Chairman’s Message – FUNAN Microfinance PLC

Covid-19 pandemic has negatively impacted global economy which resulted in noticeable economic downturn in many countries While Cambodian economy was contracted 3.1% in 2020 and projected to recover at 3% in 2021. All economic drivers were less and much growth this year including Agriculture, Garment, non-garment and construction were 1.1%, 8%, 13.8% and 1.4% respectively; except, hotel and restaurant was contracted 40.1% that was the worst effect among the sectors. Thanks to the Royal Government of Cambodia for a successful Vaccination Campaign and other measures and responses against COVID-19 outbreak in Cambodia. Starting from November 2021, the Government fully reopened all business activities to boost its economy while the COVID vaccine was penetrating almost 100% for the people greater than 18 years old and it was around 83% of total population. Meanwhile, Cambodia was one of the best-performing countries for Coronavirus vaccinations, was ranked second in Asia and seventh in the world for the highest proportion of vaccinated people in itspopulation.

Reference to Cambodia economic outlook, it is projected 5.6% growth in 2022. Even Cambodia opens the country and living with COVID-19 under new normal life with protective measures; however, the coronavirus continues to be unpredictable, and the possibility of new or existing variants of the virus spreading in the country or world. A slowdown in global demand could hurt export-oriented sectors of the economy, while the tourism sector may recover even more slowly than expected, the prospects for scarring from COVID-19 are substantial for Cambodia’s tourism sector. All these still prolong people’s income constrain and would be burdened loan repayment obligation of our clients. Hence, we continue to orient our front-line staffs to keep close monitoring with our clients in order to support them timely as needed. Thanks to the National Bank of Cambodia to continue its loan restructuring program for COVID-19 until June of 2022.

Bank and Financial sector still play a vital role in financial inclusion in Cambodia while there are around 12milloin for loans and 3.3 million for saving accounts in this sector. Cambodia is moving to digital payment and transforming to cashless community where payment is done through e-payment. Taking advantages of COVID-19 outbreak when the people is living with new normal life, Bank and Financial sector is trying to promote cashless transaction through scan pay, bank to bank transfer, direct payment through mobile banking payment list, card transaction, …..ect. Utility companies and other service providers are engaging in this e-payment ecosystem. BAKONG is an initiative from the National Bank of Cambodia, a gate way to integrate all banks and financial institutions for interbank transfer. There were 5.7milloin transitions recorded in 2021. A part of financial inclusion, operating cost reduction and taking advantages to its segment, FUNAN is encouraging its clients to have E-wallet/Mobile banking with Bank/FI’s partners as their preference for cash in and cash out purposes, especially loan disbursement and loan repayment of customers. Now, we are a part of payment list in Mobile Banking of big well-known banks including CANADIA Bank Plc., CP Bank Plc., Wing Bank (Cambodia) Plc. and True Money. So, our clients have choices, rather than come to visit our branch counter monthly. With this partnership, in a medium term, FUNAN still utilizes the existing 51 branch networks to expand more coverage areas through branchless business model. We are having 5 branchless operational areas under the current branch bases. Currently, we are covering 25 Provinces, 185 Districts, 1,073 Communes and 3,475 Villages.

For the financial year 2021, the net profit was US$2.7 million, grew 11% compared to 2020 while the assets were US$74.47 million and grew 27%. ROA and ROE were 3.9%and 16% respectively. The loan portfolio at risk (PAR30+) is recorded at 1.98% by the end of 2021. With income constrain of our clients causing from COVID-19, under the regulatory easing on loan restructuring, FUNAN was able to support its clients who were having financial congestion during this hard time; around 23% of clients have been received grace period for their repayment obligation. As of now, there are 60% of them sailed through this situation and turned to normal repayment. Even loan restructuring program has been provided, nevertheless some of our clients are still not able to recover. We have accelerated more provision of loan to recognize the loss; so the cost of credit is around 2% in 2021.

We would like to thank customers, regulators, business partners, lenders, staff, and shareholders for their supporting, cooperating, trusting, and hard working for FUNAN to achieve its performances so far. FUNAN commits to achieving its long-term Vision—to be the best Microfinance institution (MFI) that enables success and enriches lives of Cambodia people—and our Mission—to provide innovative financial products and services, that are simple, convenient, and fast; and comply with regulations— please keep your supporting us for years ahead.

Stay safe and healthy.

Neak Oknha Dr. Pung Kheav Se
Chairman of the Board of Director.