MICROCAPITAL STORY: ACLEDA Bank Receives $850k in Funding From German Development Bank to Build Microfinance Training Center in Cambodia

The Association of Cambodian Local Economic Development Agencies (ACLEDA Bank), a Cambodian based Microfinance organization has received grant worth USD 850 thousand from the German Development Bank Kreditanstaltfür Wiederaufbau (KfW) to build a new Microfinance Training Center in Cambodia. In a press release found on the Phnom Penh Post, Mr. In Channay, the president of ACLEDA Bank said the funds would be used to meet operational costs of the training center and to provide short-term scholarships and fellowships to its students for a three year period. Active in all 24 provinces/towns of the Kingdom of Cambodia, the ACLEDA Bank has 220 branch offices with an asset base of USD 473 million, total loan portfolio of USD 315 million and 185, 492 active borrowers.

KfW was established in 1948 with the Federal Republic of Germany owning an 80 percent stake and the remaining 20 percent owned by the German federal states. It has provided funds to several developing and under-developed countries in the Asian, Latin American, African and European region towards projects focusing on income generation, job creation and poverty alleviation. As of December 2007, KfW had EUR 354 billion in total assets. Information on its return on assets and debt to equity ratio is not available. KfW has been given a long term rating of AAA by the independent credit ratings provider, Standard and Poor’s.

The ACLEDA Bank was originally established in 1993, with the support of the International Labor Organization (ILO) and the United Nations Development Program (UNDP), as a national Non-Governmental Organization (NGO) for micro and small enterprise development. It was granted license in December 2003 by the National Bank of Cambodia (NBC), Cambodia’s Central Bank, to operate as a full commercial bank and is now one among the 15 commercial banks in Cambodia. ACLEDA was given a rating of B+/ B by Standard and Poor’s in January, 2008.

Cambodia is one of the most rapidly developing microfinance sectors globally, according to a report by the International Finance Corporation (IFC), the private sector lending arm of the World Bank. The NBC has recognized and licensed 17 Microfinance Institutions (MFIs) in Cambodia, each with an asset portfolio greater than Reil 100 million (approximately equivalent to USD 25 thousand). In addition, 25 NGOs providing microfinance services are also registered with the NBC. However, according to a report by the Asia Resource Center for Microfinance, most organizations operate in provincial towns leaving the rural financial sector in Cambodia underdeveloped with a very limited number of development banks. The ARCM attributes high costs of operation and low level of economic activity in the rural areas as factors constraining the development of lending organizations in the rural areas. The ARCM report also states ACLEDA as the only commercial banking institution operational in rural Cambodia. A World Bank report states that many microfinance providers in Cambodia lack the technical capacity needed for growth. The private sector lending arm of the World Bank, the IFC, has called for advisory services and technical assistance to MFIs in Cambodia that will enhance their outreach.

With the establishment of the Microfinance Training Center, the ACLEDA Bank hopes to make Cambodia a hub for MFI training, as per the press release found Phnom Penh Post. The news release quoted Mr. Channy as saying that scholarships and fellowships would be provided to students for the first three years, after which training groups would be charged USD 500 per day. No information is available on the type of courses offered. Mr. Channy however disclosed that each course would last up to five days. Mr. Say Sony, manager of Prassac MFI, another Cambodian based MFI was quoted by the Phnom Penh Post as saying that the establishment of the training center was symbolic of the progress of MFIs in Cambodia. He however did mention that local MFIs might not be able to avail the opportunity on account of the high training fee.

By Bharathi Ram, Research Assistant

Additional Resources:

Phnom Penh Post: Phnom Penh Post

ACLEDA: Facts and Figures

ACLEDA: Financial Highlights

International Finance Corporation: Cambodia Microfinance Project

World Bank Report: Social and economic background of Cambodia

Asia Resource Center for Microfinance

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