CEO’s Message – FUNAN Microfinance PLC

In Cambodia, economic growth is estimated to remain robust at 5.5%, marking an increment from the 5.2% growth observed in 2022. This growth is primarily fuelled by the flourishing tourism and non-garment manufacturing sectors despite sluggish performance in the garment, construction, real estate, and agriculture sectors. The strong growth in the tourism sector has also contributed to the recovery of related economic activities such as transportation, trade, and telecommunications.

While global inflation stayed high in 2023 at 6.9%, Cambodia’s inflation rate noticeably decreased to an average of 2.1% from 5.4% in 2022, thanks to lower prices of oil-related items and subdued food inflation. The moderate imported inflation, resulting from the stabilisation of the exchange rate of the KHR against the USD, also contributed to this low level of inflation. The average exchange rate was 4,110 riel per US dollar, and at the end of December 2023, the rate decreased to 4,081 riel per US dollar.

The microfinance sector has been playing vital roles in enhancing financial inclusion by promoting access to and usage of formal financial services, reflected by the number of depositor and borrower accounts at 2.0 million and 1.6 million, respectively. MFIs have been operating with 912 locations nationwide to reach where is underserved segment and rural people. At the same time, MFIs continue to modernize and diversify their financial services such as credits, deposits, remittance, and ATMs in response to the demand of their customers. People in the rural areas, who were aware less of financial literacy, start shifting to use more formal financial services, from where they could obtain legal protections and other benefits

Funan Microfinance Plc. has been seven years since the acquisition in 2017 that is taken over by CP Bank. The asset size has been increasing year on year. In 2016, Funan’s asset size was recorded at USD12 Million and moved to USD81.5 Million by the end of 2023. Before the COVID-19 outbreaks, the Compound Annual Growth Rate (CAGR) of Funan’s assets was 69% while the CAGR was 8.3% after the COVID 19. As of 31st December 2023, Funan was ranked in the top three in term of loan portfolio; and stood in number one for the largest branch networks among the non-deposit microfinance operators in Cambodia. With the good business momentum of Funan Microfinance Plc., in the beginning of 2023, Funan was awarded Fastest Growing Microfinance Company Cambodia 2023 in the Global Banking and Finance Review Award 2023.

Post COVID19, the world has been under pressure again with Russia-Ukraine war. With inflation, slower demands of some industrial export sectors and construction continue to be constraint for the people income, especially the low-income people and blue-collar worker that is a target group of microfinance lending. Funan is the same to other microfinance institutions increasing the None Performing Loan (NPL). The sector NPL is presented 6.5% and 5.4% for MFI and Bank respectively in 2023. The portfolio at risk (PAR30+) of Funan was recorded at 5.4% by the end of 2023. Funan Microfinance achieved the net profit of US$2 million while the total asset increased to US$81.5 million. The ROA ad ROE were recorded 2.4% and 8.8% respectively in 2023. Even the net profile of FUNAN dropped 38.2% in 2023 comparing with 2022; it was still better than MFI industry as whole with a declining rate at 70.9%. The spread became flat as results of increasing the NPL and rising cost of fund.

Implementing digitized lending process through the developed loan origination system, Funan has fully launched to all branches in 2022 and has effectively been implementing as now. With the automating process, deviation verification with the setting parameters, database integration between internal and Credit Bureau Cambodia (CBC) systems, would reduce human errors and fasten loan approval processes. Our Credit Officers are using tablets instead of paper hand-writing or manual application for client onboarding and loan assessing. To manage better customer interaction, customer complaints compiling and handling, Funan invested in contact center system in 2022 and has been implementing till now. With our customer centricity, Funan commits to bring our customers to adapt new experiences. In our regular annual action plan since 2022 for corporate social responsibility (CSR), Financial education has been added to its agenda of CSR that aligns with Government strategy on Financial Inclusion 2019-2025 in part of Promote financial literacy campaigns. In the strategy of government leading by NBC mentioned the role of financial service providers in financial literacy campaigns. Besides implementing the transparency pricing and some parts of client protection principles FUNAN is implementing the Financial Education program that targets to Funan’s clients and client’s families and students in secondary schools where locate FUNAN’s operational areas with the topic of “Basic knowledge of family financial management”. Funan developed and published the Financial Education handbook (FE handbook) of 25,000 units, and planning ahead to publish more than twelve thousand this year. Our key staffs were invited to join training of trainer (ToT) to ensure the FE handbook contents would be able to deliver to community with expectation.

Finally, we are grateful to have immense support and guidance of our customers, regulators, shareholders, partners, management team and staffs throughout the year. Without your support and advice, Funan won’t success and grow as of today.

Again, we thank you and are looking forward for such a great support in the next coming years.

Yours Sincerely,

Mr. Khou Buntry
Chief Executive Officer