Bond Issuance in Cambodia

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The FINANCIAL — IFC, has invested $20 million equivalent in riel-denominated bonds issued by Cambodian microfinance institution Hattha Kaksekar Limited. The investment helps create a domestic corporate bond market and allows HKL to expand its local currency lending to micro and small businesses, including farmers and women entrepreneurs.

Access to finance is a major obstacle to doing business in Cambodia, as the financing gap for micro, small and medium enterprises is estimated to represent as much as 21 percent of the country’s gross domestic product. Moreover, the dominance of the U.S. dollar in the economy has left smaller, rural businesses – which rely heavily on the riel local currency – particularly vulnerable to potential currency fluctuations.

Within this context, HKL as the third largest micro lender in Cambodia became the first firm to issue and list its riel-dominated corporate bonds on the Cambodia Securities Exchange (on December 5). Out of 1.2 million three-year tenor bonds worth 120 billion riels ($30 million equivalent), IFC bought 800,000 bonds. The funds will help HKL offer thousands of additional loans, with majority of them to women.

IFC investment was supported by the International Development Association’s Private Sector Window, a new initiative to catalyze private sector investment and create jobs in the IDA countries. The facility enabled IFC to provide medium-term, local currency funding at a local market rate to allow HKL to provide affordable loans to rural borrowers. This will not only expand local currency access for farmers and small business owners, it also sends a confident signal to help Cambodia develop local currency funding over the long-term.

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