Largely ignored by the banking industry, Cambodia’s most populous and prosperous province hopes to cash in with a new bank branch

WITH singing, dancing and rapping bank tellers, Acleda Bank opened its brandnew central branch in Kampong Cham city at the weekend.

The large five-story building, towering over nearby marshes and fields, will be the provincial centre for the rapidly-expanding bank.

Acleda started in 1993 as a United Nations microfinance institution, but has since grown into one of Cambodia's largest banks. It also has branches in Laos and is eyeing the Vietnamese and Chinese markets.

The newest branch in Kampong Cham brings the total to 214 nationwide.

"Kampong Cham is the most populous and wealthiest province in Cambodia, and we are very keen to expand our operations here," said In Channy, the bank's President and CEO.

"Business [in Kampong Cham] is growing very quickly - especially in agricultural exports," he told the Post .

Acleda says it has high hopes for the province, aiming for US$10 million in loans this year.

The ambitious target comes despite the fact that the local population has little or no experience with banking.

"People are becoming more  accustomed to the idea of  banking in Cambodia," said Channy.

That means developing catchy messages that appeal to potential customers. The staff at the Kampong Cham branch wrote and performed a Khmer song, "Acleda you can trust!", to inform people about banking, and how to save money.

"We hope that this bank will help to stimulate local business and create jobs [in Kampong Cham]....Helping the local economy means fewer people leaving and migrating to the city, so it prevents social problems," he said.

Operating in a country with no formal credit-rating system and underdeveloped courts has  meant developing a unique lending model.

In place of complex mathematical risk models used in the West, Acleda has local field workers who assess risk based on interviews, personal relationships and a loan candidate's standing in the community.

More loans of less

Rather than making a small number of large loans, as most Western banks do, Acleda goes for volume, making massive numbers of small loans, averaging less than $37,000 each.

The bank's strategy appears to be translating into high growth and a very low default rate. Over the past five years, Acleda has grown an average of 10 percent a year and the default rate stands at only 0.24 percent, says the company.

Acleda is optimistic that it is sheltered from the sub-prime crisis and falling foreign real estate values, saying it is not exposed to risky property debt, with only 12.5 percent of its loans in real estate.

However, one banking analyst said that all Cambodian banks could be vulnerable if Cambodia's property values crash.

"A lot of the loan collateral is in the form of property, and a property crash could undermine the security of [Cambodian banks] loan portfolios," said the source.