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Kingdom’s startups stuck in the middle with no capital

Youths work at a co-working space last year in Phnom Penh.
Youths work at a co-working space last year in Phnom Penh. Photo supplied

Kingdom’s startups stuck in the middle with no capital

Despite Cambodia having a vibrant startup scene with entrepreneurs launching ventures on a near daily basis, businesses trying to tap into financial resources for growth have difficulty accessing capital and are stuck in the unbankable “missing middle”, according to a recent study.

According to a study by the Dutch Good Growth Fund (DGGF), a $200 million investment initiative that is researching potential investments in the region, a third of Cambodia’s small- and medium-sized enterprises (SMEs) have outgrown microfinancing options but remain too small to attract large investors.

The study showed that while short-term capital loans are offered by banks to registered businesses, small businesses without assets are unable to secure funding and debt financing is largely nonexistent. The study added that when it comes to seed-stage funding, there is a limited number of firms in the Kingdom willing to take on the financial risks of lending smaller amounts.

Hav Kongngy, founder of startup My Dream Home, explained that he has been trying to expand his business, but has found it difficult to access capital.

“There are no funds who offer investment of about $50,000, but that is how much I need,” he said. “It is a real problem for me, and for other entrepreneurs, because it seems too hard to grow.”

Keo Mom, president of the Cambodian Women Entrepreneurs Association (CWEA), noted that a lack of access to growth funding had long been damaging the Cambodian economy.

“Other countries have products which help with access, including accepting different types of collateral and providing commercial loans, and we need to start pursuing these options,” she said.

Julia Kho, Knowledge Manager for DGGF’s investment manager Triple Jump, explained that regardless of the struggles SMEs face in the Kingdom, the business ecosystem in Cambodia remains strong.
“Cambodia’s business scene looks like it’s quite dynamic,” she said. “It’s a vibrant ecosystem, and we hope to find some vibrant initiatives here to help fund.”

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