The government is developing a set of procedures and conditions for tourism-related businesses to obtain a certificate of collateral from the Credit Guarantee Corporation of Cambodia Plc (CGCC) and receive credit from the recently-launched $150 million Tourism Recovery Co-Financing Scheme (TRCS).
The TRCS 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 state-run Small and Medium-sized Enterprise Bank of Cambodia Plc (SME Bank), and the other $75 million through loans made via commercial banks and microfinance institutions (MFI).
At a June 24 meeting on the matter, Ministry of Tourism secretary of state Song Tong Hap stressed that the procedures and conditions must support the TRCS – rolled out on May 17 – to restore the tourism industry and promote growth.
Tong Hap, who also chairs a sub-working group on tourism industry and labour support, noted that the CGCC launched the Co-Financing Guarantee Scheme (CFGS) on September 22 to provide credit guarantees on business loans, to share risk with lending institutions and foster financial inclusion.
Key offerings of the TRCS include a maximum interest rate of 6.5 per cent per annum, a 12-month grace period, 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 Tong Hap, no collateral is required either.
He believes that the TRCS, combined with the CFGS, will be an important financial tool to quickly align tourism recovery with the ministry’s expectations that Cambodia will receive seven million foreign visitors and see 11 million domestic trips by 2023.
CGCC deputy director-general No Lida said that the tourism business must meet a number of qualifications, such as: have more than 50 per cent local ownership; be registered with the tax authorities “after obtaining a credit guarantee”; and demonstrate the ability to repay.
He said these businesses can obtain a Letter of Guarantee (LG) by contacting the institution where they applied for the loan, which will in turn request the LG from the CGCC.
Thourn Sinan, chairman of IMCT Co Ltd and Pacific Asia Travel Association Cambodia chapter (PATACC), voiced confidence that the procedures and conditions would be “very attractive” for tourism-related businesses, noting that the industry still faces hurdles in the loan application process.
“The tourism ministry has really worked hard to help tourism businesses. But in the past, we’ve faced some issues, for example, when SME Bank announced an interest rate of 6.5 per cent, but when our members went to apply for a loan, the rate instead stood at 7.5 per cent, and more financial sustainability reports were required, and this is what we’re worried about,” he said.