PRASAC Microfinance Institution Plc, the largest microfinance deposit-taking institution in Cambodia, reported an increase in revenue but a decrease in net profit so far this year, according to the company’s interim financial report released by the Cambodia Securities Exchange yesterday.
A company spokesperson also outlined the company may need to, again, get its creditors to waive repayments covenants to avoid a possible second technical default as severe flooding and current COVID-19 restrictions continue to affect borrower repayments.
According to the report, total interest income was 440,803 million riels ($108.6 million), an increase of 39,180 million riels ($9.6 million) – equivalent to 9.76 percent compared with the same period last year. Net profit was recorded at 104,043 million riels ($25.6 million), a decrease of -1.22 percent from Q3 2019.
The quarterly figures represent for the nine months (Jan to Sept 2020) a total interest income of 1,285,188 million riels ($316.8 million), an increase equivalent to 15.74 percent compared with the same period last year. Net profit was recorded at 256,378 million ($63.2 million) a decrease of -13.3 percent compared with the same period last year.
According to the report, the decrease in net profit was stated as a result of increased operational costs and also expected credit losses because of the current market conditions caused by the COVID-19 pandemic.
This declining amount of the profit for this quarter came from increases in personnel expenses, provision for expected credit losses and general and administrative expenses compared with the third quarter in 2019, the report stated.
Speaking to Khmer Times about the results, PRASAC’s Executive Vice-President Say Sony said, “The increase in personnel expenses was because the company recruited more staff to support our operations and growth while increasing administrative expenses by increasing office space and buying some necessary items/equipment to prevent COVID-19 nationwide across our branches.”
The report also outlined expected credit losses was because “non-performing loans (NPL) [listed as 1.16 percent in September] started increasing from the borrowers losing jobs, businesses shutting down, less income and savings and more borrowers requesting to reschedule their loans”.
Also blamed was “difficultly to grow loan portfolio because of no demand, fewer business activities, people still afraid of COVID-19 infections” and “NGOs [nongovernmental organisations] and former opposition leaders are campaigning and instigating people not to pay back loans and continuing to fight the MFI [microfinance Institution] sector”.
Sony responded to concerns of another potential default after lenders had to waive some covenants stipulated in the loan agreement in the second quarter this year to avoid a technical default, stating: “We are working very hard together with our clients to grow our business during this hard time so we expect our business will keep growing. However, we do expect some potential delays or late payment caused by the recent floods and the second wave of COVID-19 restrictions. That said, we are together with all leaders that understand the current situation and challenges. So we hope, if required, our lenders will waive any required covenants in the future.”
PRASAC is currently the largest microfinance deposit-taking institution in terms of assets, loan portfolio, loan quality, net profit, customer deposits and ranks among the top five commercial banks in Cambodia.
As of Sept 30, total assets were recorded at $3.339 billion. The company operates the second-largest branch network, with 181 branches across 86 percent of the total villages in Cambodia.
This article was first published in Khmer Times. All contents and images are copyright to their respective owners and sources.