Acleda Bank has grown from a micro lender to the largest retail bank in the Kingdom, and has expanded into Laos and Myanmar. It also plans to expand into Thailand and southern China, according to group chief operations officer So Phonnary. Khmer Times sat down with her to discuss the bank’s current position in the market and what it plans for the future.
KT: With so many banks in the country, how is Acleda staying competitive?
Ms. So: I think that even though there are many banks and microfinance institutions in Cambodia, each of them has a different target market than Acleda Bank. Some commercial banks focus on property or real estate. Some focus on the higher market segment. Acleda is focused on low-end retail and business customers, including rural areas.
We have 256 branches throughout the country. Even though other banks are also trying to expand to rural areas, they are set up in provincial towns. Acleda also expanded to the district and commune levels. Some of our [offices] are at the village level.
Other banks do not do micro loans. Acleda offers micro and group loans. Some borrowers are in the informal sector. They do not have any real place or shop, they have a mobile business. Some other banks do not offer them loans because they think it is very complicated because it is not a collateralized loan. Acleda provides both collateralized and non-collateralized loans.
Our loan balance was $2.3 billion as of August and we have 346,000 clients. Acleda is the number one bank in Cambodia by market share.
KT: Some SMEs complain that it is difficult to get bank credit because many banks compete in the upper segment of the market. Do you agree?
Ms. So: Currently, in Cambodia, I think it’s easy to access financial services, however all [businesses] must consider their ability to assess the criteria to get loans from all possible institutions.
That is why Acleda has group loans if the people cannot access any institutionalized informal sector group loan. Many customers have no collateral, just income. Some of the borrowers are also under the poverty line because they are still poor and still have a business idea to establish or expand their business – they need to have access to finances. They come to Acleda to provide them the loans.
KT: What kind of enterprises do these tend to be?
Ms. So: Most of them are traders – buying and selling. Some of them are producers for the morning market – stay-at-home-women who work part time to earn additional income.
A big proportion of [the borrowers] sell food or mixed goods, groceries, house equipment and construction materials. Also, customers use Acleda bank loans for home production like making soy sauce or fish sauce or rice milling. Some villagers use microloans for agriculture or animal husbandry.
The non-collateral loan interest rate is higher [than collateralized loans] – from 2 percent to 2.4 percent per month.
KT: What’s your non-performing loan ratio?
Ms. So: 0.36 percent.
KT: What’s your customer growth?
Ms. So: On average every year, our customer base grows 20 percent.
KT: Tell us more about group loans.
Ms. So: They are for groups of two to 10 people. They should have a simple business plan – most provide about two pages. They need to show the bank what they need and their income per day. The bank provides [loans] within their capacity to pay.
KT: What about the corporate side?
Ms. So: We also provide loans for corporate customers. Our corporate loans are 34 percent [of the total loan value], but we are focused on medium enterprises. In terms of the number of loans, these are only 3.7 percent of loans. The growth of medium enterprises is speeding up. Every year, our medium enterprise customer base grows by 22 percent.
KT: Acleda also has some of the highest mortgage loan rates. Is that a major part of your business?
Ms. So: We have $164 million in home loans, with 6,900 clients.
KT: Do you think the Asean Economic Community will have a significant impact on the banking sector here?
Ms. So: [We will see] more project-finance loans. We do not offer those yet, but we plan to have that in our strategy. By pooling capital, we will be able to syndicate loans or offer loans for project finance or new financial products. We will depend not only on capital outsourcing by borrowing from commercial sources on the international capital market. There will be a capital market in Cambodia.
KT: What kind of innovations is Acleda planning to meet changing demand?
Ms. So: The banking sector will try its best to expand infrastructure relevant to information technology. The infrastructure should include new products and services to fulfill Asean demand.
At Acleda, we are planning to expand our electronic banking and electronic payment systems. Not only ATMs but also Internet banking is very important for Acleda. We have e-banking already but we have to upgrade to a more convenient browser to fulfill user need. We also have to improve our mobile-compatible e-banking services.
We also need to think: how can we improve customer service. We will train more human resources [staff] specialized in the terms of service for Asean customers. Also, it is important to work with insurance companies. When [policy holders] pay premiums, they can be used as a source of capital.
KT: What are Acleda Bank's regional ambitions?
Ms. So: Our long term strategy is to be a regional bank. We have operated in Laos since 2008 and in Myanmar since last year. In Laos we have 41 branches, and in Myanmar we have six or seven.
Myanmar has a bigger population than Cambodia and people there need financial services very much but they are relying mostly on microfinance - they have 234 licensed MFIs there… There are 23 private banks, with nine commercial banks and 43 representative banks,. In Laos, there is also reliance on MFIs, with 128 licensed institutions. People need more financial services for businesses but also housing and property loans. We have a way to build our competitive advantage through transparency, reliability and convenience. In the long term, we want to open branches in Thailand, [near the Cambodian border] and China, near the Vietnamese border.