Financial technology to lead the way for Cambodia's growing startup scene

The founder behind a Cambodian startup predicts that e-commerce is growing too slowly. Fintech, he says, and a good payment system must come first before everything else follows

December 11, 2017
Financial technology to lead the way for Cambodia's growing startup scene

Khuon Sophorth is the founder of Morakot, a Cambodian tech company that provides cloud-based core banking software to financial institutions keen to cut costs. By targeting the country’s tech-savvy business community, the company has enjoyed encouraging success since its launch in 2014. Last month, Sophorth met Southeast Asia Globe to share his opinions on the country’s nascent startup scene.

What are some of the challenges you have faced as a fintech startup operating in Cambodia?

When we first launched our product, we struggled gaining clients’ trust. People would ask us: ‘Where’s the product from?’ When we would tell them that we made it ourselves with our own team, they would not believe that local Cambodians could make these types of programmes to high standards. There was some hesitation to buy our software.

But we walked them through the system, and let them test it first to see how it worked. It did really well. Now, 26 MFIs in Cambodia use our software.

The other challenge is hiring staff. It’s not easy to find people who have coding and programming skills, as well as an understanding of accounting and business processes.

In your opinion, what are some of the common mistakes made by startups in Cambodia?

The most common mistake is that most startups don’t register themselves properly. They start without doing any legal work. And when they develop and things become more complex, they run into issues.

A lot of startups also come up with a cool idea but don’t really seek advice from business people. They’re technical people and they know they can do it, but they don’t really know how to start a business, how to connect with customers, how to do marketing, how to form a company. Sometimes, their product is really exciting, but they don’t know if someone will actually buy that product. They don’t pilot the product first to find that out.

“A lot of startups fail because the founders try to do it part-time. When I started my second company I realised I couldn’t do that. So, I quit my job and committed 100%”

Does that come down to a lack of experience, or does it come down to education?

I think it’s about a lack of knowledge of entrepreneurship. They need to get more education about that. And we’re starting to see that now. There are a lot of events trying to educate young people about what they need to do when they set up a new company, how to develop a strong business model, how to acquire customers and how to manage their cash flow.

A lot of startups also fail because the founders try to do it part-time. I’m actually talking from experience. I failed with a startup before setting up Morakot because we only did it part-time. When I started my second company, I realised I couldn’t do that anymore. So, I quit my job and committed 100%.

You took part in the 2017 Startupbootcamp FinTech accelerator. How did you find the experience?

It was very, very helpful for us. I really liked the way they did it. Let’s say you didn’t have the skills; they would connect you to mentors. They have over 200 [experts] willing to help you scale your business and take you to the next step. If you lacked funds, they would connect you to investors. If you didn’t have space to work, they would give you space.

It also helped us refine our product for international markets. They connected us to some people in Myanmar and the Philippines. Our mentors also advised us to get a security firm to help us check and validate our software and make sure that it was security compliant.

The Singaporean government is known for promoting its startup ecosystem. How can the Cambodian government help to develop the country’s startups?

It needs to improve the legal framework. When we were selected for the accelerator, we were advised to register in Singapore, as investors still don’t trust Cambodia’s legal framework.

It should also provide some allowances for startups. They shouldn’t have to comply 100% with what’s stated in the law, with respect to registering companies and things like that. They should be given tax allowances. The government could give startups a three-year tax holiday. We need these kinds of policies in place. The government also needs to take care of the country’s education system. Students are graduating without the skills they need. When I recruit people for a position, I need to interview 50 people, as only one of them will be qualified for the position.

In the future, where do you expect to see the most growth?

In Cambodia, fintech, in terms of growth. E-commerce started here a long time ago and it’s growing very slowly. The problem e-commerce companies face is how customers pay for products, and issues with know-your-customer procedures. Because when you do online shopping, you need systems for accepting payments and delivering products quickly. I think the first thing is to have a good payment system and to make it work first. Then e-commerce will follow.

Tell us about your plans to expand to Myanmar in the near future…

We chose Myanmar as the first country to expand to outside Cambodia because there are a lot of similarities in terms of how their MFIs operate. In terms of regulations, they are also making a lot of changes and making it more open.

They also have more than 200 MFIs over there. We see it as a good opportunity because most of the Myanmar MFIs are doing their accounts manually or with Excel spreadsheets. Even some banks as well, which surprised me. Next year, we will expand to the Philippines.

This article was published in the December edition of Southeast Asia Globe magazine. It is part of a three-part series that surveys the startup scene in Southeast Asia: Malaysia and Singapore, Cambodia and Vietnam. For full access, subscribe here

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