The Micro, Small and Medium Entreprises (MSME) sector in Cambodia faces a funding shortage to the tune of $3.7 billion, said Tommy Boukhris, Asian Venture Philanthropy Network (AVPN) Cambodia Advisor and Senior Consultant & Portfolio Manager, EMC.

During a presentation on Impact Investment Opportunities for Cambodia at the ‘Give A Day’ event under the Entrepreneurship Ecosystem Building Project (EEB), recently, Boukhris said Cambodia’s government has to reduce restrictions on retail investors engaged in impact investing such as through crowdfunding to address this gap in funding.

He also suggested that the government relax regulations preventing social sector organisations from generating revenue and encourage pension funds and providers of other tax-advantaged saving schemes and products to include impact investment options as part of their offering.

Give A Day is an initiative under the EEB, which is jointly funded by Khmer Enterprise, USAID’s WE Act Project through Pact Cambodia and Swisscontact. The topic for the ‘Give A Day’ May edition discussion was ‘Investment and Funding Landscape Mapping for Cambodia.’

Boukhris, meanwhile, said the digital sector in Cambodia is rapidly developing and that while the country continues to diversify, the investment interest will also diversify.

He said the peace and stability of Cambodia is an advantage for the country in attracting the interest of investors. “There is also significant progress in good governance.”

Boukhris went on to say that Cambodia has lot of opportunities in eco-tourism, sustainable farming and food processing. He added that though there are good incubators for startups in the country, they are not sufficiently linked to the national strategy.

Based on the study ‘Conducting Phnom Penh Entrepreneurial Ecosystem’ carried out by Swisscontact and Impact Hub Phnom Penh, around 50 percent of entrepreneurs in Cambodia received funding in the form of standard loans from financial institutions, while other sources of capital are equity (15 per cent) and concessional loans (three percent).

This is no surprise as Cambodia is a bank-based economy, where commercial banks are the primary sources of funding. Since banks or traditional financial institutions-based finance avoids risk associated with unproven, seed-stage businesses, it is rather a conservative investment landscape in Cambodia now.

When it comes to startups, the loans from transitional financial institutions are hard to reach. Some potential startups fail even before they can prove their concept and the growth model due to the challenges in accessing pre-seed/seed investment from financial institutions. This just goes to show that startups, in the more precarious stage of development, need a completely different type of funding along with other forms of support to grow and achieve meaningful progress, sustainability and grow their businesses.

The ‘Give A Day’ event was coordinated by Sokhuy Lay, Programme Lead of EEB, Swisscontact.

• Tags: AVPN, EMC, MSME