CAMBODIA RURAL FINANCE PRASAC overview Feb 2013, Thailand

1. CAMBODIA RURAL FINANCE PRASAC overview Feb 2013, Thailand

2. Content • About Cambodia. • Cambodia MFIs Evolution and Performance. • PRASAC Overview. • Conclusion and Development Plan.

3. About Cambodia

4. About Cambodia Good strategic location. • Area:181,035 sq km, about twice the size of South Korea; Thailand on its west, Vietnam to the East and Laos on its North. It located in the middle of south east nation countries. • Population: 13, 395,682, Total Households: 2,832,691, Rural HHs: 2,314,548 (82%) • Average HH size: 4.7, Population in agriculture: 72.3% (Census 2008) • GDP/capita: USD795 (IMF 2010), USD 677 (WB 2009) • GDP Amount: USD 9,872,222,155-WB 2009 • Life Expectancy: 61 year (2008)WB, Literacy rate (adult 15+): 78% (2008)-WB • Poverty Line: PP: KHR 2,351, Urban: KHR 1,952 and Rural: KHR 1,753 (CSES 2004) • 25.8% (predicted) of the population living below the national poverty line in 2010 compared to 35% in 2004 (MoP, 2009). • Cambodia has a multi-party democracy under a constitutional monarchy with national elections scheduled for 2013 (Every five years). The political situation is stable with the ruling Cambodian People’s Party continuing to be in control (royalist FUNOINPEC party as a minority coalition partner).

5. Cambodia MFI Evolution

6. Cambodian MFI Performance • There were 34 MFIs (7 MDIs) as of December 2012. • Operating in 24 provinces with 1,104 offices, staff increase to 12,432 • Credit portfolio increase to $881 million. • Credit client increase to 1,297,645 borrowers (approx. 40% of household family) • Portfolio at risk 30 days was 0.27%. • Deposit balance increase 144% to $274 million collected from 717,884 depositors

7. About PRASAC

8. ABOUT PRASAC • Vision • To improve the living standards of the rural people contributing to sustainable economic development by being a financially viable microfinance institution. • Mission • To provide sustainable access to financial services for rural communities and micro-enterprises

9. Background • Started in 1995 funded by EU. • PRASAC Credit Association in 2002. • MFI licensed as PRASAC Microfinance Institution in 2004 with tow main shareholders CRDF and PSCo.,. • PRASAC received a permanent license from NBC in December 2007 (Replacing CRDF with new five shareholders, BIO, DCG, FMO, and LOLC) • Microfinance Deposit Taking Institution license from National Bank of Cambodia in 2010. • Registered capital ~20MUSD divided among the five shareholders (BIO, DCG, FMO, LOLC and PSCo.,)

10. Clientele and Target Client • Village households: Village households that constitute up to 90% or more of all households located in rural areas. The majority of the clients is involved in rice production and farming and has diversified income generating activities such as trading or service activities. The cash income determines the debt capacity of a household for taking out a loan. • Micro entrepreneurs: The large majority of them are family business where family members help out in the running of the business. They are mainly located in market centers that are located in or nearby district or provincial centers, and in the rural villages as well. They have few employees (< 5) and normally all of them are family members. • Small entrepreneurs: They are mainly located in market centers that are located in or nearby district or provincial centers, and in the rural villages as well. They have few employees (5-10).

11. PRASAC’S PRODUCTS AND SERVICES 2. DepositProducts: • Savings • Term Deposit • 3. ATM • 4. Local Fund Transfer • Foreign Exchange • Payroll Service • Micro Insurance Products: • Health & Accident • Credit Products: • Agricultural Loan • Trade Loan • Service Loan • Transportation Loan • Construction Loan • Consumption Loan • Motor Loan • Biogas plant Construction Loan • Staff Loan • Invoice Discounting

12. Performance highlight • Distribution channel : Office: 167, Online office: 106, ATM: 26 • Coverage: Province: 24, District: 186, Commune: 1,499, Village: 10,874 • Human resource: Total staff: 2,135 (42% growth) • Loan portfolio • Loan portfolio: USD 214,857,594 (40% growth) • Active borrowers: 134,146 (7%) • Portfolio At-Risk (PAR30) : 0.20% • Deposit • Deposit amount: USD 57 million (858% growth) • Deposit account: 133,443

13. Performance highlight (cont’d) • Total assets: USD 251,683,934 • Debt financing/Borrowing • Borrowing amount: USD 139,382,048 (55% of Total Assets) • Number of lenders: 35 • Finance performance • Profitability • Return on Assets: 5.64% • Return on Equity: 39.3% • Efficiency • Operating cost ratio: 8.9% (8% with assets) • Financial cost ratio: 5.7% • Cost-to-income: 51.37%

14. Performance highlight-Non-financial • Establish Social Performance Management Committee • Review on Agri-Microfinance Product • Financial Literacy Module Development and Roll-out • Select poverty tool eg. PPI • Integrate SPM indicators into MIS • Design and differentiate financial products for specific target clients • Data generation from MIS (Automate report) • Market Demand Survey • SP criteria for office setting up • Incorporate SP goals into bank transformation road map.

15. Challenges • Tough Competition in credits, savings and operations • MFIs/MDIs status is still limit to introduce new products into the market • Most of fund from abroad affected by crisis in Europe. • No systematic land tenures for all households. • MIS system is outsourcing supports.

16. Opportunities • Legal frameworks are significantly improving to help governing good business framework, particularly form National Bank of Cambodia. • Strong support from local authorities and clients. • Good credit discipline clients and more confidence in banking system from the public • Economic Recovery -More financial service demand for business transactions. • Credit bureau was already functioned well.

17. Success Factors • Stable political and macro environment • Enabling legal framework, supportive regulators, and support from authorities • Supported by clients that have good credit discipline and trust • Good governance structure, strong internal control system, • Stronger leadership and professional fellowship and high committed staff • Competitive, flexible product and good customer service • Tailor made products and services for clients and SMEs in particular. • Good MIS system for tracking reports and performance. • Client Protection Principles Implementations. • Social Performance Management is mainly focused to ensure the double bottom lines (social and finance returns) of the business.

18. Conclusion and development plan

19. Cambodia MFI Sector development To close gaps, constraints and challenges and also fully support to microfinance sector, the Royal Government of Cambodia has developed strategic plan as follows: • MFI supervision • Common reporting standards • Regulatory improvement to support product diversification • Access to credit information • Market transparency and disclosures • Cost efficiency • Enhancing of microfinance institution management information system • Support for and enhancing of the role of CMA • Promotion of savings mobilization • Study and development of capacity for competition • Expansion of access to credit • Provision of client training