Cambodia Post Bank purchased the full shareholding of local microlender Funan Microfinance for $12 million, it announced on Friday, marking the latest consolidation in the Kingdom’s crowded banking sector.

The acquisition of the small microfinance institution (MFI) will allow local financial holding company Canadia Investment Holding Plc (CIHP), the largest shareholder of Cambodia Post Bank Plc (CP Bank), to provide financial services to all segments of the market, according to Pung Kheav Se, chairman of CIH.

He explained that while the average loan size of CIHP-owned Canadia Bank is $200,000, and the average of CP Bank is $7,000, Funan’s microloans are geared toward the small end of the market, averaging $700.

“Now, we have microfinance institutions and banks that provide loans to small-size enterprises, medium-size enterprises and large enterprises,” he said. “We are now covering all market segments.”

He said CP Bank will inject $40 million into Funan Microfinance to expand its business, which should also raise its average loan size to $1,000.

According to Kheav Se, negotiations for the acquisition of Funan began in mid-2016 and the parties reached an agreement last November. The National Bank of Cambodia (NBC) approved on the acquisition agreement early this year, he said.

Established in 2013, CP Bank is jointly owned by CIHP, which holds a 50 percent stake, and Singapore-based Fullerton Financial Holdings, with a 45 percent stake. State-owned Cambodia Post holds the remaining 5 percent share.

CP Bank had 41 branches with a loan portfolio of $270 million, as well as $400 million in deposits, as of end-April 2017, according to bank executives. Meanwhile, Funan Microfinance had a total of 51 branches with $12 million in outstanding loans.

Sok Voeun, the board director of the Cambodia Microfinance Association (CMA), said CP Bank’s acquisition of Funan was part of a trend in which bigger Cambodian lenders were buying stakes in smaller ones to expand their operations. He said the growing competition would push players in the sector to offer better services and lower interest rates to the benefit of their customers.

“The current market situation allows an operator to survive individually,” he said. “But for the long term, say five years from now, I think there will be consolidation to adjust to market demand.”