After more than a year of internal structural changes, Sathapana Ltd – the third-largest microfinance institution (MFI) in Cambodia – has completed its merger with a local Japanese-owned bank to operate a consolidated commercial bank following the National Bank of Cambodia’s (NBC) approval of its lending license last Monday.

“We have successfully consolidated the institutions because we have to share the bank’s resources in a competitive market,” said Bun Mony, CEO of the newly-formed Sathapana Bank Plc, a marriage between Maruhan Japan Bank Plc and Sathapana Ltd.

“We will continue our MFI services while also providing commercial bank products because some of our customers need more than what an MFI can provide by itself,” he said, adding that the merger was not an easy process and that all shareholders had to be committed.

“We had to rework all of our policies from human resources to credit financing, [as well as] internal auditing procedures and commercial management,” he added.

Maruhan Japan Bank, which began operating in Cambodia in 2008, acquired a 95 per cent share of Sathapana Ltd in 2012. Sathapana began as an NGO in 1995 before receiving a licence to operate as an MFI in 2003.

The merger has created a financial institution with a combined registered paid-up capital of $120 million and total assets of $722 million. The total loan portfolio amounts to $533 million, while total deposits are $367 million. The bank currently operates 160 branches across the Kingdom.

“The process took more than 12 months and three to four months for the NBC to give approval,” said Mony, adding that the merger would make the lending institution stronger both domestically and abroad.

While he said that the internal consolidated management system was not yet fully in place, the challenges undertaken by the bank were “normal” when considering the process of a merger.

Increasing competition in Cambodia’s fast-growing financial sector has led to several high-profile consolidations in recent years. In the latest, announced in January, Thailand-based Bank of Ayudhya reached an agreement to acquire Cambodia’s fourth-largest MFI, Hattha Kaksekar, in a deal valued at north of $140 million.

While the takeover hinges on the approval of the central bank, it was anticipated that the buyout would take six months to complete.

Analysts have predicted further consolidation in the sector following a prakas issued by the NBC late last month that hiked Cambodia’s minimal capital requirements for banks and MFIs.

Under the new scheme, commercial banks are required to have a minimum $75 million paid-in capital, up from $37.5 million. Specialised banks must double their minimum capital to $15 million, while deposit-taking MFIs are required to increase their minimum capital to $30 million, up from $2.5 million. MFIs not licensed to receive deposits must raise their capital to $1.5 million, from $62,500.