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How a microfinance NGO evolved into a mainstream bank


Liam Cochrane

'A person's good acts cannot compensate for the bad acts. You cannot offset accounts.' -Chhay Soeun

In 1992, staff members of then fledgling ACLEDA Bank met to decide on the company's

logo. Hoping to spark an inspired discussion about ACLEDA's nascent mission, general

manager In Channy opened the floor to suggestions from his colleagues.

The room fell silent. War-weary and fearful, ACLEDA's earliest employees had struggled

for months to muster the dynamism needed to launch a financial institution.

Channy recounted the episode to Heather Clark in her engaging new monograph When

There Was No Money: Building ACLEDA Bank in Cambodia's Evolving Financial Sector.

"Okay, if no one has any ideas, let's choose the pig as our logo," Channy

said. "...In everything we do, people will see this pig as the symbol of what

we stand for. It's decided, then."

The prospect of a swinish letterhead jump-started the staff, and several hours of

lively debate ensued. Near midnight, it was decided that the hong bird would represent

ACLEDA to its customers in Cambodia. In Khmer folklore, the golden bird signifies


Thirteen years later, ACLEDA appears to have lived up to its logo. What started as

a donor-funded microfinance project for demobilized soldiers is today a nationwide

commercial retail bank network with US$81 million in its loan portfolio. Industry

observers applaud ACLEDA's rigorous ethical standards and principled corporate governance

structure. Moody Investor Services even rated ACLEDA-a first for a Cambodian commercial


Though perhaps not beach reading, When There Was No Money is a surprisingly interesting

book. Clark chronicled ACLEDA's unlikely rise in the mid-1990s against the backdrop

of Cambodia's broken national banking system and a financial market driven solely

by foreign aid. She interviewed dozens of longtime ACLEDA employees and outside advisers

for the project, and she wisely allowed those narratives to stand alone amid the

(sometimes jargonistic) analysis. (In one memorable account, a former loan officer

recalled her own anguish when her poor clients failed to repay their loans. "It

was my fault," she told Clark. "I made the loan. I should accept the responsibility.")

Khmer Rouge prohibitions on private property ownership and currency in the 1970s

decimated Cambodia's monetary network and drove most pecuniary activity underground.

When There Was No Money picks up nearly 20 years later, in 1992, in the Site II refugee

camp on the Thai border. The International Labor Organization and CARE International

recruited ACLEDA's future leaders-among them teachers, government planners, and mechanics-to

staff a business development project for decommissioned soldiers.

From the outset, ACLEDA's leaders refused to tolerate corruption. Explicit policies

prohibited employees from seeking bribes from customers, or paying bribes themselves.

Chhay Soeun, ACLEDA's finance department manager, linked the bank's hard line on

corruption to Buddhist teaching: "A person's good acts cannot compensate for

the bad acts," he said. "You cannot offset accounts."

Also in the early 1990s, the microfinance community grew increasingly divided between

two camps: One side favored a donor-sponsored alternative banking system for the

poor, with small loans targeted at small enterprise owners. The other side sought

independence from large donors, and instead envisioned a market-based commercial

operation for serving the poor.

According to Clark, ACLEDA's early incarnations - first as an NGO, and later as a

microfinance institution - targeted the poor with donor-sponsored funds. But over

time, ACLEDA evolved into a self-sufficient commercial financial institution, though

Clark's figures show the relative percentage of micro, small and medium-sized loan

customers remained stable from 1999 to 2004. In the book's introduction, Clark duly

disclosed her partiality toward the bank's market-driven approach. But she maintained

that commercial banks can accommodate poor customers, though she also acknowledged

that the drive for a higher rate of return serves to push institutions away from

smaller borrowers.

"Business and development goals make for the uneasy alliance of microfinance,

" she wrote."

Though When There Was No Money was written for an audience of researchers, NGO professionals

and businesspeople, the book serves an equally important archival role for one of

Cambodia's most compelling business stories.



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