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Access to finance for Small Enterprises in water and electricity sector

Project

This project is carried out with the support of the European Union

Water station
Hanuman Films
Project start date
Status

Completed

Project end date
Project duration
5 ans
AFD financing amount
13000000 US$
Country and region
Cambodia
Location
Phnom Penh
Type of financing
Non-sovereign loans
Beneficiaries
Foreign Trade Bank, Small water enterprises , Rural electricity enterprises, Rural households
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The content of this project information sheet falls under the sole responsibility of the AFD and does not necessarily reflect the opinions of the European Union.

AFD contributed to the improvement of the access to water and electricity in Cambodia by facilitating the access to finance for small enterprises, which supply areas excluded from the national network.

Context

In Cambodia, the expansion of network of the water and electricity sector was made at the expense of rural areas. As public investment remains low in small towns and rural areas, numerous Small Enterprises (SE) have invested in the water (Small Water Enterprise, SWE) and electricity (Rural Electricity Enterprise, REE) supply in those areas.

Small Enterprises are constrained by the lack of adequate financing to finance their investments to build (i) infrastructures capable of producing treated water with a large service coverage or (ii) medium voltage distribution lines to link up to neighbouring villages, and in low voltage distribution to increase coverage rates for the more scattered households.

Description

AFD’s project aimed at expanding the access to safe drinking water and electricity coverage in small towns and rural areas by responding to the sectorial challenges through:

  • The development of adequate financing for SWEs and REEs thanks to a credit line granted and through ARIZ portfolio guarantee (a risk-sharing tool) to a local bank, the Foreign Trade Bank (FTB);
  • Technical assistance provided to the bank to accompany (i) the development of an attractive financial offer for SWEs and (ii) the due diligences processes in order to ensure the sustainability of this new business line.
  • An investment grant mechanism which encouraged the connection of poor households to the water network.
  • Training provided to SWEs and REEs to help them designing, monitoring and operating efficiently their infrastructures.

Impacts

Thanks to EU and AFD financing, USD 10.42 million were granted in loans to 47 private water and electricity providers in 18 provinces of Cambodia, improving the access to water to nearly 40,000 households and to electricity for 27,285 households.

The technical assistance provided capacity building on risk management to FTB allowing them to improve their practices: development of an ESRM policy (environmental and social risk management), implementation of a new AML policy, creation of a Risk Department.

Since the end of the project, FTB continues financing Small Operators on its own funds, demonstrating the impact of the technical assistance, which has convinced them to pursue the development of their portfolio on those sectors.

This project was a pilot at national scale and an innovative initiative for AFD. It demonstrated that small water supply and rural electricity private-run businesses have a strong social impact and can be bankable without high securities as it was required beforehand.