, CEO of Cambodia Post Bank Plc (CPBank), a CGCC partner, remarked that the new prakas sets more precise benchmarks and standards for calculating risk-weighted assets, and claimed that the instrument will bolster security as well as capital adequacy and resilience among the Kingdom’s financial institutions.

Providing an example using the document’s guidelines, Chaochek stressed that sovereign bonds are recognised as being less risky than other securities.

In another example, Chaochek underscored that small- and medium-sized enterprises (SME) which are properly registered and seek loans with assistance from state-owned enterprise Credit Guarantee Corporation of Cambodia Plc are less risky than their counterparts that do neither.

In the prakas, the NBC expressed support for lending to smaller businesses, noting that the benchmark risk weight was reduced to 75 per cent for properly registered SMEs that can produce appropriate financial statements.

The CGCC was established by Sub-Decree No 140/ANKR/BK on September 1, 2020, and its $200 million Business Recovery Guarantee Scheme (BRGS) was launched on March 29, 2021 in a bid to widen access to formal loans from participating financial institutions (PFI) for working capital, investment and business expansions.

The enterprise announced that it had issued a total of 1,275 Letters of Guarantee (LG) for loans worth $113.6 million equivalent as of March 31 – up eight per cent from end-February and up 258 per cent year-on-year, in terms of value. MSMEs accounted for 1,173 – or 92 per cent – of the LGs.

As of March 31, the outstanding guaranteed amount was $65.4 million out of the $90.7 million worth of loans covered by the LGs, as noted by the CGCC, remaining in the 70-80 per cent target range at just over 72 per cent.


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