Acleda poised to shift focus out of Cambodia

By Raphael Minder in Hong Kong

Acleda, a Cambodian microfinancier that has built up the country’s largest retail banking network, is considering opening its shareholding to a western commercial bank as it starts to expand outside its home market.

Last month Acleda became the first Cambodian bank to make a foray abroad, after obtaining a banking licence from neighbouring Laos. The bank is eyeing China and Vietnam next.

In Channy, chief executive, told the Financial Times that Acleda had received 19 investment proposals and would decide next month which one would make the best “strategic shareholder”. Western banks are on the list, although he would not disclose names.

Acleda began 15 years ago as a microfinance program­me backed by the United Nations and has since established itself as one of Asia’s leading providers of microcredit.

It has also developed a full-fledged retail business, with 214 branches across Cambodia. Mr In Channy forecast that, in five years, microfinance would represent 30-40 per cent of Acleda’s lending business, down from 50 per cent now and 70 per cent in 2005.

Mr In Channy added that there was no specific timetable for expanding into more countries but sounded particularly optimistic about filling a void in the Chinese lending market. “There is just no institution in China like ours serving the lower sector,” he said.

To meet such ambitions, Mr In Channy said Acleda “really needs the capital base to grow”, at a rate of about $70m a year. Adding a shareholder, however, could alter the balance of power, since Acleda is currently 51 per cent-owned by its staff and other locals, while the other 49 per cent is owned by foreign funds and international donors, including the International Finance Corporation, the World Bank’s private lending arm.

With inflation recently soaring in Cambodia, Mr In Channy insisted that Acleda could weather any serious economic downturn, noting that its rate of non-performing loans was 0.02 per cent in 2007, compared with an average of 5.2 per cent for the country’s banking sector.

In a report earlier this year, Standard & Poor’s, the credit ratings agency, commended Acleda for its good asset quality, “although the laws on secured transactions are not well-defined in Cambodia and recovery is not guaranteed. This might call into question the bank’s ability to enforce claims and magnify its exposure to structural weakness in the economy.”