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Bridging the Funding Gap: How the EIS Platform Supports Cambodia’s Small and Medium Enterprises 

Cambodia
Entrepreneurial ecosystems
23.07.2024
Cambodia's small and medium enterprises face a daunting challenge: a funding gap of $3.7 billion. Furthermore, the Gender Lens Investing Landscape Study published in 2023, revealed that men-owned enterprises demand more capital than women-owned enterprises, however, the latter exhibit higher financial needs: US$6.4 billion for women-owned enterprises compared to US$4.1 billion for men-owned enterprises. The financial needs for MSMEs in Cambodia was thus, estimated to be around US$10.5 billion. 

These businesses, often too large for microfinance but too small for traditional banking, struggle to find the financial and technical support they need. They fall into what’s known as the “missing middle,” needing capacity-building services to absorb investment capital but unable to afford them. Compounding this issue is the fact that many of these SMEs lack developed leadership, technical knowledge, and strategic business management skills. This situation not only hampers their growth but also presents significant hurdles for investors. With a low number of investment-ready businesses and a lack of an investable pipeline, investors face high costs in deal sourcing and due diligence, particularly if they have no local presence in the region. 

Enter the Entrepreneur Investment Support (EIS) platform, a key program within the Enhancing Entrepreneurial Ecosystem and Investment (3Ei) initiative is designed to bridge this gap by offering technical assistance (TA) to SMEs, aiming to catalyze more investment into these crucial sectors of Cambodia’s economy. Through EIS, investor and intermediary partners can recommend entrepreneurs for TA support, providing them with the necessary resources to become investment-ready or to sustain growth post-investment. 

Currently, EIS is supporting two SMEs with investment readiness TA and three SMEs with post-investment TA. For those preparing to secure investments, EIS offers support in numerous areas including, but not limited to, business strategy, financial management, market assessment, human resources acquisition, internal control systems, governance, legal, and taxation and others. For businesses that have already raised funds, additional support extends to sales and marketing, product and service improvement, supply chain management, impact assessment, and other industry-specific technical assistance. 

To access these services, entrepreneurs must be recommended by EIS’s investor or intermediary partners. Companies seeking investment readiness support need to have connected with investors or intermediaries and require TA to address specific issues to become investment ready. Those seeking post-investment support must have already received investments in the form of debt, equity, or blended funding.  

EIS delivers these tailored TA services through a pool of vetted consultants, ensuring that each business gets the right kind of support. These consultants can be either local or regional, and EIS also accommodates preferred providers chosen by the companies or investors after a quick vetting process. 

EIS structures its support as a repayable grant with a discounted TA value, where entrepreneurs are expected to pay back a portion of the TA value over time. This approach creates a revolving fund, enabling EIS to support additional businesses in Cambodia. EIS pays the TA fee upfront to the consultant, requiring the entrepreneur to make a small down-payment and repay the remaining fee as their business grows and/or receives investments 

Through non-financial support services, EIS helps build an investable pipeline for investors, contributing to risk mitigation within their portfolios. This approach catalyzes additional investment capital towards SMEs and mobilizes capital within the Cambodian market. 

The Entrepreneur Investment Support (EIS) platform within the Enhancing Entrepreneurial Ecosystem and Investment (3Ei) initiative is co-financed by the Swiss Agency for Development and Cooperation (SDC), the Korea International Cooperation Agency (KOICA), and Khmer Enterprise. 

Cambodia
Entrepreneurial ecosystems
Enhancing Entrepreneurial Ecosystem and Investments (3Ei)
The overall goal of the 3Ei is for the private sector to actively contribute to the Cambodia's socio-economic development and attaining the goals of the Sustainable Development Goals (SDGs). The achievement of this overall goal will be driven by two outcomes: enhanced coordination, and collaboration within the entrepreneurial ecosystem; and increased business performance and investments in the ecosystem.
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