Message From Chairman – FUNAN Microfinance PLC

In line with economic growth and the country stability, 2018 has been one of the most prosperous year in terms of business growth for FUNAN Microfinance both in asset size and profitability, while it is in the second year after the acquisition.

Over the past two decades, Cambodia’s growth rate has been slightly over 7 percent. Remarkably, in 2016, Cambodia graduated from its status as a least developed country became a lower-middle-income country and expected to be upper middle-income economy by 2030 and a high-income country by 2050. The real GDP growth in 2018 is 7.1 percent and projected to be maintained at 7 percent by 2019. Political stability, peace, the inflow of foreign direct investment, and regional integration have been the driving forces of Cambodia’s growth.

Economic growth remains strong, driven primarily by robust expansion in consumption and exports. Domestic demand has been boosted by higher wage growth and larger public investments. At the same time, strong external demand has boosted exports of garment and footwear products, which increased 16.1 percent (y/y) during the first half of 2018—a two year high—from 8.3 percent at the end of 2017. Tourist arrivals during the first six months of 2018, a 13.6 percent increase (y/y), compared with 11.8 percent in 2017, driven by a surge in tourist arrivals by air from China. Capital inflows, mainly comprising foreign direct investment (FDI) continue to increase. Vibrant construction activity continues to be financed by rising FDI inflows and domestic credit. FDI is estimated to have increased by 14.3 percent (y/y) during the first six months of 2018. About 90 percent of the inflows (excluding those to the financial sector) have originated from China and are directed toward the construction and real estate, agriculture, and garment sectors. Rising disposable income remains the main driver of domestic demand—increase consumption & construction. Motor vehicle import increased 81.4 percent in the first semester of 2018. Credit continue to moderate growth, credit to GDP rose 20 percent in 2018 (June) from 73 percent by the end of 2017. Credit in Cambodia banking sector is expected by the central bank to accelerated 17.1 percent in 2019.

The European Union market accounts for more than a third of Cambodia’s key exports, which are garment and footwear products. Therefore, losing EBA preferences, which currently provide Cambodia full duty-free and quota-free access to the EU for all their exports with the exception of arms and armaments, will likely slow Cambodia’s export growth, and negatively impact its labor market in the short term, however, the government are already come up the appropriate actions in order to stabilize and minimize the impacts. With peace, stability and development, Cambodia still boost economic growth around 7 percent (y/y).

While FUNAN’s parent company shareholders are from Canadia Investment Group, Fullerton Financial Holding (FFH), and Cambodia post office, the state own company, FUNAN nurtures ties with local regulators and all levels of authority. With a strategic partnerships within the parent company and other investment groups establish and cultivate the business ecosystem for the mutual benefits and create value proposition to their customer segment. Notably, Funan Microfinance Plc. is invested by Cambodia Post Bank Plc. and officially shares transfer in April 2017. Funan microfinance Plc. targets to the small and medium income generation people both self-employed Mass Market (SEMM) and Salaried Mass Market (SMM). 51 branches covering all potential areas of Cambodia including city, provinces, and districts—FUNAN is reaching to where it is underserved especially rural area. Currently, 62 percent of its clients are in the rural areas, 35 percent is in provincial urban and only 4 percent are in the city urban.

To support and ensure the sustainable growth of Funan Microfinance Plc., Canadia Investment Group (CIH) will continue to support funding source; and the parent company, the Cambodia Post Bank Plc., still continue its technical assistance to this Microfinance.

For the performance record 2018, it is much appreciated with the financial aspects including, gross loan portfolio growth is 63 percent from USD28.7 Million in 2017 to USD47 Million in 2018. The year to date total asset is USD49 Million, 54 percent growth. The current year net profit after payable tax is USD1.7 Million. With FUNAN’s risk management capability, the percentage of non-performing loan is decelerated from 1.3 percent in 2017 to 1.19 percent in 2018.

I would like to thanks the Funan Team, clients, business partners, regulators, lenders, and shareholders for their hard working, cooperating, trusting, and supporting Funan Microfinance Plc. achieving a fruitful result in 2018. I look forward to your continued support in future.
Yours Sincerely,

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