Mr. Sok Voeun

Chief Executive Officer

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The banking and microfinance sector continues to be resilient and progressive, ensuring the sustainability of financing and essential financial services, and plays an active role in supporting key economic sectors, though credit growth has slowed. By the end of 2023, the gross loan portfolio of the microfinance sector was USD 5.4 billion with 1.6 million in loan accounts. Loans from microfinance institutions have been provided to key economic sectors including household 30.8%, agriculture 22.2%, trade and commerce 20.3%, service 11.5%, construction 7.1%, transportation 2.9%, manufacturing 2.9% and others 2.3%. Meanwhile, microfinance institutions could collect customers’ deposits with the balance of USD 2.2 billion across 1.9 million accounts. In overall, most microfinance institutions remain robust and resilient, continuing to strictly adhere to the prudent laws and regulations, guidelines and measures issued by the central bank, according to Annual Report 2023 of the National Bank of Cambodia.
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‌In 2023, LOLC conducted its business operations with caution and maintained its loan portfolio with quality and strong internal control. The recovery of clients’ income, which was impacted by COVID-19 and flood disasters, has not yet fully back to normal. With regulatory support from the National Bank of Cambodia (NBC), LOLC Cambodia was able to continue providing its clients with relief measures, allowing them the necessary time and space to recommence business activities, especially in the tourism sector.

LOLC'S MAIN ACHIEVEMENT IN 2023

Loan performance
LOLC conducted a cautious approach to ensure its quality and sustainability. In 2023, the gross loan portfolio was USD 1,247 million, with more than 335,000 borrowers, while the portfolio at risk 30 days was 2.7%. The borrowers are made up of groups and individuals, representing 43% and 57%respectively. Around 66% of loans were provided to micro entrepreneurs (loan size ≤ USD 3,000), of which 81% were without real estate collateral. The micro loans contributed just 20% of total gross loan portfolio with an average loan size of USD 965, while other 80% of loan portfolio were provided to the small, medium and large sectors.
Loan Portfolio Quality
With the adaptation of macroeconomic changes and constraints, LOLC Cambodia has made itself ready for adverse situations and continued the expansion of its loan portfolio, balanced by strong, quality internal controls. The Board of Directors and management team have collaborated closely to enhance credit risk management and internal controls by implementing the following measures:
  Loan assessment and evaluation are conducted following cash flow base analysis;
  Different levels of authorities for loan review and loan approval;
  Policies, procedures, manuals and their implementation are frequently reviewed;
  System support provided to monitor the implementation of policies and procedures;
 Credit monitoring continues to be strengthened after disbursement through a variety of approaches;
  A risk management culture has been integrated throughout LOLC;
 The credit quality assurance team continues to be strengthened to ensure the implementation of internal controls;
  The Internal Audit Department continues to play a crucial role in ensuring the application of robust internal controls;
  Credit quality-based incentive structure is applied for financial sale advisors and other field personnels.
  The Credit Bureau of Cambodia checks 100% of borrowers and co-borrowers before disbursement to supplement rigorous in-person loan evaluations (cash flow base assessment);
  Training and retention programs continue to be provided to strengthen staff capacity and skilled knowledge, ensuring proper conduct and implementation;
  Client Protection Principles have been incorporated as a fundamental risk management practice;
  Compliance with ABC/CMA lending guidelines regarding multiple loans and refinancing has been maintained.

Deposit Performance
‌The deposit base increased dramatically to more than USD 904 million by the end of 2023, a growth of 18% compared to the end of 2022. The number of depositors slowed a bit to around 511,000 thousand. The growth of its deposit balance and deposit accounts demonstrates that LOLC is a reliable microfinance institution delivering superior customer service, guaranteeing client protection, and providing competitive and innovative deposit and loan products.
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‌Digital Banking
‌To support business development and cater to the fast growth of digital financial service requirements, LOLC continues to invest in innovative digital banking projects to provide superior customer experience.
  LOLC upgraded its iPay Cambodia mobile app to include more convenient functions, allowing customers to perform various banking transactions free of charge. Examples of this are Cross Border Payment (Thai QR), Scan and Pay to all merchants/ customers via KHQR, Interbank Transfer via FAST, RFT and Bakong, Internal Transfer within LOLC, Bill Payment, Phone Top-Up, Open Digital Savings Accounts, Open/Change Condition/Close Fixed Deposit, Balance Inquiry, Generate Monthly Statement and Fixed Deposit Certificate.
  LOLC Cambodia upgraded its CSS ATM Card with EMV standard chip functionality to improve card security. With LOLC’s CSS ATM cards customers are able to perform self-banking transactions with CSS members, such as Cash Withdrawals, Balance Inquiry, PIN Change, Mini Statement and Fund Transfer within LOLC Cambodia/Inter Bank Fund Transfer at over 4,000 ATM machines nationwide free of charge.
  LOLC launched its tablet banking system across all branches in 2023. Through the tablet banking system, our officers are able to operate their tasks (such as loan origination, loan collection and customers onboarding) conveniently from tablet devices, reducing manual work and increasing productivity, efficiency and effectiveness.
  LOLC has begun integrating third party connectivity in order to create more distribution channels and provide the best customer experience.

Bancassurance
LOLC Cambodia has partnered with Serendib Microinsurance Plc. to be a bancassurance business partner, model “Corporate Agent.” The partnership aims to enhance financial inclusion by increasing access to insurance services for clients and strengthening consumer protection. It provides clients with a term life insurance, relieving burden on the family in case a borrower and/or co-borrower experience a health issue and/or accident leading to death or permanent disability.

Sustainability Management
‌LOLC continued to deliver its inclusive, responsible, and environmentally friendly financial services to rural Cambodians. As of December 2023, about 79% of its loan clients lived in rural areas, around 70% of borrowers were females, 49% of borrowers were involved in agriculture with no significant environmental risk exposure, 1,900 clients had access to clean energy, 9,300 clients were using home improvement loans, 4,900 clients were using WASH loans for better sanitation and clean water, 511,000 clients had access to savings, and approximately 74% of clients were likely living above 150% of the National Poverty line (using PPI tools for measuring poverty). 
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‌As the company’s strategy, the environmental, social and governance management standards – including the Client Protection Principle (CPP), the Universal Standard of Social Performance Management (USSPM), as well as environmental, social and governance best practices – have been integrated into institutional policies, procedures, training, product delivery, services and monitoring tools. This is because management and the Board of Directors understand the philosophy that “the company succeeds only if the clients succeed.” As a result, LOLC was awarded a Gold level of Client Protection Certification from Cerise and SPTF. This verifies that LOLC always protects and supports clients to financially grow their businesses through efficient and sustainable financial services. Besides these, LOLC was awarded the ^sBB+ of social rating, which indicates adequate social performance management, client protection systems and alignment to the social mission. Also, LOLC was awarded the Medium of institutional rating by Microfinanza, which indicates strong outlook for financial sustainability, as well as strong and stable fundamentals. 
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To support Sustainable Development Goals (SDGs) as well as to be part of the solutions toward environmental and social protection, LOLC Cambodia has incorporated key points to address concerns on environmental, social and governance in to the loan origination process, which involve ESG in decision-making. LOLC Cambodia has an exclusion list which prohibits the financing of activities with a negative impact on the environment and community. LOLC has in place robust measures to prevent loans being granted for any excluded activities. All loans are assessed by field staff, reviewed and approved by supervisors/Branch Managers/ Credit Committee against the exclusion list and on the environmental and social assessment. Environmental and Social assessments are implemented with all loans. For loans which are lower than USD 30,000, environmental and social awareness are discussed with clients on risk areas and suggestions are given for improvement. For Small and Medium Enterprise loans (SME) which are bigger than or equal to USD 30,000, a comprehensive tool is fully integrated into the lending process. The detailed assessment is conducted to evaluate whether the impact is low, medium or high, and suggestions are made to the client for awareness and improvement. As an ongoing implementation, progress on the environmental and social assessment is monitored. At least two times (during assessment and before disbursement), clients are informed about the product’s features, fee charges, cooling of period, terms, and conditions by using visual aids (A4-Metacard). In addition, the video guideline of using visual aids A4-Metacard is disclosed on LOLC’s website. 
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‌In 2023, LOLC provided financial education awareness training to more than 63,000 participants (74% or 46,925 females) including clients, villagers, university students and children.
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  Financial literacy awareness: 75 banners with key messages of financial education were designed, produced and installed at selected places.
  Radio program “Ideas for Growth”: This program aims to deliver financial literacy messages and educate rural people about consumer protection and self-motivation.
  Financial literacy awareness videos were produced to provide a financial literacy message to the public/clients. As of December 2023, 28 short videos have been produced and 26 videos have been posted on popular media channels and LOLC’s Facebook Page. As a result, the 26 videos surpassed 16 million views by the end of December 2023.
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Furthermore, LOLC also allocated funds to the following social activities:
  Bench installation, tree planting, school activities, and donated bins and solar lights to communities, schools, pagodas, and other public places.
   Donated foodstuff to client and victims of floods.
  Donated bicycles and study materials to students in an effort to promote education in Cambodia and encourage students to study harder.
  Educated One Village One Product Project beneficiaries on “How to Get the Right Financial Services” in some provinces.
  Delivered anti-drug campaign leaflets and other promotional materials to the General Secretariat of the National Authority for Combating Drugs (NACD) to disseminate drug-related awareness to the public.
  Signed an agreement with Ecobatt-Energry Cambodia to collaborate in collecting electronic equipment waste that adversely affects the environment and human health.

STRATEGIC PRIORITIES FOR 2024

We see 2024 as the year of new opportunities and challenges for LOLC.

On the lending side, we will continue to follow our existing strategy and keep focusing on micro, small and medium business loans and asset-backed lending/leasing, which are the core business of LOLC.

On the deposit side, we will keep strengthening our customer services and using diversified digital channels to promote more deposit collections. We will also diversify products and services to meet clients’ needs, including plan savings accounts, kids savings accounts, bill payment services and payroll services.

On the digital side, LOLC will keep innovating inclusive digital financial services to cater to clients’ need in anywhere banking experience in Cambodia

On the funding side, LOLC will diversify sources of funds to ensure sufficient funding required to support LOLC’s growth. In addition to the existing funding sources of shareholder paid-up capital, borrowing and deposits, LOLC issued its first corporate bond to support the company’s long-term growth and is in the process of issuing its second.

On the ESG side, LOLC will continue focusing on implementation of environmental, social and governance best practices to meet LOLC’s commitment toward sustainability and to meet LOLC’s core value: “LOLC values the vision of a balanced social and profit organizational agenda.” In short, we will try to make the most out of the opportunities that our current successes open for us. And, we are confident that LOLC is well positioned to bring further value to its customers, investors and shareholders.

Finally, I would like to express my sincere thanks to our shareholders, Board of Directors and committee members for their leadership, support, and guidance throughout the year. I would also like to express my sincere gratitude to all LOLC staff who have been working very hard/smart and are highly committed to performing their work with integrity, ethics, professionalism and responsibility. Additionally, I would like to express my sincere thanks to all of LOLC’s clients, investors and business partners for supporting LOLC and being part of its achievements. To the Royal Government and the National Bank of Cambodia, I offer my sincerest thanks — both for your support in 2023 and in anticipation of happy and prosperous coming years.