Access to Finance Program for Small Water and Rural Electrification Enterprises

In Cambodia, over the past two decades, a tremendous amount of formal and informal small enterprises have invested “spontaneously” in unstructured water supply and electricity utilities. However, these enterprises still face problems in technical and financial management. The quality of infrastructure planning, design, financing are quite low. To expand their infrastructures, they encountered also difficulties in debt financing preparation and negotiation. The access to finance for small enterprise is quite low in Cambodia. Consequently, in April 2014, the Agence Française de Développement launched the Access to Finance Program for Small Water and Rural Electrification Enterprises (SWEs-REEs). It ambitions are to promote the financing of small enterprises by dealing with all identified barriers for a sustainable access to commercial loans by REEs and SWEs. The AFD has provided the FTB a concessional credit facility and a risk-sharing mechanism called ARIZ dedicated to financing the small enterprise in the water supply and electricity sectors and to secure the FTB bank. The credit facility is sized at 10 million USD for electricity and a minimum of 5 million USD must be dedicated to the financing of water supply.

The program aims to: i) to expand access to safe drinking water and electricity in small towns and rural areas by providing adequate financing to REEs and SWEs through loans provided by a local commercial bank (Foreign Trade Bank – FTB) ; ii) to help the FTB to develop an attractive financial offer for REEs and SWEs; ii) to support FTB to develop its portfolio of water and electrification projects and to perform due diligence, in order to ensure the sustainability of this new business line; iv) to support REEs and SWEs in developing their business and enhancing their business practices to a level suitable for financing by the FTB. This program aims to improve the access to safe water and sustainable access to electricity for about 410, 000 Cambodian peoples.

The European Union (EU) has also provided to AFD a grant in order to finance three kinds of technical assistance supports: i) Component 1- Technical Assistance to the FTB to implement the Credit Facility; ii) Component 2- Capacity Building for REEs and SWEs to access financing from the FTB and to improve business performance; iii) Component 3- Incentive investment grants. The component 2 and 3 are leading by the GRET in consortium with ARTELIA, SEE / SAW and ISEA as main sub-contractor.

The Components 2 and 3 aims to:

  • To assist eligible small enterprises to obtain debt financing from the FTB through preparing loan applications, both on financial and technical aspects and other support (Task 1);
  • To support SEs in improving their management and business operations through training on financial and technical issues related to the electricity and water sectors (Task 2);
  • To design the principles and instruct the allocation of incentive investment grants to SWEs (Task 3);
  • To monitor, report and assess the access to finance program over the five years of implementation (Task 4).

The electricity sector is concerned by tasks 1, 2 and 4; task 3 is dedicated to the water supply sector. The Access to finance program is also built on a strong involvement of local private and public institutions such as: i) in the electricity sector: the Ministry of Mines and Energy (MME), the Electricity Authority of Cambodia (EAC), and the Rural Electricity enterprise Association (REA) (with participation of Électricité du Cambodge (EDC) on power development aspects in Cambodia and through the Rural Electrification Fund (REF) as a department of EDC); ii) in the water supply sector: the Ministry of Industry and Handicraft (MIH) and the Cambodian Water Association (CWA).

Project completed
Start date 12/11/2014 end date 12/11/2019
Budget : 23 000 000 €