A total of 19 tourism-affiliated businesses have received approval for loans under the $150 million Tourism Recovery Co-Financing Scheme (TRCS), the CEO of state-owned Small and Medium Enterprise Bank of Cambodia Plc (SME Bank) said on July 20.
However, many tourism-related businesses are calling on participating commercial banks to ease their conditions for loans under the scheme.
The TRCS was rolled out on May 17 to provide a lifeline for businesses involved in the tourism value chain that are deemed to have been significantly impacted by the Covid-19 crisis, and is currently implemented with the support of 19 participating financial institutions (PFI). The scheme’s lending rules and procedures were officially established on July 1, opening the door for loan applications.
The scheme was financed by a counterpart fund between the government and financial institutions, with $75 million of the national budget to be disbursed in the form of loans issued by SME Bank, and the other $75 million through loans made via the PFIs, which comprise commercial banks and microfinance institutions (MFI).
Key offerings of the TRCS include a maximum interest rate of 6.5 per cent per annum, a 16-month grace period on principal payments, loan term of up to seven years, loan amount of up to $400,000, and the option of receiving funds in either riel or US dollars, according to a July 1 notification letter addressed to tourism industry bodies and business owners in Cambodia.
SME Bank CEO Lim Aun told The Post that 21 business owners applied for loans under the TRCS from July 1-19, but that only 19 were approved for the equivalent of $3.9 million. The other two were rejected on the grounds that the purpose of the loans did not align with the objectives of the scheme, he said.
The July 1 letter had said that loans under the TRCS are “for the purpose of restoring business operations, or expansions or diversification of tourism services, to be ready to receive national and international tourists”.
Aun commented that the TRCS was set up in consideration that the current state of tourism has earned the sector the classification of “high-risk”, but acknowledged that banks would not easily depart from standard practices for loan approvals.
“We’ve advised SME Bank’s partner banks to find middle ground when it comes to the credit approval process for customers. However, they continue to adhere to internal policies that push for higher-quality loans, as [PFIs] have also set aside a $75 million counterpart fund to the $150 million financing scheme,” he explained.
Nonetheless, he added, SME Bank is keen to hear the opinions and challenges of tourism insiders, to discuss with the Ministry of Economy and Finance and PFIs, and hopefully make it easier for owners and operators to get the funds they need to restore their troubled businesses.
Citing people in the tourism trade, Thourn Sinan, chairman of IMCT Co Ltd and Pacific Asia Travel Association Cambodia chapter (PATACC), affirmed that there were discrepancies between the commercial bank PFIs’ actions and the words of the finance ministry and SME Bank.
Some operators are only able to access loans from commercial banks under the TRCS if they can show that business activity is at a desired level and can get other businesses to act as guarantors for the credit, he claimed.
“Such requirements differ from the idea of ‘lending to help revive the tourism sector’. Due to the Covid-19 crisis, tourism businesses cannot be as busy as they had been before. As we all know, before providing a loan, banks will only accept collateral that is worth more than the credit. This poses an obstacle for us as operators,” Sinan said.
According to the SME Bank CEO, the 19 PFIs have earmarked an exact total of $98.75 million, exceeding the allotted $75 million for the scheme.
The Ministry of Tourism listed the 19 current PFIs as Chip Mong Commercial Bank Plc, Hattha Bank Plc, ACLEDA Bank Plc, Advanced Bank of Asia Ltd (ABA), Sathapana Bank Plc, Cambodia Post Bank Plc (CP Bank), Wing Bank (Cambodia) Plc, Prince Bank Plc, Canadia Bank Plc, Phillip Bank Plc, Asia-Pacific Development Bank Plc (APD Bank), Phnom Penh Commercial Bank Plc, CIMB Bank Plc, Saigon Thuong Tin Bank (Cambodia) Plc (Sacombank Cambodia), RHB Bank (Cambodia) Plc, Foreign Trade Bank of Cambodia (FTB), LOLC (Cambodia) Plc, Prasac Microfinance Institution Plc and CAMMA Microfinance Ltd.