Acleda, the microfinance institution that began life as a local NGO in 1993, has

applied for a license to become a full-fledged commercial lending bank, Acleda officials

said on September 15. It expects to receive approval by early November.

Chhay Soeun, Acleda's finance department manager, said it had already received "permission

in principle" from the National Bank of Cambodia on June 12. He said if the

new license is granted, the bank will offer a full range of financial services through

its network of 93 offices in 14 provinces. At the moment, Acleda is limited to providing

small savings and loans accounts under its license as a specialized private bank.

Once Acleda gains a commercial banking license, its minimum capital requirement will

increase from $4 million to $13 million. The bank's eight shareholders, which include

the Acleda NGO, the World Bank's International Finance Corporation and several international

development banks, plan to provide additional capital through a share issue, Soeun

said.

The bank's original 400,000 shares, valued at $10 each, have already been split into

4 million shares of $1 each since they were first sold in 2000. The remaining $9

million of capital required will be raised by issuing more shares to the current

investors.

Acleda's management predicts the company will one day be listed on the proposed Cambodian

stock exchange and its shares traded by the bank's customers.

"Because of our success, the [National Bank of Cambodia] wrote to encourage

us to transform into a commercial bank," Soeun said.

Acleda, which received its specialized bank license in October 2000, commands more

than 67 percent of the microfinance market compared to similar financial institutions,

the company stated. Since 1993, it has disbursed more than 758,000 loans totaling

more than $224 million.

Acleda will be required to pay an annual license fee of $17,500 for its head office

and $14,000 for each branch. Soeun said that the bank's management, "depending

on our growth", hoped to expand into five more provinces by the end of 2004.

Acleda grew from a humble local NGO operating as a small enterprise development bank

into a major player in Cambodian banking. The bank has more than 92,000 customers,

a loan portfolio of $34 million and more than 1,100 staff nationwide.

This will make it the largest commercial bank in the country in terms of the number

of branches and customers it has, said Soeun. There are 18 commercial banks now operating

in Cambodia

He maintained the bank would not stray from its philosophy of seeking to help Cambodia's

rural poor. The bank will target lending to small and medium enterprises (SMEs),

he said.

The market for loans to SMEs grew from $162 million in 2001 to $222 million in 2002,

according to a 2002 banking study on SMEs. But Cambodia suffers from chronically

low lending levels from traditional commercial banks. The study pointed out that

70 percent of loans made to SMEs had to be repaid within one year or less. That limits

the ability of SMEs to raise capital.

And the overall lending rate in Cambodia is extremely low. In China, the region's

powerhouse economy, lending runs at 100 percent of gross domestic product. In Cambodia,

it is a mere 8 percent.

"There is a movement to develop the economic sector in Cambodia," said

Soeun. "Better banking will help activate that."