Logo of Phnom Penh Post newspaper Phnom Penh Post - Sri Lanka’s LOLC Holdings plans to sell Cambodian unit

Sri Lanka’s LOLC Holdings plans to sell Cambodian unit

Content image - Phnom Penh Post
Prasac Microfinance Institution Ltd is Cambodia’s biggest microlender. POST PIX

Sri Lanka’s LOLC Holdings plans to sell Cambodian unit

LOLC Holdings Plc, Sri Lanka’s second-largest publicly traded company by revenue, plans to sell its 70 per cent stake in Prasac Microfinance Institution Ltd, which also counts Hong Kong’s Bank of East Asia Ltd. as a shareholder, LOLC deputy chairman Ishara Nanayakkara said.

Nanayakkara told Bloomberg that LOLC Holdings Plc plans to sell its stake in a unit in Cambodia and use the proceeds to fund the acquisition of microfinance firms in emerging markets from Brazil to India.

“It is very large as a microfinance institution. I think Prasac needs to move to a bank,” said Nanayakkara in an interview with Bloomberg at LOLC’s headquarters in Colombo.

“The company’s thirty per cent return on equity in Cambodia, which has a largely dollarised economy, makes it attractive, he said.

As of 2018, Prasac’s total assets amounted to $2.37 billion. Outstanding loans amounted to $1.96 billion while total deposits reached $1.29 billion.

By the end of last year, Prasac had installed more than 126 ATMs, 498 point of sale (POS) terminals and had amassed 11,200 mobile banking users.

The deputy chairman of Cambodia Microfinance Association Bun Mony denied on Tuesday that the plan would negatively impact Cambodia’s microfinance institution (MFI) sector, noting that it would, in fact, attract investors to join the financial firm.

“It is not uncommon for a shareholder to take out their stake and invest in other projects. I don’t see it impacting the MFI [sector], including Prasac,” Mony told The Post. “I believe a new shareholder will commit to making the institution [Prasac] grow,” he said.

For Nanayakkara, who runs two MFIs in Cambodia, selling Prasac, the Kingdom’s biggest microlender, will help reduce risk as the market saturates. More than 70 registered MFIs compete for business in a country with 16 million people.

With a median outstanding loan of $3,370 a borrower, Cambodia has the world’s highest level of small-ticket debt, according to a World Bank report released earlier this year.

The managing director of Micro-Credit Ratings International Ltd Sanjay Sinha told Bloomberg, “there isn’t much scope” for microlenders to expand in Cambodia.

“Loan sizes have been increasing. As a result, the portfolio has been going up, which itself can lead to dangers of indebtedness.”

Bloomberg reports that next year, LOLC, which gets about 84 per cent of its pretax income from overseas, plans to expand into Uganda, Kenya, Tanzania, Zimbabwe and Mozambique.

The company is also close to acquiring a firm in India’s Tamil Nadu state, and is seeking opportunities in Brazil, Nanayakkara added.

“What we are trying to create is the world’s largest microfinance platform,” he said.

To fund growth, Nanayakkara plans on selling a stake in a unit in Singapore to a strategic investor or private equity funds “probably” in 2021, he shared.

Prasac had a bad loan ratio of 0.7% last year. This, according to Nanayakkara, is because of the company’s focus on women.

All over the world at “the bottom of the pyramid, women with entrepreneurial spirit want more money,” Nanayakkara told Bloomberg. “So with each loan cycle, we upscale her and make sure she doesn’t over-expand.”

Prasac Microfinance Institution Ltd senior vice-president Say Sony declined to comment on Tuesday.

MOST VIEWED

  • Body of woman killed in Bangkok returns

    The Cambodian embassy in Thailand is working to repatriate the body of a casino dealer who was shot dead in Bangkok on Monday night. Ministry of Foreign Affairs and International Cooperation spokesman Kuy Kuong told The Post on Wednesday that officials are preparing paperwork to

  • Chikungunya hits 15 provinces, says gov’t

    Ministry of Health spokeswoman Or Vandine said on Thursday that the chikungunya outbreak in the Kingdom has spread to 15 provinces. Some 1,700 people are now suspected to have the disease. Vandine urged people to prevent its further spread by eliminating shelters for the Aedes aegypti mosquitoes

  • Gov’t exempts visa A and B holders from Covid fees

    Airline passengers who are diplomats and officials of international organisations holding Type A and B visas for travel to Cambodia are exempted from paying Covid-19 testing fees, said the Ministry of Health in its latest adjustment of rules on Wednesday. Health Minister Mam Bun Heng

  • Bill covering dress code draws ire

    Ministry of Interior secretary of state Ouk Kim Lek responded on Tuesday to criticism concerning a draft law that would ban women from wearing overly revealing clothing, saying that input from all parties will be considered as the law moves through the promulgation process. Several

  • Police arrest 29 Chinese for PP kidnapping

    Phnom Penh Military Police arrested 29 Chinese nationals on kidnapping charges on Wednesday. The suspects are said to have abducted three other Chinese nationals from a hotel in Chaktomuk commune, Daun Penh district. The operation took place on Wednesday and was led by two deputy commanders –

  • What’s the deal with Cambodia and China’s FTA?

    Cambodia’s Free Trade Agreement (FTA) with China kicks off a series of FTAs in future but for now, critics wonder what else the parties could bring to the table apart from what it already has to date By the end of this year, Cambodia