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ACLEDA Bank Receives IFC Client Leadership Award

September 26, 2005

IFC Client Leadership Award 2005

Washington, DC, September 26— IFC has awarded its annual Client Leadership Award to ACLEDA Bank Plc, the leading microfinance institution in Cambodia. The Client Leadership Award recognizes a highly successful corporate client who, in line with IFC’s mission, has made a significant contribution to sustainable development.

“ACLEDA Bank’s evolution from a non-profit institution focusing on rural development to a first-tier commercial bank serving thousands of entrepreneurs in both rural and urban areas, is a role model for any business, not just microfinance institutions,” said Assaad Jabre, Acting Executive Vice President of IFC. “The winner of the IFC Client Leadership Award should be a company that sets the standard for leadership in corporate governance, community involvement, environmental and social sustainability, and commercial success—ACLEDA has truly earned this award.”

With IFC’s support, ACLEDA has transformed itself from a non-governmental organization, serving 55,000 small borrowers, into Cambodia’s second largest lender. ACLEDA has expanded coverage to areas not usually served by financial institutions, reaching 131,000 active borrowers through 136 offices and branches.

Nearly 70 percent of the bank’s borrowers are women. The bulk of the bank’s loans go to entrepreneurs selling basic commodities such as rice, fish, produce, and artisanal goods.

We are delighted to receive this award. IFC has been a valuable partner in helping us become a full-fledged commercial bank that brings critical financial services to ordinary entrepreneurs and families in urban as well as rural areas,” said Mr. In Channy, General Manager of ACLEDA Bank. “It is my firm belief that sustainable microfinance is an important tool for economic growth at the grassroots level and a powerful tool in the fight against poverty in Cambodia.”

Established in 1993, the Association of Cambodian Local Economic Development Agencies (ACLEDA) began its transition into a full-service bank in 1998, assisted by IFC’s Mekong Private Sector Development Facility—which provided technical assistance—the United States Agency for International Development, United Nations Development Program, and other international aid agencies.

IFC acquired an equity stake in ACLEDA through investments in 2000 and 2003, mobilized other investors, and provided financing to expand the bank’s lending to microenterprises. Today the bank’s loan portfolio stands at $80 million, compared to just $10 million in 1998. ACLEDA also offers savings accounts, money transfers that help families assist one another across provinces and regions, and direct payroll deposits to lower-income clients. In these ways, the bank is achieving its business goals, while committing to sustainable development.

IFC is a leader in commercial microfinance. As of June 30, 2005, IFC had invested $323 million in 69 microfinance projects in 43 countries. It helps build strong commercial microfinance institutions through its investments, partnerships, and carefully targeted technical assistance. The goal is to bring microfinance into the mainstream of the banking industry to help reduce poverty and improve people’s lives.

Mr. Assaad Jabre, Acting Executive Vice President of IFC

Qualifications needed to receive IFC Client Leadership Award and its benefit to us

What is the International Finance Corporation (IFC)? What is its objective? And what is its extent?

The International Finance Corporation is an international corporation and is a member of the World Bank Group and is headquartered in Washington, DC. It shares the primary objective of World Bank Group instructions: to reduce poverty and improve the lives of people in its developing member countries.

IFC has 176 member countries, has a net worth of US$7.8 billion including authorized capital is US$2.45 billion. The mission of IFC is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve the people’s lives, help clients improve social and environmental sustainability, and provides technical assistance and advice to government and businesses.

What are the qualifications of the ACLEDA Bank Plc. to receive the Client Leadership Award from IFC?

Among 1,400 institutions around the world, financed by IFC, ACLEDA Bank Plc. is the only institution that has best completed the conditions to receive the Client Leadership Award from IFC. These conditions include:

1. Corporate Governance means the ACLEDA Bank has good performance with high responsibility, accountability, and transparency.
2. Community involvement means the ACLEDA Bank has participated directly in developing and promoting the standard of living of people in rural areas in 22 provinces over 24 provinces in Cambodia, no diver institutions can operate.
3. Environmental and Social Sustainability means the ACLEDA Bank has taken part in strengthen the social and environmental sustainability by carrying out the special policies to avoid providing loans to business, which is harmful to social environment in accordance with the provisions, prohibited internationally.
4. Commercial Success means the ACLEDA Bank is a successful institution, which has gradually increased the income since its first operation, especially, it has provided dividend to all shareholders annually.

What are the benefits of receiving this award for the ACLEDA Bank?

This award provides a large benefit for the ACLEDA Bank as follows:

• Being recognized in local and international communities as a commercial bank operating its business with high responsibility, accountability, and transparency.
• Building up the trustworthy for internal and external communities, especially the ACLEDA Bank’s customers, and it will increase the uses of all products and savings-deposit services.
• Improving employees’ motivation and a better understanding of the bank’s vision and mission that they are working with a potential and worldwide recognized team.
• All employees are being recognized from local and international communities for their professional and transparency attitude in carrying out their duties with high commitment and willingness.
• Facilitating and building confident in relation and seeking for financial sources from various institutions to support its operations.
• Other benefits from other micro-finance institutions such as providing training, visiting and internship programs.

Address of In Channy General Manager, ACLEDA Bank Plc.

From left to right, Mr. Assaad Jabre, Acting Executive Vice President of IFC, Mr. In Channy, General Manager, and Mr. Chea Sok, Chairman of ACLEDA Bank

It is a great pleasure to be with you today to participate in the Client Leadership Award ceremony. On behalf of the ACLEDA Bank team and myself, I would like to express my sincere thanks to IFC for the selection of ACLEDA Bank for the 2005 Client Leadership Award. As one of our original investors, IFC helped give life to our bank. So I welcome this opportunity to report in person on what your investment has accomplished and what it means to the people of Cambodia.

In 1998, ACLEDA received its first commitment from IFC for technical assistance through its Mekong Private Sector Development Facility. We had a loan portfolio of just 10 million US dollars and 55,000 small borrowers. We employed 318 staff in 27 offices in 11 provinces of Cambodia. Today—with your help and financing—we are the second largest lender in the country with 130,000 active borrowing customers. Nearly 70 percent of our borrowers are women, and outstanding loans now total 81 million US dollars.

ACLEDA Bank has introduced saving accounts to ordinary people in urban and rural areas through our network of offices which now number 136 in 22 of Cambodia’s 24 provinces. Today 76,979 small savers who previously did not have access to any bank, now entrust their money to ACLEDA Bank. Our deposits have grown from almost nothing four years ago to nearly 62 million US dollars today.

Last year ACLEDA Bank became a fully licensed commercial bank. Since then, our staff has grown to over 2,300—most of whom are graduates. And we now offer a large range of country-wide banking services to entrepreneurs with micro and small businesses, as well as larger ones. For example, people can now freely transfer funds throughout the country, and to and from other countries. We have also introduced payroll accounts to factories and businesses. This alleviates the burden—and risk—attached to cash payments, and also encourages employees to save.

Last year ACLEDA Bank became a fully licensed commercial bank. Since then, our staff has grown to over 2,300—most of whom are graduates. And we now offer a large range of country-wide banking services to entrepreneurs with micro and small businesses, as well as larger ones. For example, people can now freely transfer funds throughout the country, and to and from other countries. We have also introduced payroll accounts to factories and businesses. This alleviates the burden—and risk—attached to cash payments, and also encourages employees to save. Last year ACLEDA Bank became a fully licensed commercial bank. Since then, our staff has grown to over 2,300—most of whom are graduates. And we now offer a large range of country-wide banking services to entrepreneurs with micro and small businesses, as well as larger ones. For example, people can now freely transfer funds throughout the country, and to and from other countries. We have also introduced payroll accounts to factories and businesses. This alleviates the burden—and risk—attached to cash payments, and also encourages employees to save.

People often ask me, "Now that you have a full commercial banking license, does it mean that you are turning your back on the small borrower?" On the contrary, our and small-scale customers whose success has helped them to move up the economic ladder. Still, the annual income per capita in Cambodia is mere $320 US dollars. ACLEDA Bank, which enjoys a predominant position in the microfinance sector, would be foolish indeed to turn its back on the source of its past—and future—success!

Our clients’ stories bear this out. Mrs. Houn Kong is a widow living in the capital, Phnom Penh with three daughters. In 1997, she ran a business selling Khmer noodles in Boeng Tom Pun market. With ACLEDA's first loan of KHR200,000 (about US$48), she began changing her business. Her new business is called the Fast Food and Rice Shop. She is on her 18th loan from ACLEDA Bank—this one for KHR 1.5 million (about US$358). ACLEDA Bank has made a difference in Mrs. Kong’s life. Before she began borrowing from ACLEDA; she lived in a very small house with a roof and walls made of palm leaves. Loans helped her business and income grow. She has now built a bigger house with wooden walls and a tin roof. She bought a motorbike to make her life easier. Her daughters now go to school.

Ms. Khat Chean, another client, is a widow with 8 children who lives in Kampong Bay district of Kampot Province. She makes bamboo baskets used as containers for goods. Her first loan in 1996 of KHR 150,000 (approximately US$36), enabled her to buy a bicycle for transporting bamboo. Her latest ACLEDA Bank loan is for KHR 800,000 (about US$191) to expand her business. With ACLEDA Bank loans, Ms. Chean's business has grown, enabling her to take better care of her family. She rebuilt her small thatch house into a larger wood house with a tin roof. Five of her children go to school and the other daughter and sons work in her business. She purchased farmland, along with a cow and an ox.

Our new commercial bank status means we can keep lending to successful entrepreneurs. Take Mr Keng Chek, a married man living in Siem Reap province, home to the famous Angkor Wat temples. He started a silk-screen printing business and took his first loan from ACLEDA Bank after learning skills from the ILO Vocational Training Program in 1993. He first borrowed $488 to buy molds for making Apsara and Angkor sculptures, and silk screen supplies for printing on T-shirts and other products. He started this business with his family and no other workers. At that time, he earned just US$97 a month. After he repaid his first loan, he asked for subsequent loans from ACLEDA because he wanted to improve his business. Due to strong demand, Mr. Chek has continued to upgrade and expand. Mr. Chek’s sixth loan with ACLEDA Bank was for $15,000. His net income has increased to more than US$1,600 per month and his business employs 10 full time workers. Mr. Chek's business has improved life for his family. He now has cars and motorbikes for transport, and a plot of land.

I could go on about the many clients ACLEDA Bank serves. But I think these few cases show you why I believe so firmly that sustainable microfinance is an important tool for economic growth at the grass roots level. It provides a stimulus to social development and is a powerful weapon in the fight against poverty in Cambodia.

On this important and joyful occasion, let me offer my deepest thanks to IFC, and all our other shareholders, for your investment in ACLEDA Bank. Any success we have enjoyed is also your success!

On behalf of myself and all my colleagues from ACLEDA, I wish IFC many more decades of achievement and prosperity, and may our happy partnership long continue!