The new strategy focused on simplicity, accessibility, flexibility, and confidence-building to ensure the RPCGF was practical and impactful. By addressing both financial and structural challenges, the approach sought to strengthen the entire rice value chain, reduce dependency on foreign buyers, and enhance Cambodia’s economic resilience in the sector.
— Cambodia —
security. rice. markets.
Developing a Targeted Rice Credit Guarantee Scheme in Cambodia: Enhancing Financial Resilience Amidst Climate Risks, Value Chain Disruptions, and Market Uncertainty
"Access to finance is the lifeblood of agricultural resilience. A well-structured credit guarantee scheme can bridge the gap between farmers and financial institutions, ensuring sustainable growth in the rice sector." — Dr. Shenggen Fan, Former Director General, IFPRI
Challenge
The Cambodian Rice Sector has faced significant distress due to adverse weather conditions, a broken value chain, and low market confidence, leading to a collapse in rice paddy prices. Farmers and millers struggle to access financing, forcing much of Cambodia’s rice paddy to be exported unprocessed to neighboring countries, resulting in economic losses and market destabilization. The challenge was to design and implement a targeted Partial Credit Guarantee Facility (RPCGF) that would restore market confidence, improve access to working capital, and retain value-added processing within Cambodia’s economy.
Strategy
We developed an implementatable targeted Rice Partial Credit Guarantee Facility (RPCGF). The key strategic elements included:
1. Learning from Past Failures and Redesigning the Scheme
- The 2012 RPCGF had little to no impact due to its complexity, high costs, and administrative difficulties.
- The new RPCGF was redesigned to be simpler, more accessible, and flexible, ensuring wider adoption by both lenders and borrowers.
2. Addressing Market Confidence Issues
- Acknowledged that low market confidence was a major barrier preventing access to financing.
- The government committed $20 million to create a robust and well-publicized credit guarantee scheme to restore confidence in the sector.
- Outreach programs and reliable market data dissemination were introduced to build trust among farmers, millers, and financial institutions.
3. Financial Accessibility for Rice Farmers and Millers
- The new RPCGF guarantees loans from commercial banks to agricultural collectives and millers.
- Aimed at reducing reliance on middlemen and brokers who often purchase paddy at artificially low prices.
- Sought to retain more value-added activities within Cambodia by ensuring local processing rather than exports to Thailand and Vietnam.