Chairman’s Message – FUNAN Microfinance PLC

The effectiveness of the COVID-19 pandemic management by the Cambodian government and living with new normal life adaptation of people, in 2022, Cambodia has resulted the activation of domestic recovery activities, reflected its estimated growth of GDP at 5.6%. The growth in service sector was 4.6% in 2022 that was contributed from the recovery of hotel and restaurant sector that was 30% increased; while it was contracted 32.2% and 39.5% in 2020 and 2021 respectively. Another key economic driver, Industrial sector, rose 8.3% in 2022 while it was contributed from the garment and textile and non-garment and textile with the growth 10.8% and 12.2% respectively. The agricultural sector was recorded slightly increased in 2022. Cambodia was like other countries facing with a surge in inflation recorded at 5.3% in 2022.

The prolonging of Russia-Ukraine war continues to put pressure on inflation as results of interest rate increase by the US Federal Reserve and cause the appreciation of US dollar. Despite these external challenges, the Cambodia economy is expected to grow around 5.6% in 2023. With releasing zero COVID policy in china, there will be gradually increased tourists and capital inflow to Cambodia. The industrial sector is expected growth around 5.9% in 2023, slower than 2022 (8.3%) with lower demands in EU and US. The agricultural sector is also forecasted to increase around 1.1%. However, the construction and real estate sectors are expected to continue slower growth, at 1.7% and 1.2% respectively.

With key stakeholders’ efforts, especially the National Bank of Cambodia (NBC), Cambodia’s banking system remained resilient and robust, and continued to maintain public confidence from the communities. The Cambodia’s banking system asset growth was 12.6% last year, 10.4% for banking sectors and 18.5% for Microfinance. The demand of loan to customers increased 18.9% in the system which was 19.5% for Banking sectors and 21.4% for Microfinance sector. A part of economic development, Microfinance sector has been promoting financial inclusion in Cambodia that is reflected by the access and usage of formal financial service both depositors and loan accounts of 2.7 million and 2.1 million respectively. The total asset of Microfinance sector has been increasing around 18% in the last three years since the COVID-19 outbreak while it was more 30% before the COVID-19. Microfinance loans have been provided to key economic sectors including—23.3% trades and commerce, 17.8% agriculture, 13.6% services, 33.2% Household and 12.1% others. Raising interest rate from the US Federal Reserve has resulted the strong in US dollar and leading to the increase in cost of fund in Cambodia and other countries. The interest rate of Microfinance deposits rose to 9.2% per annum and 8.5% per annum in Khmer Riels (KHR) and US dollar currency respectively in 2022.

For the financial year 2022 of Funan Microfinance, the net profit was US$3.25 million, grew 20% compared to 2021 while the total asset increased to US$81.98 million with 10% for the annual growth rate. The ROA ad ROE were recorded 4.0% and 16.2% respectively in 2022. Just back to new normal life from the world pandemic, COVID-19, while some business activities not yet fully recovered; Russia-Ukriane war has brought the world under pressure again. With inflation and slower demands in some industrial export sectors continues to be constrained for the people income, especially the low-income people. Non-performing loan (NPL) for MFI and Bank sectors in 2022 were increased and recorded at 3.1% and 2.5% respectively; and the NPL of Funan was 3.42%. Even increasing interest rate locally and globally, Funan still maintains the same interest rate charge as stating in the loan agreement with clients while some Financial institutions call for to increase of interest rate from their clients. As the Microfinance to enables success and enriches lives of Cambodia people what we have supported to our clients in the hard time including COVID loan restructuring or non-COVID loan restructuring, maintaining the loan interest rate to clients during the world financial interest rate increased, we expect our clients would be resilient and recovered as well as loyalty with our institution while we believe that client success is our success.

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.