MICROCAPITAL STORY: Cambodian Microfinance and AMK to Receive Support from IFC

The International Finance Corporation (IFC) has pledged to increase support for microfinance in Cambodia by an unspecified amount. In a press release by the IFC, it was reported that the IFC has pledged to double its global support for microfinance to USD 1.2 billion over the next three years, and while it specifically pledged increased support to Cambodian microfinance, this amount was not reported. The IFC has reported on its website that it expects to raise its annual investments in the country to more than USD 50 million by 2010, however it is not specified how much of this would be dedicated to supporting microfinance. These annual investments would be an increase from its current average of USD 20 million.

The support to Cambodia’s microfinance industry was announced by IFC executive vice president and CEO, Lars Thunell, at a ceremony where he also pledged IFC assistance to Angkor Microfinance Kampuchea (AMK), a microfinance institution (MFI) in Cambodia. While no monetary amounts were specified, the IFC did state that it will advise AMK on microfinance strategy as well as the development of new products and services. These services will be provided through the IFC Mekong Private Sector Development Facility (MPDF), an IFC-managed private sector development initiative.

The financial sector is underdeveloped in Cambodia, having a weak rural finance network and a lack of rural development banks; it has been reported by Banking With The Poor. It is estimated that the total demand for credit by micro and small business entrepreneurs is USD 100 to 123 million, but only 45 to 55 percent of this is provided by existing providers of financial services. In 2005 the Consultative Group to Assist the Poor (CGAP) highlighted the most pressing challenges for the successful growth of microfinance in Cambodia in their Country-Level Effectiveness and Accountability Review. They highlighted the need for regulation and information sharing between microfinance institutions (MFIs) in Cambodia as a key area where microfinance is lacking, which was recently reported on in this MicroCapital story.

The International Finance Corporation (IFC) is an intergovernmental organization launched in 1956. It is a member of the World Bank Group and its main objective is the promotion of private enterprise. The IFC finances private sector investment, mobilizes capital in the international financial markets, and provides advisory services to businesses and governments. In Cambodia the IFC’s advisory services program in the country are supported by the IFC Mekong Private Sector Development Facility, which is funded by Australia, Canada, the European Union, Finland, IFC, Ireland, Japan, New Zealand, the Netherlands, Norway, Sweden, and Switzerland. The IFC’s net worth as of June 2008 totalled USD 18.3 billion.

Angkor Microfinance Kampuchea (AMK) AMK is a Cambodian MFI that originated from the savings and credit development work done by Concern Worldwide, an NGO dedicated to humanitarian efforts and poverty alleviation. The savings and credit program from which AMK is created was founded in 1999, but AMK did not become an independent organization until 2003. The most recent financial data from the MIX shows AMK had total assets USD 12.3 million at the end of 2007, with a gross loan portfolio of USD 10.3 million. The MFI had a return on equity of 24.71 percent and a return on assets of 8.64 percent. As of 2007, AMK had 120,111 active borrowers, with 84.5 percent of these borrowers being women. The average loan balance per borrower is USD 86.