Ex-Ante Evaluation (for Japanese ODA Loan)
Private Sector Investment and Finance Division,
Private Sector Partnership and Finance Department,
JICA
1．Name of the ProjectCountry: Kingdom of Cambodia
Project: Micro, Small, and Medium Enterprise Development Project (under the“Facility for Accelerating Financial Inclusion in Asia”)
Loan Agreement: March 27, 2020
Borrower: Hattha Bank Plc.
2．Background and Necessity of the Project(1) Current State and Issues of the MSME Sector in Cambodia
In recent years, as Cambodia achieved stable economic growth (growing at anaverage annual rate of 7.0% from 2006 to 2017), the country’s poverty rate improved
from 47.8% in 2007 to 13.5% in 2014. However, 90% of the population below thepoverty line live in rural areas1, causing a regional gap. In addition, it is estimated that
4.5 million people (27.6% of the total population) in the population above the poverty
line still remain at a level very close to the poverty line, and in order to further reducepoverty, it is important to ensure growth of micro, small, and medium enterprises(MSMEs), which account for a large percentage of total employment, and thereby
create employment. MSMEs play an important role in the Cambodian economy,representing 99.8% of the country’s total enterprises, creating 70% of its total jobs, andaccounting for 58% of its total GDP. However, many of the MSMEs (70.0% of the small
enterprises and 44.2% of the medium ones) are informal, with their access to regularfinance limited. Since MSMEs are forced to depend on their own funds or non-regularfinance for 97.7% of their investment funds and 94.8% of working funds, the funding
gap is large, at about 21%, and this hinders the growth of MSMEs (source: ADB andIFC). Furthermore, many of the MSMEs (62% of the micro enterprises and 26% of thesmall and medium enterprises) are run by female managers, and from the viewpointof women’s empowerment, it is important to promote the growth of MSMEs.
In Rectangle 3 “Promotion of private sector development and employment” of its
highest national development strategy known as the Rectangular Strategy, theCambodian government aims at helping MSMEs create new businesses and improve
productivity. In its Industrial Development Policy (2015-25) positioned just below the1

Areas except for the Capital and Provincial capital
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Rectangular Strategy, the government particularly points out the necessity ofexpanding MSMEs’ access to financial services. In 2017, it decided to establish a
special-purpose bank specialized in financing small and medium enterprises (SMEs)
and urged the country’s microfinance institutions (MFIs), which provide microfinanceto MSMEs by making the most of their extensive office networks among private
financial institutions, to actively work on MSME financing. The Project, which strives toexpand MSMEs’ access to financial services in rural areas of the country throughHattha Bank Plc., which boasts of its largest branch network among the Cambodian
MFIs and focuses on financial services for rural and female customers, is in accord
with the challenges faced by the sector and the policy of the Cambodian government.
(2) Japan's and JICA's Policy for the MSME Sector in Cambodia and the Priority ofthe Project
In his statement at the Japan-ASEAN Summit in November 2019, referring to financial
inclusion in ASEAN and other Asian regions, including Cambodia, the Japanese Prime
Minister stated that Japan committed to doubling JICA’s overseas investments andfinancing, including expanding access to financial services in ASEAN and other regions
and funding financial institutions in the regions to empower women, low-income
earners, MSMEs, etc. Behind this commitment are the launch of the Global Partnershipfor Financial Inclusion (GPFI) by the G20 participants, including the Japanese
government, in 2010 and the adoption of 2X Challenge: Financing for Women by JICA
and other development financial institutions in the G7 countries in 2018 in order tomobilize funds of $3 billion by 2020 for projects that contribute to women’s economic
empowerment. Japan’s Country Development Assistance Policy for the Kingdom ofCambodia (July 2017) cites industrial promotion support as its priority area, and its
attachment “Business Development Plan” states that Japan will provide support tocontribute to development of MSMEs, which account for the majority of total
enterprises in the country, and strengthening of their management. As described above,
the Project corresponds with the cooperation policy of Japan and JICA and the analysis
conducted thereby.
3．Project Description(1) Project ObjectiveBy providing long-term finance to Hattha Bank Plc. in Cambodia, the Project aims at
expanding MSMEs’ access to financial services in rural areas, thereby contributing toreducing poverty and filling the regional gap in the country and ensuring sustainablegrowth of the country’s economy.
(2) Project Site/Target Area
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Rural areas of Cambodia(3) Project Component
Promote lending to MSMEs in rural areas, including businesswomen, through longterm finance for Hattha Bank Plc.
(4) Environmental and Social Consideration/Gender Category① Environmental and Social Considerationa) Category: Cb) Reason for Categorization:
It is judged under the JICA Environmental and Social Considerations Guidelines
promulgated in April 2010 that the undesirable effects of the Project on theenvironment are minimized② Gender Category:■GI(S) (Gender Informed(Significant))<Reason for Categorization> The borrower in the Project granted 64% of its
loans to women in 2018. The Project will contribute to women’s economic
empowerment because the borrower is expected to maintain the same level oflending even after it expands finance through the Project(5) Other Important Issues
4. Targeted Outcomes(1) Qualitative Effects
The balance of loans granted to MSMEs (and female customers) in rural areas will
be measured.
(2) Quantitative Effects
Expansion of MSMEs’ access to financial services is expected.
5. Lessons Learned from Past Projects(1) Results of Evaluation of Similar Projects
The results of ex-post evaluation of the Micro Enterprise Assistance Project, aJapanese ODA loan for the Arab Republic of Egypt, and other data drew one lesson:in developing similar projects to support loans for micro and small enterprises in twosteps, it is important for JICA to grasp the loaning system of implementing agencies
and intermediary financial institutions.
(2) Lessons for the ProjectIn the examination process, the Project has checked Hattha Bank Plc.’s financing
experience and branch system and confirmed that the financial institution has sufficientability to implement the Project.
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6. Evaluation Results
The Project is relevant to the development issues and development policy ofCambodia and is consistent with Japan's and JICA's development cooperation policies.
It will also contribute to sustainable industrial development by providing MSMEs with
better access to financing. Therefore, the Project is expected to help achieve the twoof the SDGs: Goal 8 (better access to financial services) and Goal 9 (promotion ofindustrial development through small enterprises’ wider access to financial services),and is highly significant.
7. Plan for Future Evaluation(1) Indicators to be used
As shown in Section 4. (1) above(2) Timing
Future evaluation is scheduled for March 2027.
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