IFC in Cambodia - supporting private sector development

IFC in Cambodia
- supporting private sector development

IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilising private capital, and providing advisory and risk mitigation services to businesses and governments. In Cambodia, IFC Advisory Services are delivered in partnership with Australia, Canada, the European Union, Finland, Ireland, Japan, New Zealand, the Netherlands, Norway, Sweden, and Switzerland.
IFC’s strategy in Cambodia is embedded in the World Bank Group’s Private Sector Development agenda, which seeks to improve the investment climate, foster export-led growth, promote diversification of sources of growth, and facilitate private sector participation in infrastructure. IFC investments target commercially-viable projects that create jobs and reduce poverty. Our advisory services programme targets improvements in governance, access to finance, agribusiness supply chains, and private investment in power and transportation infrastructure, among others.

Investment Programme
IFC’s investment strategy has been to support businesses across a broad spectrum of Cambodia’s emerging private sector and social enterprises at the grassroots level. Investments include Acleda Bank, which started as an NGO and is now Cambodia’s second largest bank; airports in Phnom Penh, Siem Reap, and Sihanoukville; tourism infrastructure in Siem Reap and Sihanoukville; and telecommunications network expansion via the operator CamGSM. We have supported local partners who are working to develop good, ethical businesses and to set new standards in this challenging environment. These businesses have succeeded not just financially but also in terms of building human resource capacities and developing good corporate governance practices. These model investments create a strong demonstration effect for other private companies across various sectors of the economy. The goal has been to illustrate to market players that good business practices lead to sustainable results for companies while creating opportunities for local communities.
We are strengthening our presence in the country by basing a senior investment officer in Phnom Penh. By dedicating more resources to pursuing the many investment opportunities in the country, IFC believes it is well positioned to increase the size of its investment portfolio in Cambodia. During these uncertain times resulting from the global financial and economic crisis we believe it is our role to actively seek investment opportunities that will help encourage others to invest. IFC is confident in the future of Cambodia and plans to play a greater role in economic development through increased investments.

Advisory Services Programme
IFC has four active advisory services programmes in Cambodia. These include the Business Enabling Environment, Access to Finance, Environmental and Social Sustainability, and Corporate Advice.

Business Enabling Environment: IFC, together with the Asia Foundation, has completed the second Provincial Business Environment Scorecard (PBES), which is a survey of over 1,000 businesses across Cambodia on key business environment indicators (e.g., starting a business, property rights, access to information on regulations). Survey results will be issued in April of 2009 and will rank the business environment of all 24 provinces and municipalities. The 2007 PBES ranked the country’s ten most economically-active provinces. By ranking the business environment of the provinces against each other, the survey encourages provincial governments to carry out administrative reforms in order to improve their ranking.
At the request of the Siem Reap government, IFC is working with the provincial authority to help streamline administrative procedures, particularly in the area of business start up. The Siem Reap provincial government announced reforms of administrative procedures related to starting a business in December 2008. These revised procedures should result in a reduction of the steps, cost and time necessary for starting up a new business in the province.
Since 2002, IFC has been facilitating Cambodia’s twice-yearly Government-Private Sector Forum (as a reliable means for the private sector to raise issues with the government. IFC’s involvement has improved the dialogue among all participants and the private sector now shows sufficient capacity to directly engage government counterparts. As the government and private sector take on more ownership of the dialogue process, IFC is working with key Cambodian business associations to develop their capacity over the next three years to take over IFC’s administrative work and play a greater role in commissioning research, delivering training, and undertaking advocacy for further regulatory reforms.
To help Cambodia attract more foreign investment, we are working with Foreign Investment Advisory Services and the Council for the Development of Cambodia on a law to govern Special Economic Zones (SEZs). This is expected to standardise incentives and conditions for establishing SEZs, which are currently approved on an ad hoc basis.

Access to Finance: IFC is advising the Ministry of Economy and Finance on a micro-insurance law. Micro-insurance, which will be sold through microfinance institutions (MFIs), will enable poorer people to insure themselves and their dependants against illness, accidents, and other disasters that devastate family finances. IFC is also supporting the launch of new services in the country such as mobile phone banking, which enables people to transfer money in the country through a cellphone. This innovation will allow lower income consumers with cell phones to transfer money and make payments without the risk of carrying substantial amounts of cash.
At the request of the National Bank of Cambodia, IFC is advising on the development of a comprehensive credit bureau that will provide financial institutions, including MFIs, with more information on the credit histories of would-be borrowers. Financial institutions have requested that information held by the credit bureau not only cover current borrowing from banks and MFIs, but also unpaid debts to all credit providers, including retailers and utilities. Such information should lower bank lending risk. SMEs and individuals with good credit histories but limited collateral should find it easier and cheaper to get access to financing.

Environmental and Social Sustainability (ESS): Building on three years of programme experience in Cambodia, our work continues to target the garment sector because of its importance in earning foreign exchange. The garment industry is Cambodia’s largest industry, and is especially important for rural women workers who support extended families on their earnings. As the global economic crisis results in a slowdown in garment exports it is important to continue to work on improving sector competitiveness. In collabouration with International Labour Organisation, IFC is bringing together buyers, manufacturers, unions and the government at the Buyers’ Forum to promote strategies to sustain the industry in the face of growing global competition. IFC is also working closely with ILO on Better Factories Cambodia – a labour monitoring and reporting initiative, which has now become a global model for advancing Corporate Social Responsibility in other labour-intensive sectors.

Corporate Advice: IFC is supporting initiatives to assist the development of three initial sectors: rice, cashews, and fruit & vegetables. IFC is working with lead firms to develop linkages between buyers and sellers. We are exploring ways to ease financing constraints in supply chains, and supporting the development of organic farming by identifying prospects for improved storage facilities and the usage of renewable energy. The project also supports business and industry associations with delivering services related to a range of standards, including organics, safety, and fair trade to their members.

IFC Joins Forum To Help Promote Cambodian Microfinance amid Global Financial Crisis

Phnom Penh, Cambodia, August 19, 2009 - IFC is helping Cambodian microfinance institutions strengthen their contribution to the country’s socio-economic development, and expand financial services to the rural population amid the global financial crisis.

Beginning today, at a two-day forum co-organised by the National Bank of Cambodia, IFC, the European Union, and the Cambodia Microfinance Association, senior microfinanciers, bankers, regulators, and local authorities will discuss how microfinance institutions could boost the country’s economy, promote financial inclusion, and enhance customer protection.

“The microfinance sector in Cambodia has grown fast and significantly contributed to improving access to financial services for the rural population,” said H.E Chea Chanto, Governor of the National Bank of Cambodia. “The success of the sector is vital to ensuring quick financial inclusion. We have adopted legislation that enables microfinance institutions to mobilise public deposits to help them access cheaper sources of funds while allowing rural populations to safely save their hard-earned cash.”

Participants also shared their views and experiences on how to respond to the global financial crisis, addressing credit culture, risk and nonperforming loan management, ethical debt collection practices, financial education, and consumer protection.

“The microfinance sector, which has loans of more than $280 million outstanding to about a million clients in rural areas, already has felt the impact of the global financial crisis as nonperforming loans have increased from under 1 percent a year ago to 3.8 percent as of June 2009,” said Huot Ieng Tong, President of Cambodia Microfinance Association. “However, given the current crisis, this increase is reasonable and NPLs are still low by international standards.”

IFC also works with individual microfinance institutions to help them diversify and focus their strategies, expanding their product range and improving their risk management capabilities.

“While the crisis has adversely affected microfinance institutions and their borrowers, it also brings opportunities for them to review their lending practices and risk and nonperforming loan management systems so they become more resilient to future crises,” said Russell Muir, IFC Acting Head of Advisory Services for East Asia and Pacific.

In Cambodia, IFC advisory services are delivered in partnership with the European Union, Finland, Ireland, the Netherlands, New Zealand, and Switzerland.

About IFC
IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. Our new investments totaled $15 billion in fiscal 2009, helping channel capital into developing countries during the financial crisis.

For more information, visit www.ifc.org.