CEO Remarks – FUNAN Microfinance PLC

Market overview

The number of Microfinance Institution (MFI) increases to 74 by the end of 2018 from 64 in 2016. There are 43 commercial banks, 14 specialized banks, 7 MDIs and 74 MFIs. In addition, there are 16 payment service institutions that are double increased from 2016.  The share of MDIs assets and credit gradually increased to 14 percent and 18 percent respectively. The contribution of MFIs has also increased. However, due to their small sizes and operations, their share of credit and assets remained 2.8 percent and 2.1 percent respectively. The Financial Industry’s credit growth was 24.4 percent (Y/Y) in 2018 while 31.3 percent (Y/Y) and 26.5 percent (Y/Y) is the growth rate of MFI and MDI respectively. The household credit accounts for the largest share of microfinance’s total credit, registering 36 percent share for MDIs and 40 percent share for MFIs. The Return of Asset (ROA) and Return on Equity (ROE) for MFIs remained 2.4 percent and 3.5 percent respectively. MDIs have generated sustained profits as reflected in relatively high ROA and ROE, 2.8 percent and 16.5 percent. After the interest rate cap from National Bank of Cambodia (NBC)—the non-interest income of MFI and MDI increased to 19 percent and 8 percent respectively of the percentage income structure while the interest income was 78 percent and 91 percent respectively. In overall NPL ratios for banks and MDIs over the past two years was declined, while the NPL of Bank, MDI and MFI was 2.2 percent, 0.7 percent and 5 percent respectively by the end of 2018.

Totally the Microfinance industry remains strong and healthy in the last decade and expected to be continuous its growth in line with country’s economic growth and stability.

Overcome 2018 with break record

The financial year 2018 has been a challenging one while we are in the second year after the acquisition, staffs capacity building and brand awareness need to be much more focused because there are some changes during the transformational process and implementing the new the PRAKAS on credit risk grading and impairment provisioning. However, with strong support from the key stakeholders, FUNAN Microfinance achieved its financial performances at a satisfactory level with its growth rate at 54 percent in term of asset size, FUNAN was standing in rank number 3 among the MFI license (Non-MDI) with a total asset of USD49 million. By the end of 2018, we are having a loan portfolio of USD47 million and the current year net profit after payable tax is of USD1.7 Million. By strengthening risk management capability, the percentage of the non-performing loan is decelerated from 1.3 percent in 2017 to 1.19 percent in 2018. Both Return on Equity (ROE) and Return on Assets (ROA) had been improved significantly from 0.4 percent in 2017 to 19.9 percent in 2018 and 0.1 percent in 2017 to 4.1 percent in 2018, respectively.

Our competitive advantages

Our corporate governance and risk management framework are in place to create a sound system of the company, check and balance ensuring the sustainable development; and complied with regulators.

We are a part of Cambodia Post Bank’s Group with well-known shareholders from Canadia Investment Group, CIH (50%), Fullerton Financial Holding, FFH (45%), Cambodia Post Office, the state own company (5%). With our parent company, we have defined a clear market segment especially to the low-income people in self-employed mass market and salaried mass market. And with this value proposition and segment—we have determined a clear Vision & Mission for the long term value of Company and benefit to all stakeholders including client, shareholders and staffs. FUNAN’s parent company is investing to become a digital banking, leveraging technology between the two companies are the best opportunity to enhance our internal capability for Fin-Tech solution to the segment.

We are having a skillful diversified and dynamic management team with many experiences in relating to the field.  With different functions, we are getting support from the technicians of the parent Company and Fullerton Financial Holding (FHH).

In addition to our current branch network of 51 branches countrywide and in order to increase the footprint, FUNAN is building business synergistic cooperation to enlarge the business channel, enhancing segment through cross selling products and client convenience. The synergistic cooperation is our long-term business strategy. With this, we will leverage our operational areas wider through introducing branchless business model.

Planning ahead 

With our business aspiration in the medium term, we are enhancing our strengths to absorb the opportunity of becoming a Microfinance Deposit Taking Institution (MDI). To be there, FUNAN needs to improve its asset size becoming the first-ranked Microfinance, profitability, enhancing prudential policies and risk management framework, further investing in technology and our branding and public awareness. Keeping good relationship with regulators through implementing compliantly the PRAKAS and all recommendations are also our priority and taking in to account.

To this end, we are grateful to have the immense support of our board, shareholders, partners, regulators, management team, staffs, clients, and would like to acknowledge them for their encouragement, dedication and being a part of our growth.

Yours Sincerely,

Khou Buntry
Chief Executive Officer