AMK Microfinance

Debt : May 2023

BIO has granted a USD 15 M loan to AMK Microfinance, a Cambodian microfinance institution

Amount

$ 15,000,000.00

Type of investment

Debt

Development impacts

Local economic growth
Private sector consolidation/innovation
Financial inclusion
Promotion of ESG best practices

Beneficiary locations

Asia: Cambodia

Investment field

Financial Institutions

Activity

KK.64.191 Microfinance institution

Organisation

AMK Microfinance

Website

https://www.amkcambodia.com/en/

Domicile

Cambodia

AMK Microfinance is a Cambodian microfinance bank that provides one-stop-shop financial solutions to microentrepreneurs and MSMEs.

The institution serves about 400,000 loan clients. 80% of its borrowers are women and 96% of its clients live in rural areas.

The average loan size is USD 1910. The main sectors are Agriculture (25%), Trade (16%), Services (10%) and Household and Family (43%). The purposes of Household and Family are Affordable Housing loans, Motor loans, Education, Sanitation, Personal Consumption, etc.

73% of the gross loan portfolio goes to natural persons, 16% to small enterprises, 7% to micro-enterprises and 4% to medium enterprises.

The company has 35 branches, 115 sub-branches, 69 ATM, and is active in over 13,000 villages which represent 92% of the villages of the country.

Development impacts

Local economic growth
Further growth of a leading deposit-taking MFI (35 branches and 115 sub-branches; USD 554M loan portfolio; 400k active clients) that is mostly focusing on microfinance (73%) and SMEs/Value Chain loans (27%);

Finance enabling effects in an LDC where MSMEs represent >99% of the companies. Unlocking their potential is crucial while financial access remains a major obstacle for MSMEs to upgrade competitiveness and integrate the global supply chain
Private sector consolidation/innovation
Highly digitalized MFI (digital entry, digital repayment through agents, local and international transfers) with solutions to reach more un(der)served or vulnerable groups.

Innovative one-stop-shop strategy and large range of products and services (individual and group loans, remittances, etc.) that includes specific products to promote domestic value-added creation (and reduce exports of primary goods).
Financial inclusion
Strong focus on financial inclusion by providing access to basic financial services to underserved/unbanked segment (70% women, mostly low-income households)

Very low average loan size compared to local competitors;

Holistic, inclusive and easy-to-use set of products and services including microsavings/terms deposits, microloans, payments/transfer/remittances services, and micro insurances (life insurance and voluntary health insurance).
Promotion of ESG best practices
AMK is playing an industry-leading role to promote sector regulation and to mitigate the risk of over-indebtedness for several years.

Good track record on client protection principles (CPP), certification since 2016;

Strong social performance mindset and management - including through CPP and ESG stewardship as well as (independent) impact study, reducing the risk of mission drift.

E&S Impact

AMK will maintain its high social performance and will report on any deviations. Specifically, it will maintain the Social Performance Committee and will maintain compliance with the lending guidelines and the Banking and Financial Institutions Code of Conduct. It will also maintain a Gold Level Client Protection Certification.

Situation at the time of investment

The Cambodian microfinance sector has been under scrutiny from civil society for years. The rapid growth of the microfinance sector and improper regulation has led to over-indebtedness and MFIs being accused of misconduct.

Cambodia’s microfinance industry reacted by self-regulation. They developed the Lending Guidelines & the Banking and Financial Institutions Code of Conduct. Implementation is being monitored by the banking/microfinance association and the Credit Bureau.

AMK has been Smart campaign certified since 2016, with the latest certification awarded in April 2021. The institution has a “Code of Practice for client protection” in place, which formulates their commitment to client protection. The Research department monitors the social performance and reports to the Social Performance Committee, a subcommittee of the Board of Directors, that then discusses implications for the business strategy.

Risk Category: C