Meet the Business Owner Who Received a Loan Guaranteed by CGCC

Agriculture is one of the key sectors in supporting Cambodia’s economic growth. Seeing the potential to promote Cambodian products and support Cambodian farmers, I decided to start a Cambodia Safety Vegetable Union of Agricultural Cooperative in 2021.

When starting this business, my main challenge was the lack of human resources to prepare documents and handle administrative work since most of the community union members were farmers. Another major challenge was the lack of working capital to expand the business and product exports. The solution for me was a loan from a financial institution.

At first, because my collateral was not enough for the loan, I could not obtain the necessary loans to support my business. However, later with a guarantee from CGCC, I was able to receive a sufficient business loan from Chamroeun Microfinance Institution. I used the guaranteed loan as a working capital, which allowed me to grow my Cambodia Safety Vegetable business to serve my customers and distributors in many provinces and cities on time. I also gained the trust of various development partners on my business.

Obtaining a guaranteed loan from CGCC depends on the potential of my business, namely the possibility of growth, building a good credit history, as well as completing the required documents that can confirm the need to use a loan for my business. Other business owners who need capital but lack collateral can also seek credit guarantees from CGCC through CGCC partner banks or microfinance institutions.

Read more: Meet the Business Owner Who Received a Loan Guaranteed by CGCC

Understanding GMS of CGCC

A business cannot grow to its full potential without technology. CGCC is not an exception. “Information technology and business are becoming inextricably interwoven. I don’t think anyone can talk meaningfully about one without talking about the other”, said Bill Gates, founder of Microsoft. Since the first day of its operation, CGCC has embraced information technology, starting with the basic functions of Excel spreadsheets and Microsoft SharePoint to manage credit guarantee operations. Today, CGCC hit a new milestone by launching the Guarantee Management System (GMS) to further leverage information technology for effective credit guarantee operation. Technology adoption is our commitment to play a small part in supporting the key priorities – People, Road, Water, Electricity, and Technology – of the “Pentagonal Strategy – Phase I” of the new Royal Government of Cambodia.

What is GMS?

GMS is a digital platform that automates and streamlines the credit guarantee process, making it more convenient, faster, and more secure. It is the first-ever and only digital platform to manage a credit guarantee operation in Cambodia, tailored explicitly to CGCC’s credit guarantee model. It is a web-based system developed using microservices architecture and modern technologies to improve the guarantee process’s efficiency, accuracy, and security.

How was GMS developed?

. End-to-end automation: The GMS automates the guarantee application process, from PFI’s submission to CGCC’s approval. Auto validation of CGCC’s scheme features is integrated to reduce error and time consumption when composing and reviewing the guarantee application.

. Real-time tracking: The GMS provides real-time monitoring of the status of all guarantee applications, allowing users to stay updated on the progress of each application and request.

. Comprehensive reporting: The GMS provides comprehensive reporting on all credit guarantee activities, allowing users to track the performance of guaranteed loans and identify areas for improvement.

. High security: The GMS is hosted on a secure platform and uses the latest security technologies to protect user data.

Read more: Understanding GMS of CGCC

Meet the Business Owner Who Received a Loan Guaranteed by CGCC

Seeing that the financial awareness of Cambodian people is still limited, and their use and management of finances are not very effective, my husband and I started this company RithyPul in 2012 to spread the knowledge and share financial advice. Until 2020, our business was affected by the COVID-19, however we can still get through it until today. The most difficult factor at that time was the lack of working capital to support day-to-day business operations. At that time, we used our property as collateral to apply for a loan, but we still could not get enough capital as needed. The best solution at that time was to have a CGCC’s Participating Financial Institution, CAMMA Microfinance, advising us to apply for a CGCC guaranteed loan for our business, which would allow us to obtain a loan without collateral to use as working capital.

After obtaining guaranteed loans from Participating Financial Institution of CGGC, we are also able to address several key issues such as marketing, advertising, and overall business operation costs. We have expanded our business with more staff, and customers becoming more aware and acquainted with the use of our services has increased steadily. On the other hand, we also have more time to think about new strategies without having to worry about capital issues.

The success of a business depends on many factors, including having enough working capital, that is the most important factor for every business. We would like to thank the Government for establishing CGCC to support our business and other MSMEs on access to finance, as well as to improve financial inclusion in the country.

Read and Download in PDF: Mrs. Bopha Pen, Executive Director Rithipul Training Center

Understanding Adverse Selection and Moral Hazard

Adverse selection and moral hazard are the problems arising from information asymmetry that can lead to market failure. Information asymmetry occurs when parties of a transaction do not have equal relevant information to execute a fair transaction. For instance, when buying a second-hand car, the buyer does not know its defects as much as the owner does. The owner would know an underlying price for his car, while the buyer may not have equal information to negotiate down to a fair price that best matches the car’s true value. In this case, the information asymmetry can lead to second-hand car market failure by preventing the buying-selling transaction from happening because the buyer believes whatever price the seller agrees to sell would be more advantageous to the seller. Information asymmetry is the term coined by Nobel Prize winner economist George Akerlof in 1970.

Information asymmetry can be observed in different types of transaction. In bank loans, borrowers generally know better about their own repayment capacity than the bank from which they seek the loans, making it difficult for the banks to determine a fair price (i.e., interest rate) that best suits the borrower’s creditworthiness. In a credit guarantee, information asymmetry is when a lending institution that seeks guarantees on loans has more information about the loans and the borrowers than the credit guarantor. Information asymmetry can lead to two problems – adverse selection and moral hazard.

When there is an information asymmetry, the banks might be unable to distinguish between bad and good borrowers. Facing this risk, the banks may set an interest rate that is too high for good borrowers. Good borrowers will then leave the market; only bad borrowers remain to seek loans. This is called adverse selection. As such, one way to increase credit market efficiency is to narrow the information gap between lenders and borrowers. That is why banks usually require as much information as possible from the borrowers before lending to reduce the risk of adverse selection. Adequate, reliable, and timely information about the borrowers would help the banks to narrow information gaps and offer fair loan conditions that can make both parties better off. Similarly, an adverse selection in credit guarantee is the risk that the lending institution, having better information about the borrowers and loans, only selects the bad loans for guarantees from a credit guarantee institution.

Read more: Understanding Adverse Selection and Moral Hazard 

Meet the Pig Farm Business Owner Who Received a Credit Guarantee from CGCC to Support His Business

Read and Download in PDF: Mr. Sok Nalen, owner of a pig farm using a large-scale biogas plant Kampong Chhnang province

In 2014, I started this pig farm business. Initially, this farm was a farm raising piglets, but in 2019 this it was transformed into a bigger farm supplying meat.

When starting this business, I faced two main challenges: technical and financial challenges. Technology changes rapidly from one year to another requiring businesses to have enough capital to keep up with it. Based on the technical standard, my farm must have a biogas plant to protect the surrounding environment by reducing emission of toxic fumes and odors. The biogas plant can also recycle waste and other residuals. Fortunately,​​ Biogas Technology and Information Center (BTIC) provided technical support to me to restore and set up a biogas plant for my farm. However, I need more capital. With the cooperation with CGCC, BTIC introduced me to a way to access non-collateralized loans with credit guarantees. With CGCC’s guarantee, I could get a business loan from Canadia Bank as requested on time without collateral. The guaranteed loan served as my working capital, which allowed me to continue building a new biogas plant to support my pig farm.

Obtaining guaranteed loans depends on the potential of my business, namely the possibility of growth, a good credit history, and the required documents that prove the need for the loan for my business. Other business owners who require additional capital, but no collateral can also seek for credit guarantee from CGCC through CGCC’s PFIs.

Understanding CGCC Portfolio Guarantee Scheme

It has been two years since CGCC launched Cambodia’s first-ever public credit guarantee scheme on 29 March 2021 – the Business Recovery Guarantee Scheme (BRGS) – when Cambodia was at the peak of the COVID-19 Pandemic. Shortly after the launch, Cambodia experienced a 3-week lockdown on 8 April 2021. In that situation, the credit guarantee was more needed than ever when potential businesses struggled to access the required capital to stand on their feet. Two more schemes were then introduced: Co-financing Guarantee Scheme (CFGS) and the Women Entrepreneurs Guarantee Scheme (WEGS) to support businesses. The BRGS, CFGS, and WEGS are regarded as the Individual Guarantee Scheme (IGS), which means the PFI shall seek guarantee approval from CGCC on a piecemeal basis before each guaranteed loan disbursement.

On 1 January 2023, CGCC hit a new milestone by introducing the Portfolio Guarantee Scheme (PGS) after approval was granted by the Deputy Prime Minister, Minister of Economy and Finance. PGS is a scheme under which guaranteed loan criteria are pre-agreed by CGCC and PFI to enable the PFI to enroll multiple loans in PGS without having to get CGCC’s guarantee approval on each loan prior to loan disbursement. As such, PGS enables quicker outreach and turnaround time than the previous Individual Guarantee Schemes (IGS).

Read More: Understanding CGCC Portfolio Guarantee Scheme

Understanding Credit Guarantee-Interview with LOLC Microfinance Institution

Read and Download in PDF: Hear from Our PFIs – Interview with LOLC Microfinance Institution

1. What is LOLC’s perspective toward the credit guarantee schemes and why does LOLC to partner with CGCC?

  • LOLC Management is pleased to participate with CGCC to seize the partnership opportunity to further expand the market through new lending with CGCC guarantees. This credit guarantee scheme is very important for both LOLC and its clients, especially those who do not have collateral to provide access and encourage small and medium enterprises in Cambodia to access easy capital at low-interest rates to rehabilitate, start or expand their businesses.
  • LOLC joins CGCC as a participating financial institution, seeing that this credit guarantee scheme plays an important role in supporting the overall national economic growth, giving access to small and medium enterprises in Cambodia to access to financing to rehabilitate, start and expand their businesses, at the same time providing local employment opportunities for people to have jobs and income to support their families.


2. How do the credit guarantee schemes benefit LOLC and your customers?

In collaboration with CGCC, LOLC has the opportunity to further expand the potential market and have the confidence to expand lending to potential clients who have enough repayment capacity and want to expand their businesses but do not have sufficient collateral. In addition, the CGCC credit guarantee scheme plays an important role in fulfilling the needs of clients to expand their business and eliminate their worries from the words, “No matter how good his/her business is, without collateral, they are not able to borrow money from microfinance institutions or banks”. But now, even without collateral, clients can borrow money from microfinance institutions or banks to do business if they are able to make repayments and have a clear business plan.


3. What is LOLC’s strategy in structuring loans with CGCC’s guarantees? What are the main criteria of LOLC’s loan assessment?

In fact, LOLC has developed some clear strategies in structuring loans under the CGCC credit guarantee, such as:

  • Providing loans to clients who have clear and legal business, good cash flow, good credit history, whether the clients have collateral or no collateral, especially lending to clients who are small and medium enterprises (SMEs) aiming to expand their businesses, which contribute to society by providing employment to people with a decent income to support their daily family life.
  • Providing loans to clients who have a risky business but expect the business to improve soon.
  • Providing loans to key priority sectors that can contribute to the rehabilitation and upliftment of clients affected by the Covid-19 pandemic, which LOLC expects clients’ businesses to improve soon.

To assist potential clients in obtaining a guaranteed loan, LOLC has some criteria for loan assessment as the following:

  • Clients shall have clear and legal businesses.
  • Clients shall have a good cash flow to be eligible to get the loan and be able to repay it back.
  • Clients shall have a good reputation and good repayment history.
  • Clients shall have a clear business plan and clear purpose of using the loan effectively.
  • Clients can have some working capital in their business.
  • The client’s business is in good condition with quality products and services, reasonable prices, market needs, staff, and leaders with experience and skills.
  • Clients who have or do not have collateral or have collateral but not sufficient can also get the loan.


4. LOLC is CGCC’s Top 4 PFIs in disbursing guaranteed loans in 2022. What is the LOLC’s strategy to keep up with this momentum and to further expand the disbursement of guaranteed loans in 2023?

LOLC will continue providing more credit to clients, for those who have collateral and no collateral, to meet their needs for all sectors to improve their living standards and to continue contributing to the royal government to promote economic growth in Cambodia. Through this, LOLC will further encourage the branch management to disseminate this credit guarantee scheme widely to all target customers, especially new customers who have not yet received a loan from LOLC, for clients who have collateral or do not have collateral or have collateral but not sufficient. The most important thing is that clients have a clear legal business, a good reputation, a good credit history, strong cash flow, and good business conditions.


5. Besides providing guaranteed loans, what LOLC and CGCC should do together to support the MSMEs in Cambodia?

In addition to providing credit services, CGCC and LOLC will continue working together to support non-financial services to increase the understanding or additional skills related to financial literacy to entrepreneurs, especially small and medium business owners in Cambodia, to give them more knowledge on governance, financial literacy such as cash management, expense management, which contributes to more efficient business management of clients.


Understanding Credit Guarantee-Interview with Sathapana Bank

Read and Download in PDF: Hear from our PFIs_Interview with Sathapana Bank

1. What is your bank perspective toward the credit guarantee schemes in Cambodia and what encourage Sathapana to join as CGCC’s PFI?

Credit guarantee scheme is important in filling the financing gap for SMEs. The scheme provides credit risk mitigation to Sathapana Bank. This, in turn, helps us to extend loans to SMEs which contribute significantly to the economy of Cambodia. The Credit Guarantee of Cambodia (CGCC) therefore plays a crucial role in supporting credit access for SMEs in the country.


2. After signing a partnership with CGCC and becoming one of the most supportive CGCC’s PFIs in disbursed guaranteed loans, how do the credit guarantee schemes benefit the bank and your customers?

Majority of the lending products in Cambodia are secured loans. We saw working with CGCC as a good opportunity for us to extend our support to our customers who require funding to help their business grow with no collateral needed. The scheme allows us to innovate and provide a 100% hard collateral-free loans to business owners. We are proud to be the first bank to do so. As of September 2022, more than USD12 million of loans have been booked under Credit Guarantee Scheme. For our clients, the scheme gives them the opportunities to continue growing their business with better access to financing.


3. What motivates Sathapana to initiate the uncollateral loan product “Business Installment Loan Program (BIL)” that is 100% unsecured loans for borrowers with the capacities to repay but lack of collateral?

In Cambodia, FIs are mainly lending against hard collaterals. Access to credit will be curtailed for business owners who do not have hard collateral to provide to FIs to secure the loans. We believe this represents a large segment of the market. Our goal is to help them to gain access to financing to help them grow while managing our credit risks.


4. Recently, CGCC, Sathapana and two other partners have jointly organized a flagship training program called “I am Financially Literate (IFL)”, how does this program support SMEs and drive more growth to their businesses including access to financing?

IFL is an executive program initiated by Sathapana Bank in a joint partnership with CGCC and two other partners. The program aims to promote and improve financial literacy for women entrepreneurs and business owners through practical training sessions. The training includes project management, operation handling, financial management, marketing, and sales. Through IFL, participants are better equipped with making financial assessments and the know-how in getting access to financing.


5. As currently, Sathapana Bank’s momentum in disbursing unsecured loans for businesses under CGCC’s guarantee is moving fast, what is the future plan/strategy of Sathapana Bank for further expanding the usage of credit guarantees all over Cambodia?

In line with the government strategy to support the tourism sector to recover from the pandemic, we are working on a program with CGCC to support the recovery scheme. In addition to this program, we are launching a few initiatives country-wide to support clients in supply chain, leveraging on our extensive branches network.


6. As the credit guarantee topic is still considered as a new topic in Cambodia, what should Sathapana Bank and CGCC do to raise awareness of credit guarantees to the borrowers?

Through IFL, Sathapana Bank and CGCC are reaching out to customers who need to help grow their businesses. This is one of the few initiatives that we are working together to create more awareness and promotion of the credit guarantees to our customers who are looking for financing but are not sure how and what are their options. We can also personalize our message and communicate the benefits of our BIL program and scheme to the meet the needs of customers from different geographical locations and industries.

Understanding Credit Guarantee-Canadia Bank’s View on Partnership with CGCC

Read and Download in PDF: Hear from our PFIs_Canadia Bank

  1. As one of the first banks who become CGCC’s PFIs, what motivates Canadia Bank to utilize the credit guarantee schemes with the existing loan products of Canadia?

One of the main reasons that motivates us to use credit guarantee schemes is that we believe that the CGCC credit guarantee scheme can help potential business owners who need loans to for their businesses but do not have enough collaterals to access more capitals to meet the financial needs of their businesses, especially to recover and expand the businesses after the COVID crisis has been eased.


  1. After adopting CGCC’s credit guarantee schemes for more than a year, how do those schemes benefit the bank and your customers?

We have provided loans under the CGCC credit guarantee schemes to more than 200 clients with a total loan size of nearly $ 20 million over the past year. Through these guaranteed loans, clients are able to expand their business in various sectors that generate more employment and contributed significantly to the country’s economic recovery.


  1. How does Canadia Bank structure loans with credit guarantee?

We have CGCC’s guaranteed loan programs for potential clients with good credit histories and clear business plans. It can be provided to both existing customers and new customers.


  1. Recently, both Canadia Bank and CGCC have each launched products supporting women entrepreneurs. How will the “Smart Lady Loan” and CGCC’s “Women Entrepreneurs Guarantee Scheme” (WEGS) impact women-owned SMEs in greater access to finance regarding unsecured loans?

“Smart Lady” of Canadia Bank and “Women Entrepreneur Guarantee Scheme (WEGS)” of CGCC are making a significant contribution to support women entrepreneurs to access to the finance for their business needs, avoiding high-risk and risky loans. Through these two projects, women entrepreneurs have not only been able to access their loans more easily and conveniently but have significantly reduced their financial costs, especially in the first year, which included lower interest rates and guarantee fees. In addition, women entrepreneurs will receive many other benefits through the Smart Women Lady loan program from Canadia Bank.


  1. Canadia Bank is currently the top performer of using CGCC’s scheme, what is Canadia Bank’s strategy of further expanding the usage of credit guarantees, especially to the rural area SMEs?

We continue to reach out to our target customers, especially those who have potential businesses but do not have sufficient collateral to secure a loan. We will also continue to link credit guarantee schemes with our new loan products to provide a wider range of options for our customers.


  1. As the credit guarantee topic is a new topic in Cambodia, how should Canadia Bank and CGCC do to raise awareness of credit guarantee to the borrowers?

In order to raise awareness about credit guarantee, we should continue to promote it more comprehensively, especially reach out to more business owners through social media, workshops, business associations, etc.

Understanding Credit Guarantee-Maybank’s View on Partnership with CGCC

Read and Download in PDF: Hear from our PFIs_Maybank’s View on Partnership with CGCC

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