Sri Lanka’s LOLC to exit Cambodia micro-lender, sell down Singapore unit: report

STABLE FOUNDATION: Without an activist central bank generating high levels of instability, the largely dollarized Cambodia is among the fastest growing Asian nations.

ECONOMYNEXT – Sri Lanka’s LOLC group plans to exit one of two micro-lenders in Cambodia to fund new acquisitions elsewhere and may also sell a stake in a Singapore holding company, a media report said.

LOLC plans to sell its 70 percent stake in Prasac Microfinance Institution Ltd, Bloomberg Newswires reported.

“It is very large as a micro finance institution. I think Prasac needs to move to a bank,” the report quoted Deputy Chairman Ishara Nanayakkara as saying.

PRASAC is Cambodia’s largest micro-lender with a 2.2 billion dollar balance sheet by the end of the last financial year.

The largely dollarized Cambodian economy, where the central bank has been mostly edged out, has driven LOLCs growth.

LOLC also owns a second firm, LOLC Cambodia, which is the fourth largest in the country with over 500 million dollars in assets, at the last balance sheet date. However it operates in domestic currency according to the annual report.

Cambodia’s riel has also been stable around 4,000 to the US dollar for almost 20 years, after falling from 400 to 4000 in the 10 year to 2000 and promoting dollarization.

Without the monetary instability that hit many other Asian nations in 2019, Cambodia’s economy is forecast to grow by 7.0 percent in 2019 and 6.8 percent in 2020, according to International Monetary Fund projection.

Cambodia is one of few developing countries whose growth was upgraded by the IMF in October.

At LOLC’s home base in Sri Lanka, bad loans have risen across the banking system, hit by monetary instability generated by a soft-pegged central bank.

Bad loans have risen in Sri Lanka as the currency collapsed to 182 to the US dollar from 153 in 2018, due to contradictory monetary and exchange rate policies.

LOLC is also building a holding company in Singapore, another country with monetary instability and a strong currency and free flow of capital. The firm controlled by Sri Lanka will hold many of its overseas units.

LOLC may also sell a stake in the Singapore holding company to a strategic investor later to raise more capital probably around 2021, Nanakkara had said.

LOLC already has operations in Myanmar, Indonesia, Philippines and Pakistan. It plans to expand into Africa, Brazil and India, where however monetary stability is weak. (Colombo/Dec11/2019)