Phnom Penh, September 20, 2004 — The International Finance Corporation (IFC), the U.S. Agency for International Development (USAID) and Canadia Bank today announced the signing of two agreements aimed at strengthening Cambodia’s financial sector.
Under the terms of the first agreement, IFC – the private sector arm of the World Bank group – will provide Canadia Bank with a loan of up to $5 million to expand its mortgage operations. The transaction is accompanied by a $600,000 technical assistance project funded by IFC and Canadia Bank aimed at strengthening its ability to deliver effective financial services in Cambodia.
At the same time, USAID signed a $5 million Micro and Small Enterprise Development Initiative agreement with Canadia Bank. Under the terms of the agreement, USAID will provide 50 percent guarantee coverage of up to $5 million on loans that Canadia Bank intends to provide to small and micro finance businesses in Cambodia.
“Improving financial institutions is at the core of IFC’s strategy for promoting private sector development,” stated IFC East Asia and Pacific Director Javed Hamid. “Introducing mortgages as a standard product promotes home ownership among a growing middle class in Cambodia.”
“The potential rewards for Cambodia are significant,” noted U.S. Ambassador Charles Ray. “The success of these programs can go a long way toward broadening access to financial services and providing the kind of financial sector that all Cambodians deserve.”
“This transaction builds on the technical assistance work of IFC’s Mekong Private Sector Development Facility,” observed Mr Pung Kheav Se, CEO of Canadia Bank. “By supporting us further through lending, IFC is helping build confidence in the Cambodian banking sector.”
Canadia Bank is Cambodia’s largest private bank. As of 31 August 2004, it had assets of $241.7 million, equity of $24.2 million and net income of $2.8 million. With 300 employees, Canadia offers a range of financial services through its network of eleven branches across the country. Canadia Bank was established in 1991 as Canadia Gold & Trust Company Limited, a joint venture between Mr. Pung and other overseas Cambodians and the National Bank of Cambodia (NBC). In 1998, the NBC sold its shares and the bank was fully privatized.
The USAID-supported Micro and Small Enterprise Development Initiative is part of a worldwide USAID effort to extend financial services to small and micro entrepreneurs who in the past have had difficulty accessing credit. The program with Canadia Bank marks the initiative’s first direct involvement in Cambodia.
IFC’s relationship with Canadia Bank started through the Mekong Private Development Facility, an IFC-managed, multi-donor facility supporting small and medium enterprises in Cambodia, the Lao People’s Democratic Republic and Vietnam. Following a review of Canadia’s operations in 2000, the Facility launched a program of hands-on training aimed at improving the ability of credit officers to assess and structure medium and long-term loans.
“Such capacity development is critically needed in Cambodia in order to increase the availability of the longer-term credit that enterprises need for expansion,” said Adam Sack, General Manager of the Mekong Private Development Facility. “With over 200,000 young people joining the labor market every year, private sector expansion is crucial both to create jobs and to alleviate poverty.”
The documents officially launching the two new programs were signed at a ceremony this morning involving Mr. Pung Kheav Se from Canadia Bank, Mr. Deepak Khanna from IFC and Mr. Jonathan Addleton, Director of USAID/Cambodia. Ambassador Charles Ray from the United States also participated in the signing ceremony.
