E-payments to save MSMEs on costs: NBC

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National Bank of Cambodia (NBC) governor Chea Chanto speaks at the 9th Global SME Finance Forum, held in Phnom Penh last week. SUPPLIED

Digitising payments could bring substantial cost savings for micro-, small-, and medium-sized enterprises (MSME), not only by simplifying cash management processes but also reducing potential opportunities for misappropriation or corruption, according to the central bank chief.

Speaking at the 9th Global SME Finance Forum in the capital last week, National Bank of Cambodia (NBC) governor Chea Chanto stressed that MSMEs play a crucial role in the world’s economies, particularly in developing countries.

 

He shared that in the Kingdom, MSMEs account for 99 per cent of enterprises nationwide, and contribute over 70 per cent to employment and 58 per cent to gross domestic product (GDP).

MSMEs are key drivers of “decent jobs”, entrepreneurship for women, and income generation for vulnerable populations, he said, adding that these smaller businesses contribute to inclusive economic growth, shared prosperity, sustainable production and consumption, and reductions in poverty and inequality.

“Despite their important roles and contributions to the economies, MSMEs continue to face many challenges, and one of the most critical issues is access to finance. Their challenges have been exacerbated by the impacts of the Covid-19 pandemic, especially in emerging and developing economies where MSMEs are mostly in the informal sector,” Chanto said.

Small businesses often have poor bookkeeping records and lack appropriate financial accounts and audited financial statements, leading many of them to be unserved or underserved by formal financial institutions, he added.

“The Covid-19 pandemic accelerated the digitalisation of payments. According to the latest Red Book Statistics from the Bank for International Settlement [BIS] Committee on Payments and Market Infrastructures, consumers have shifted from physical cash to digital and contactless payment instruments at a rate unprecedented since the start of the Red Book Statistics.

“Recognising the massive potential of digital payments, the [NBC] recently introduced Bakong, a national payment system based on Blockchain technology, which aims to offer low-cost, secured, fast, and convenient payment services to people and small businesses in Cambodia,” he said.

 

According to Chanto, the NBC has been building Project Bakong since 2017, seeking to avail a peer-to-peer fund transfer service to retail customers of local banks, financial institutions and payment service providers. After a pilot run that started in July 2019, the Bakong system was officially launched in October 2020, he added.

The project is named after a prominent 9th century Hindu monument dedicated to the god Shiva, built by King Indravarman I as his official state temple in the middle of the Khmer Empire’s then-capital city Hariharalaya, located about 13km east of Siem Reap town along National Road 6 in an area now called Roluos.

Ministry of Industry, Science, Technology and Innovation director for small and medium enterprises (SME) and handicraft Chhea Layhy told The Post on September 27 that fintech (financial technology) development has markedly increased MSME activities, especially against the backdrop of the Fourth Industrial Revolution (4IR).

He pointed out that fintech has substantially cut down on production costs and wasted time for MSMEs and other businesses, while by and large remaining consistent with government objectives. “Judging from the feedback I’ve gotten from MSMEs, they appear to be happy to integrate fintech into their business processes, like e-commerce for example,” he said.

Layhy affirmed that “our goal” is to transform family-owned SMEs into corporations, with larger labour forces as well as greater productivity, access to funds, and overall capabilities.

According to the International Finance Corporation’s 2017 MSME Finance Gap report, 40 per cent of formal MSMEs across various industries in emerging markets – or the equivalent of 65 million enterprises – require about $5.2 trillion to develop and support their businesses. Moreover, the informal sector remains woefully underserved with a roughly $2.9 trillion demand for finance.