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Largest MFI sees increasing marketplace competition

13 Prasac Bank
A Prasac Microfinance team delivers a show during a product launch event last year at Sofitel.

Q and A with Sim Senacheert, President and CEO, PRASAC Microfinance Institution

When did Prasac start in the business and what are some milestones along the way to your present situation?

PRASAC was a credit component of the former PRASAC (Programme de Rehabilitation et d’Appui au Secteur Agricole du Cambodge) project started in 1995 as a support program for the agricultural sector in Cambodia, covering six provinces around Phnom Penh which was a rural development project in Cambodia, funded by the European Union. The whole PRASAC project was phased out in December 2003, except its credit component continues operations under the name PRASAC Credit Association (PCA) and was finally transformed into a licensed MFI in December 2004 under the name of PRASAC Microfinance Institution. The followings are the milestone:

  • 1995-1999: PRASAC I, EU-funded three rural development projects in six provinces, with three different credit components.
  • 2000-2003: Extension as PRASAC II combined to one project, one credit component.
  • 2000: First strategic decision to create a sustainable institution beyond the closure of PRASAC II project.
  • 2001: HO and branch offices separated from PRASAC II, with separate management but still under umbrella of the project management.
  • 2002: The establishment of PRASAC Credit Association (PCA) registered with the NBC in March 2002 as Rural Credit Operator.
  • 2003: Two initial shareholders were created, a Trust Fund called CRDF created by PRASAC II and PRASAC Staff Company created by staff members to facilitate the transformation process.
  • 2004: Registered as PRASAC MFI Ltd with Ministry of Commerce as a private limited liability company and received license from NBC.
  • 2006: The commercialization process was to seek for equity investment participation from commercial and social investors.
  • 2007: PRASAC completed its transformation with new five international shareholders, BIO, DCG, FMO, LOLC, and Oikocredit.
  • 2008: PRASAC increased its capital to 15 billion Riels from six shareholders. PRASAC was rewarded for extending its financial services throughout the country.
  • 2009: PRASAC selected Oracle Flex cube to modernize its core system to build competitive advantages, offer more diversified ranges of products and prepare for the next level.
  • 2010: PRASAC obtained a Microfinance Deposit Taking Institution (“MDI”) license to conduct deposit taking business from the National Bank of Cambodia. And PRASAC increased its registered capital from 15.4 billion Riels to 80 billion Riels.
  • 2011: Launch of 5 additional branches.
  • 2012: Launch of ATM service and become the first MFI offering ATM to clients in the country.

What interest rates do you offer for savings accounts in Cambodian Riel?
The followings are our current interest rate of Cambodian Riel (KHR) offered to the depositors:

How is the growth during 2012? Do you expect more growth in 2013?
 The deposits grew above 800 per cent from US$5.9 million to $56.7 million at the end of December 2011 and December 2012 respectively. We expected that deposits will grow as per our projections at 200 per cent. As of April 2013, our deposit grew about 74 per cent compared to December 2012.
 
What are the challenges in the microfinance marketplace in Cambodia?
Microfinance marketplace in Cambodia faces some challenges including the increase of competition, limited funding sources and high cost of funds.

Are you seeing more competition in the marketplace?
Yes, we see that there is more competition in the marketplace. The competition comes from expansion of the existing MFIs, new established MFIs, and commercial downscale the operations. More competition is good for the end-users (clients). But, it is not a concern for us because we have large operational area (nationwide coverage), big office networks, diversified products, more than 15
years’ experience in the sector, and strong branding in the sector as well.

How many total staff do you have and how many branches around Cambodia?
As of April 2013 PRASAC has 2,507 staff and 170 office networks operating in all provinces of the country.
 
How many ATMs do you have? Where are they?
As of April 2013, PRASAC has 29 ATMs. 13 ATMs are located in Phnom Penh and 16 ATMs are located in provincial branches. This year, we planned to add another 30 ATMs.  

What’s your percentage of bad loans?
Non-performance loans are very stable during the past quarter of the year. As of April 2013, the NPL rate was 0.21 per cent.

What’s your average loan size and what’s a typical business you loan to?
As of April 2013 the average loan portfolio or outstanding loan was US$1,844. The main typical businesses are agriculture represents around 30 per cent of total loan portfolio; business loan portfolio represents 45 per cent, personal loan 23 per cent, and other activities 2 per cent.

How do you see Cambodia’s future unfolding in the microfinance sector?
I think that the Cambodia’s microfinance sector is still good and strong because of economy growth; clients have more business activities, increase of the professional and high standard of the all MFIs, supportive regulations
 
Do you see people starting to have better lives in the provinces?
I think that we see people starting to improve their living standard. To some extent I think that MFIs also contribute to this development.

Are you now the largest Microfinance institution in Cambodia?
In the MFI sector, we are the largest in term of total assets, loan portfolio outstanding, office networks, savings and deposit balance, and we are also the best performing MFI in terms of portfolio quality, productivity and efficiency, and profitability in the country as well.
 
To what do you attribute your success?
A. I think that there are many factors, but can be summarized as follows:

  • Support from the government, and especially local authorities
  • Enabling regulation environments, strong and supportive regulators
  • Loyal and discipline clients
  • Strong governance structure, good and supportive shareholders and the Board
  • More professional and high commitment staff and management
  • Strong institutional capacity ie, internal control, policies, procedures.

 
What are the long term prospects for microfinance in Cambodia?
I think that after gone through all the difficulties and challenges in the past, microfinance in Cambodia is now on the right track and right direction, therefore, I think that it will continue growing in the sustainable manner and continue to contribute to the development of the country by providing access of the banking services to the unbanked people, especially, in the rural area.

The Prasac website may be viewed at www.prasac.com.kh.

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