ECONOMYNEXT – Sri Lanka-based LOLC group said, a holding company in Singapore had had received 422 million dollars from the sale of the first tranche of its Cambodian unit PRASAC to KB financial group of Korea.
LOLC group struck a deal to sell 70 percent of PRASAC, the largest micro-finance company in Cambodia to Kookmin Bank for 603 million dollars.
The 422 million dollars for the first tranche had been remitted to LOLC International Pvt Ltd, a holding company based in Singapore.
A part of the money will be brought to Sri Lanka, LOLC Deputy Chairman Ishara Nanayakkara said.
“We are pleased that this landmark transaction will also facilitate a significant inflow of foreign currency to the country,” Nanayakkara said in a statement.
“We are proud that we were able to secure the required approvals to conclude this transaction swiftly, despite the current challenges across the globe.
“We appreciate all the guidance, support and encouragement given to us by the Central Bank of Sri Lanka and for the support given by the National Bank of Cambodia and the Financial Services Commission in Korea.”
LOLC said the sale proceeds will strengthen the balance sheet of the company and help its growth.
“The stronger balance sheet of LOLC will also provide the necessary impetus for the local financial services companies such as LOLC Finance PLC, LOLC Development Finance PLC and Commercial Leasing & Finance PLC to grow their businesses further,” the company said.
LOLC bought into PRASAC in 2007 with an 18 percent stake at the invitation of FMO the Nederland Government’s Development Finance Company, Belgian Investment Company for Developing Countries and Dragon Capital, who had studied its operations in Sri Lanka.
LOLC also controls LOLC Cambodia, the second largest micro-financier in the country, in which the group has a 97 percent stake.
The strong growth and value of PRASAC was made possible by the dollarization and mostly fixed exchange rate of Cambodia, where a central bank can no longer print money for stimulus or other purposes and trigger monetary instability, analysts say.
After the Cambodian Riel fell from 750 to 4,000 from 1991 to 1991 many people adopted the dollar dropping the RIEL (technically currency competition) and the central bank lost its ability to conduct monetary policy, generate instability, destroy private capital including deposits and financial assets, scare foreign investors and lower living standards, analysts say.
LOLC Cambodia has assets in excess of 1 billion dollars, an 832 billion asset portfolio and a deposit base of 485 million US dollar.
Singapore, where the holding company is based also has one of the best monetary authorities in the world, which also does not have a policy rate.
The Singapore dollar has appreciated from 3.0 to the US dollar at the break up of the failed Bretton Woods system of soft-pegs in 1971 to about 1.4 now.
LOLC also has units in Myanmar, Pakistan, Philippines, Indonesia, Nigeria and Zambia which have weak central banks. (Colombo/Apr13/2020)