Ex-Ante Evaluation (for Japanese ODA Loan)
Private Sector Investment Finance Division,
Private Sector Partnership and Finance Department, JICA
1. Name of the ProjectCountry: Kingdom of Cambodia (Cambodia)
Name of the Project: Rural Area Agricultural Sector Supporting Project inCambodia(Based on the Facility for Accelerating Financial Inclusion in Asia (FAIA))
Loan Agreement: May 13 2022
2. Background and Necessity of the Project(1) Current State and Issues of the Agriculture Sector in Cambodia
The agricultural sector plays a very important role in the Cambodian economy,
accounting for 22.1% of Cambodia's GDP and 32.3% of its employment (2.99million people) in 2019. 90% of the poor (1.5 million people, calculated by the2020 poverty rate) are said to live in rural areas. 78% of rural residents arefarmers, and there is an income gap as rural incomes are only 50-60% of thosein urban areas. (Source: ADB, Phnom Penh Post). In addition, it is estimated that,
due to the impact of COVID-19, 400,000 people across the country lost their jobs
in the first half of 2020 alone, with 100,000 of these people returning to their ruralhomes after losing their urban employment, so creating rural jobs has also
become an issue (Source: ADB, July 2021). The growth of the agriculture sector
and the accompanying job creation is also important from the perspectives ofsustainable economic growth, poverty reduction and helping those who are
unemployed due to the effects of COVID-19.
On the other hand, one of the challenges in the agricultural sector is to improvelabor productivity (As of 2021, Source: ADB). Restraints on improving productivity
include access to transport, information, technology and finance. Improving
financial access will contribute to improving labor productivity by enabling thepurchase of agricultural materials and equipment, high quality seeds, andnecessary fertilizers, but financial access in the agricultural sector accounts for
only 9.4% of the country’s total loans (as of 2018. Source: ADB) and 53% offarmers do not have access to finances (as of 2016. Source: National Bank ofCambodia).
Under these circumstances, this project aims to improve financial access in theagricultural sector through loans to ACLEDA Bank Plc., a local financial institution

in the country. In its National Strategic Development Plan 2019-2023, theCambodian government identifies the agricultural sector as important in terms ofproviding employment, reducing poverty, and developing rural areas. Thechallenges facing the agricultural sector include increasing labor productivity,
poor product quality, and inadequate supply chains and irrigation facilities. The
Cambodian Ministry of Agriculture, Forestry and Fisheries addressed thechallenges facing the Cambodian government through its “Master Plan for
Agricultural Sector Development towards 2030” and “Agriculture Sector StrategicDevelopment Plan 2019-2023,” and this project is in line with the challenges
facing the sector and the policies of the Cambodian government.
(2) Japan and JICA’s Policy and Operations in the Agriculture Sector
Japan’s Development Cooperation Policy for the Kingdom of Cambodia (July2017) lists support for promoting industry as a mainstay of one of its priority areas,
and as an initiative for the promotion of agriculture, a key industry in rural areas,
this project is consistent with this policy. In addition, this project will be extended
to a financial institution with the aim of improving financial access in Cambodia inthe ASEAN region, as well as empowering women, low-income earners, micro,
small and medium enterprises, etc., and comes under the "Initiative on Overseas
Loans and Investments for ASEAN." As well as supporting the agricultural sector
through technical cooperation projects such as the Project for Rice Seed
Production and Distribution (2017-2022) and the Project for Establishing
Business Oriented Agricultural Cooperative Model (2014-2019), JICA has been
assisting the national road infrastructure development and supporting theagricultural supply chain through the National Road No.5 Improvement Project,an ODA Loan project (L/A signed in 2014), the Project for Improvement of theNational Highway Route 6, Siem Reap Section, a Grant Aid project (E/N signedin 2000). Also, ACLEDA Bank Plc. is encouraged to promote female executives
in consideration of gender balance, and this project is expected to contribute tothe 2X Challenge.
3. Project Description(1)

Project Objective

The objective of this project is to improve financial access in the agricultural
sector, especially for small and medium-sized farmers, by providing long-termloans to ACLEDA Bank Plc., a major financial institution, thereby contributing
to the expansion of agricultural production, the improvement of farmers'

income, and the maintenance and expansion of employment in Cambodia.
(2)
Project Site / Target Area
The whole country of Cambodia(3)
Project Components
Promote lending to the agricultural sector (farmers, MSMEs), focusing mainly
on small and medium-sized farmers, through a long-term loan to ACLEDABank Plc.
(4)
Financing plan
US $135 million(5)
Project Implementation Structure1) Borrower: ACLEDA Bank Plc.
2) Executing Agency: ACLEDA Bank Plc.
(6)
Environmental and Social Consideration / Cross-Sectoral Issues / GenderCategory
1) Environmental and Social Consideration① Category: C② Reason for Categorization: Based on the JICA Guidelines forEnvironmental and Social Considerations (announced in April 2010), thisproject’s undesirable impact on the environment and society is judged tobe minimal.
③ Other/Monitoring: The main use of funds is for investment in materialsand equipment required for agricultural production2) Cross-sectional Matters: None in particular3) Gender Category:[Gender issues] ■GI (S) (Gender Activities Integration Project)< Activities / Reasons for classification >As it’s a loan to a financial institution which aims to help improve access tofinance in Cambodia in the ASEAN region and empower women, low-income
earners, and small and medium enterprises.
(7)
Other Important Issues
This project is an application case of the Sustainable Finance Framework forco-financing between SMBC and JICA that was introduced on March 30, 2021.
4. Targeted Outcomes(1) Quantitative Effects
Indicator

Baseline (2021)

Target (2025)

Loan balance for the $1,094 million$1,611 million

agricultural sector
Number of borrowers 0whoreceiveloans
financed by JICA

12,000 cases(2) Qualitative Effects
Improvement in financial access in the agricultural sector(3) Internal Rate of Return
Since this is a bank loan project, the Economic Internal Rate of Return (EIRR)
and the Financial Internal Rate of Return (FIRR) are not calculated.
5. External Factors and Risk Control
None in particular
6. Lessons Learned from Past Projects
The results of the ex-post evaluation of the Strengthening of the Agricultural
Sector Project (II) in Paraguay identified the importance of setting up a loan
scheme that matches the objectives of the project. It was pointed out that theloans did not reach the originally intended targets as they didn’t meet thescreening conditions of the intermediary financial institution. Thus we learned theimportance of setting the loan conditions of the intermediary financial institution
at an appropriate level. The project reviewed and checked ACLEDA's loan
screening conditions and confirmed that there was a high probability that theloans would be given to the expected agricultural sector.
7. Evaluation Results
This project is consistent with Cambodia’s developmental issues and policies,
as well as Japan’s and JICA’s cooperation policies and analyses, will contributeto poverty reduction through improving financial access to the agricultural sector,
and it will likely contribute to five of the SDGs: Goal 1 (No Poverty), Goal 2 (Zerohunger), Goal 5 (Gender Equality), and Goal 8 (Decent Work and Economic
Growth). This, therefore, suggests that it is highly relevant to support theimplementation of the project.
8. Plan for Future Evaluation(1) Indicators to be used:As shown in Section 4(2) Timing:
Ex-Post Evaluation is scheduled for 2026.
End