Cambodian SMEs Boosted by Demand, But Face Bureaucracy and Capital Shortages

Demand for Cambodian-made products has jumped about 30% over the past year, driven by a nationalist campaign to boycott Thai goods after border clashes and trade restrictions between the two countries, according to the Federation of Associations for Small and Medium Enterprises of Cambodia. Several Cambodian brands have said they will stop manufacturing in Thailand and shift production home. But expanding domestic output requires time, capital and navigating cumbersome registration rules, business owners told CamboJA News. Roughly 45,000 registered small and medium-sized enterprises (SMEs) and handicraft businesses accounted for 58% of Cambodia’s GDP in 2025, according to government data, underscoring their weight in the economy. Yet formal registration still captures only a fraction of the sector. The government has since taken steps to close that gap, including tax incentives and a digital registration platform launched in late 2024 to bring informal businesses into the official record. The bottlenecks have drawn the attention of Prime Minister Hun Manet, who has called for urgent reforms to simplify business registration and licensing. He said Cambodia must remove barriers to local production and capitalize on the border disruptions pushing the country toward greater reliance on domestic goods. One such reform is Hun Manet’s order to expand CamDX, the government platform that lets agencies and businesses share data to cut paperwork. Hem Hema, owner of Yeaksa Laundry Franchise, said some reforms have eased the process. But challenges remain: registering a business like his can require coordinating with more than a dozen ministries and government departments. “Some people are not very happy when we go to register our businesses,” Hema said. “I don’t know whether they are officials or not. Sometimes, when we arrive, they tell us to sit and wait at a coffee shop.” Capital Remains A Challenge For many SMEs, access to capital is a major obstacle to growth. Hema said small businesses often have limited capital and struggle to secure bank loans because lenders typically require land or other assets as collateral. “As entrepreneurs, we are not [a] land business,” he said. “If you do not have land, you cannot get the loan. No matter how capable you are, if you do not have sufficient collateral, it is almost the same as having nothing.” He urged banks and regulators to weigh a business’s actual capacity, not just its collateral, when determining access to financing, and to provide more support to SMEs. Nuth Samphors, founder of LSV Industry, a Phnom Penh manufacturer of household and hygiene products, said businesses like hers need more capital reinvested into the company as it grows. She said manufacturers need capital across three stages – pre-production, production and post-production – since businesses must pay for raw materials and production costs upfront, while recovering that money through sales can take time. “When we first start, we can produce according to what we can afford. But once we grow, we have to adapt to the market,” she said. Like Hema, Samphors called on SME-focused banks to reconsider whether lending requirements could better support small businesses, adding that while interest rates have improved somewhat, they remain higher than those in neighboring countries. About 74% of Cambodian SMEs cited collateral requirements as a major barrier to obtaining loans in 2024, according to ASEAN Briefing, a publication of the pan-Asian consulting firm Dezan Shira & Associates. More than half of those businesses also lacked formal financial records, making it harder for banks to assess their creditworthiness. Loans for small businesses in Cambodia typically range from 6.5% to 8.5%, according to the state-owned SME Bank of Cambodia. More favorable rates are becoming available through a $20 million Energy Efficiency Revolving Fund launched last month by the Asian Development Bank and SME Bank of Cambodia. Backed by $2.5 million in loan guarantees, the program offers small Cambodian businesses loans at interest rates of up to 5.5% a year, with terms of up to 10 years. Local Firms Face An Uneven Playing Field Despite the opportunities created by the border closure, Samphors said Cambodian small businesses still face strong competition from imported products, which are often cheaper due to larger-scale production and lower costs abroad. Land border closures, in effect since June 2025, have also disrupted supply chains, particularly for foreign-owned factories, some of which have shuttered as a result. “Imports can be produced in places where the cost of production is lower, while our production here is on a smaller scale, which makes our costs higher,” she said. “So they may have an advantage over us.” She said larger companies also have more resources for marketing and securing prominent shelf space, leaving smaller producers with fewer opportunities to promote their goods. “When we enter the market, we are treated like a fully equipped competitor,” Samphors said. “The market does not lower its standards for us.” She added that bigger firms can afford to rent more prominent display space, leaving smaller businesses with less visibility and a harder path to competing on equal footing. Hong Vannak, an economist at the Royal Academy of Cambodia, said the border conflict has given Cambodian producers more room in the domestic market, but that local firms need to lower production costs, improve quality and build consumer trust, while the government should provide greater technical and regulatory support. “Consumers buy benefits, not just products,” he said, stressing that small local companies must focus on quality, hygiene and safety rather than simply ramping up output. Counterfeit goods have also become a problem. In July, authorities seized nearly seven tons of counterfeit Cabbage Soup in Phnom Penh, saying the products originated in China and used local packaging. Samphors, whose company makes the genuine product, described the counterfeiting as a serious infringement that could undermine the consumer trust. She urged authorities to strengthen measures against counterfeit goods, saying small businesses often lack the resources to monitor their products across the market. The Ministry of Industry, Science, Technology and Innova