On October 14, 2021, the Association of Banks in Cambodia (ABC) and USAID Green Invest Asia delivered a Green Project Finance Training session to ABC’s member banks.
The purpose of the training was to provide a high-level overview of project finance and raise banks’ awareness of project financing techniques, enabling long-term financing of projects without pre-existing cash-flows that can demonstrate strong future revenues to meet debt servicing and repayment obligations.
Mr. DITH Sochal, Chair of Sustainable Finance Committee at The Association of Banks in Cambodia (ABC), said during the Green Project Finance Training webinar that Cambodia’s need for climate finance is well-established. However, green projects in Cambodia currently face significant barriers to obtaining financing, limiting the growth of Cambodia’s sustainable economy.
He said that that project financing is a key solution to addressing these barriers, funding green projects and growing green finance. However, while project finance is commonly used overseas (mainly for long-term infrastructure projects), not many Cambodian banks have experience providing project finance.
Sochal added that project finance refers to a specific loan structure used to fund long-term projects that relies primarily on the project’s cashflow for repayment. This loan structure is “non-recourse” or “limited recourse”, meaning debtors cannot be pursued for any additional payment beyond seizure of project assets, rights and interests held as secondary collateral. Because of this, risk identification and management, including through carefully negotiated risk sharing agreements, is central to project finance.
Mr John McGinley, Managing Partner of Mekong Strategic Partners (MSP), who gave the closing remark, thanked the participants as well as the trainer who took the valuable time to join the session. He also explained why project finance is relevant to our sustainable finance efforts, including the Green Bank/Financing Facility for Cambodia.
