The project objective is to increase access to finance by micro, small, and medium sized enterprises (MSMEs) that are affected by the economic upheaval during the COVID-19 pandemic. This will be achieved by enhancing PRASAC’s capacity to provide critical liquidity financing support to its MSME clients during this acute shock, which in turn will support MSMEs’ active participation in the economic recovery process in Cambodia.
The project is a non-sovereign backed loan to PRASAC Microfinance Institution Plc. (“PRASAC”), to support and expand its lending to eligible private-sector micro, small and medium sized enterprises (MSMEs) in Cambodia. PRASAC is the largest microfinance institution in Cambodia that has operated for more than 25 years offering a range of credit and savings products to retail and MSMEs.
AIIB’s Environmental and Social Policy (ESP) is applicable to this on-lending facility. The project has been placed in Category FI, because the financing structure involves the provision of funds through a Financial Intermediary (FI), whereby AIIB delegates to PRASAC the decision-making on the use of AIIB’s funds for sub-loans in so far as the sub-loans meet the conditions of the eligibility criteria.
PRASAC will undertake an environmental and social (E&S) screening process for sub-borrowers in accordance with the eligibility criteria which determine the use of proceeds of AIIB’s funds. The criteria have been reviewed by AIIB and are consistent with the AIIB’s ESP, and only sub-borrowers from eligible sectors aligned with AIIB's priorities with low to medium ES risks are eligible. Additional applicable requirements include the AIIB Environmental and Social Exclusion List and national ES laws.
PRASAC’s Social and Environmental Protection Policy governs its operating procedures regarding E&S diligence for sub-borrowers and is integrated into their credit review process. This policy is implemented by a dedicated team and staff. AIIB has appraised the process and is satisfied with PRASAC’s capacity to implement its policy. PRASAC is required under its Social and Environmental Protection Policy to screen loan proposals, to categorize them as per its E&S internal processes, to conduct an E&S assessment of contextual risks and current E&S compliance status and performance, and to conduct monitoring of sub-loans. The Social and Environmental Protection Policy makes provisions for PRASAC’s annual reporting on its E&S performance to its creditors.
The project will support PRASAC in increasing its lending to MSMEs through short-term, limited scale liquidity and investment loans under the COVID-19 Crisis Recovery Facility. The project will not allow the financing of sub-projects in the form of project finance toward project capex. Higher risk sub-projects including all those corresponding to Category A as per the AIIB ESP and other categories’ sub-projects potentially involving a) involuntary resettlement, b) risk of adverse impacts on Indigenous Peoples, c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural resources, d) significant Occupational Health and Safety risks, or e) significant retrenchment will not be eligible for financing from the proceeds of this loan. Coal-related sub-projects including coal mining, coal transportation or coal-fired power plants, as well as infrastructure services exclusively dedicated to support any of these activities and large dams will also be excluded.
PRASAC will be required to disclose key elements of its E&S policy and performance on its website. Stakeholder consultation and disclosure by the sub-borrowers, beyond what may be required by Cambodian regulatory requirements, will not be required in the scope of eligible sub-loans, given that only sub-borrowers from low-to-medium E&S risk are eligible. PRASAC is required to establish an institutional-level grievance redress mechanism (GRM) prior to the implementation of the Project, and the information of this GRM as well as the Project-affected People Mechanism of AIIB in local language will need to be disclosed timely to local communities in an appropriate manner, which will include contact details.
Won Sooyeon
Executive Vice President & Chief Financial Officer
Home Projects Project Summary Project List Project Details Cambodia: Cambodia PRASAC COVID-19 Response Facility
