Swedfund contributes to responsible microfinancing in Cambodia

The Development finance institution Swedfund is investing in Cambodia’s largest microfinance company, Prasac Microfinance Institution Ltd (Prasac), through a loan of USD 15 million. The loan will be used for on-lending to the country’s micro businesses and SMEs, which account for the majority of jobs in the country.

Prasac is Cambodia’s largest microfinance company, 180 branches around the country. Customers mainly consist of micro, small and medium-sized businesses in the retail sector. The company focuses its business on the countryside in order to increase financial inclusion and contribute to sustainable economic development. Prasac is SMART-certified, meaning it has systems that protect customers through responsible and transparent pricing, prevention of over-indebtedness and respectful treatment.

The Cambodian microfinance sector started in the early 1990s. Following the peace agreement with Vietnam in 1991, international development aid provided numerous initiatives to rebuild the country’s financial system, and microfinance was a key element of this. Despite the country’s stable economic growth in recent years, 20% of Cambodia’s 16 million citizens live on less than USD 1.5 a day.

The majority of jobs are created by the country’s many micro, small and medium-sized enterprises. These businesses are mainly capitalised by their owners and their families. To provide entrepreneurs with the opportunity to instead obtain financing from official institutions, more operators need to enter the regulated market.

Swedfund’s loans are part of a syndicate that also includes the Norwegian and German Development finance institutions Norfund and DEG. Together we have the ability to have an influence on opportunities to develop Prasac into a commercially licensed bank and contribute to developing the country’s financial system.

“Investing in Prasac, which is a responsible microfinance institution with an emphasis on female borrowers, enables us to contribute to financial inclusion, an increased tax base and job creation in Cambodia, which is key to reducing poverty,” said Swedfund CEO Gerth Svensson.