Chairman's Message

Mr. Brindley de Zylva


THE GLOBAL outlook continues to be uncertain amid financial sector turmoil, high inflation, effects of the Ukraine war and the continuing impact of COVID. The baseline forecast is for growth to fall from 3.4% in 2022 to 2.8% this year. Global headline inflation is set to fall from 8.7% in 2022 to 7% in 2023 on the back of lower commodity prices. Underlying core inflation is likely to decline more slowly. The rate of interest is important for both monetary and fiscal policy and a key determinant of the sustainability of public debt. Public debt as a ratio to GDP soared across the world during COVID-19 and is expected to remain elevated. Supply-chain disruptions and rising geopolitical tensions have brought the risks, potential benefits and costs of geo-economic fragmentation to the center of debate. A lot depends on how such fragmentation can reshape the geography of foreign direct investment and how it can affect the global economy.

CAMBODIA’s GDP growth could accelerate to 5.8% in 2023, after a growth of 5% in 2022, supported by the continued recovery of tourism and ongoing policy support, despite external pressures and the impact of rising prices on real disposal income. Tourism is poised to recover more strongly, following the return of tourists from China with the lifting of China’s zero covid policy. The Annual Report 2022 released by National Bank of Cambodia pointed out that Cambodia’s economy would benefit from favorable factors such as rising investment in the region, implementation of the Regional Comprehensive Economic Partnership (RCEP) and bilateral agreements that include the Cambodia-China Free Trade Agreement and the Cambodia-Korea Free Trade Agreement. In the political sphere, the ruling party won a majority of council seats in the nationwide local elections in 2022 and should show a strong performance in the general elections scheduled for 2023 providing political stability.

THE COMPANY adopted a cautious approach in the face of the negative impact of measures taken to curb the spread of COVID-19. Cambodia has still to reach the pre-covid levels of economic activity due to the impact of climate change resulting in severe floods that adversely affected around 85,000 households across 74 districts in 14 provinces; causing damage to houses, infrastructure (roads, schools, health services etc.) and agricultural land. 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.

With the approach of ‘living with COVID-19’, people have adopted to the new normal and heightened the demand for digital financial services (DFS). LOLC Cambodia has fastforwarded the uptake of DFS and we are able to offer a wide variety of digital banking solutions, which support our customers’ increasing demands, including iPay our mobile banking application providing seamless access to internet banking services, RFT, FAST and Bakong. With these digital channels, our customers are able to perform banking transactions conveniently from their mobile devices at any time without having to visit branch offices. In 2022, LOLC Cambodia rolled out the use of tablets in the field for client onboarding and data collection. This initiative improved productivity and reduce manual work, including loan origination, loan collection, and deposit taking. We will keep enhancing our digital offerings to provide convenience customers.

We are strategizing the use of the fast evolving digital ecosystem in Cambodia to move micro entrepreneurs from the informal sector to the formal sector. Currently we serve around 280,000 micro entrepreneurs (67% of total borrowers) of which 75% are women with a majority coming from Rural Cambodia. The micro sector contributed just 23% of our total portfolio. The Small, Medium and Large sectors constituting 77% of our total portfolio has largely contributed in subsidizing the micro sector, which has assisted us in no small way in continuing with the inclusive nature of our business model.

In the upcoming years, LOLC Cambodia will keep extending its innovative digital financial services and products designed to reflect customer requirements. LOLC Cambodia will keep extending its social activities, financial literacy awareness and ESG activities to meet emerging business requirements.

It is very reassuring to note that Management and Employees of the Company have demonstrated resilience and the capacity to adapt to macroeconomic changes and constraints while ensuring compliance with all applicable laws and regulations. LOLC Cambodia is in compliance with all regulations and prudential ratios issued by the National Bank of Cambodia. We continue to uphold the Sustainable Development Goals to ensure long-term sustainability of the Company.

Last but not least, thank you to all our stakeholders, including our customers, investors, regulators, and banking and funding partners – both local and international for placing their trust and confidence in LOLC Cambodia and supporting our growth over the years.

I would also like to take this opportunity to extend my appreciation to my colleagues on the Board for their counsel and support, as well as the entire LOLC Cambodia team, which is under the direction of a competent and dedicated management team, for their outstanding achievements.

We pledge to all of our clients and shareholders that in 2023 we will continue to focus on areas that represent the best opportunities and support businesses that have shown resilience in light of the pandemic without losing sight of our environmental and social responsibilities.