By Simon Montlake
Forbes Magazine
28th July, 2001
Many entrepreneurs develop a head for numbers in their teens. For In Channy (pictured), a 14-year-old city kid evacuated at gunpoint in April 1975 to labor in Cambodia's infamous Killing Fields, the only numbers that mattered were the 320 cows assigned to him. Losing a cow meant trouble. And under the Khmer Rouge regime, you didn't want any trouble.
Fortunately for Cambodia's stirring financial- services sector, Channy kept his nose clean. In 1981 he fled to a refugee camp in Thailand, where he became a teacher and won a scholarship to study business at a U.S. college. It would be another decade before he returned home. Today the former cowherd is president and CEO of ACLEDA Bank, Cambodia's largest bank, which he cofounded in 1993 as a nonprofit microfinance lender making $10 loans to demobilized soldiers.
Last year ACLEDA (Association of Cambodian Local Economic Development Agencies) reported net profit of $24.3 million, a sharp rebound from recession-hit 2009, and is on track for another bumper year: First-half net was $21.7 million, 130% higher than the year earlier. Foreign banks are starting to wake up to Cambodia's potential. Malaysia's CIMB and Maybank have opened branches and are said to be seeking acquisitions. ANZ Bank has a head start with its joint venture with Royal Group, while the Pung family-owned Canadia Bank, the second-largest lender, is courting strategic investors for a 30% stake.
But none has the reach or reputation of ACLEDA, with 234 branches across Cambodia that are often the tallest buildings in town. Most banks stick to the capital, Phnom Penh, and take a pass on the small entrepreneurs who are the backbone of the economy in rural areas where most people live and work. Of Cambodia's 1.1 million depositors 700,000 entrust their money to ACLEDA. "When people think of banks, they come to us," says Channy, now 50.
Dependent on aid, tourism and garment exports, Cambodia remains one of Asia's poorest countries. During 2000-07 its economy grew at over 9%, sparking interest from frontier funds seeking the next tiger economy. Corruption, red tape and a paucity of investable companies kept many on the sidelines; then the global crisis erupted.
But the tide has begun to turn, says Scott Lewis, chief investment officer at Leopard Capital, which runs a $34 million Cambodia fund and holds an indirect stake in ACLEDA. Vietnam's largest asset manager, part of VinaCapital Group, said earlier this year it wanted to invest $100 million in Cambodian assets, though no acquisitions have been announced.
More funds may flow when Cambodia's stock market gets going. It opened its doors on July 11, but no companies have listed shares. Besides sanctions-hit Myanmar, Cambodia is the laggard in Southeast Asia; even tiny, Communist-run Laos has a stock exchange. Three state-owned Cambodian companies are preparing IPOs, possibly by year-end.
Could ACLEDA follow suit? It has the credentials: solid profits, audited results and credit ratings from Moody's and Standard & Poor's. Bank staffers would benefit because they own 19% of the bank's shares via an employees' trust fund in which Leopard has invested. Other shareholders include several European nonprofits, the IFC and Jardine Matheson, which acquired a 12.5% stake in late 2009.
But Channy is leery of rushing an IPO. "Are we ready? Yes, we're ready. Do we want to do that? Not yet," he says, leaning forward in a carved wooden chair in his modest fourth-floor office. Instead, he wants to build out the business by tapping shareholders for extra capital. His ambitions don't end in Cambodia. ACLEDA opened its doors in Laos in 2008 and is eyeing opportunities in Vietnam, China and Myanmar, where microfinance is still in its infancy.
Not that ACLEDA considers itself a microfinance lender, having long outgrown its NGO roots. Last year it became the first bank in Cambodia to offer mobile-phone services, which 35,000 customers now use to check balances, pay suppliers and transfer funds. Branches remit funds in four currencies (Cambodia is heavily dollarized). Multinationals rely on ACLEDA to make payroll in remote towns.
ACLEDA's average loan is over $3,000, in a country with per capita income below $1,000, reflecting growth in small and medium borrowers. "We grow with our customers. Our micro customers stay with us," says Channy.
So does his staff: Fourteen of the 28 original employees are still with ACLEDA, part of a 7,000-plus workforce. In many Cambodian companies workers follow orders and keep the boss happy. But that's not Channy's way. He believes in teamwork and participation, and encourages employees to speak up. It can be awkward and time-consuming for managers, he admits. "But when they accept [new ways], it's sustained. We can grow fast," he says.
Humility and honesty are also embedded in the bank's culture. Anyone caught for corruption is fired, and loan officers aren't even allowed to accept fruit from customers. "They've taken the best elements of Cambodian Buddhist culture and made it into corporate culture," says Lewis. While Channy credits his colleagues for making the policy stick, Lewis isn't fooled by his modesty. "He's an ‘aw-shucks' guy who drives the business," he says.
The soft-spoken banker is the polar opposite of Kith Meng, the flamboyant CEO of rival ANZ Royal Bank (Read more about Kith Meng, "Bringing Commerce to Cambodia"). But Channy can be steely, too, facing down corrupt officials and meddling politicians. In 2005 ACLEDA agreed to pay $1.3 million for a plot of land in the capital for its headquarters. The landlord went to the tax department and declared a purchase price of only $130,000, but Channy objected. He says the owner alleged that the tax department was on his side and threatened to cancel the sale if ACLEDA didn't go along with the ruse. So Channy wrote to the Ministry of Finance and Ministry of Land Development, explaining his stance. ACLEDA got its land, and the taxman got his cut. "I told the landlord: ‘Now the price is known to everyone, to the minister,'" laughs Channy. He sits on several government committees and has advised the UN on microfinance. Brett Sciaroni, chairman of the American Chamber of Commerce in Cambodia, says, "His quiet confidence and his leadership of the institution he represents gives him considerable clout, which, consistent with his manner, he uses sparingly."
Not bad for a cowherd who never finished high school. The Khmer Rouge didn't believe in education or banking, so they closed the schools, abolished money and dynamited the central bank for good measure. After the regime's fall in 1979 Cambodia had to start from scratch under Vietnamese rule, which meant a centrally planned economy.
As one of only three Cambodians with banking expertise, Chea Sok--today ACLEDA's chairman--joined the reconstituted central bank. He had spent the previous four years planting rice and playing dumb, terrified that if found out he would be killed along with other intellectuals that the regime despised. At night he dreaded falling asleep in case he spoke French in his dreams.
In 1992 Channy returned to Phnom Penh to work as a loan officer for a UN-funded microfinance project. The following year the 28 employees turned the project into a nonprofit that was transformed in 2000 into a commercial bank. At the time Cambodia had plenty of banks, not all of them reputable (the Rich Nation Bank, anyone?). New minimum capital rules drove away the shadiest operators.
The global financial crisis dented Cambodia's economy and checked ACLEDA's growth. Net profit more than halved in 2009 to $9 million, yielding a paltry 9% return on equity (ROE) to shareholders. Still, Channy reckoned that Cambodia's recession would be short and that the bank should position itself for a recovery. So he asked ACLEDA's board to support more staff recruits and training, sharp slowdown or not.
It was a bold play that met with resistance, says John Brinsden, a retired Standard Chartered executive who sits on the board. "We had a robust discussion and met in the middle," he recalls. That was probably what Channy expected, and it gave him enough juice to make 2010 a record year and hike ROE to 20%. "We're now getting the benefits of scale because we did build up the team," says Brinsden.
A trip into the countryside reveals why Channy is confident of continued growth. Kien Svay lies 20 km from the capital, on the busy highway to Ho Chi Minh City. There's plenty of poverty, but signs of progress, too. Last year Tung Savoeung borrowed $1,000 from ACLEDA to buy fertilizer and seeds, and to install irrigation pipes in her vegetable fields. Fragrant basil plants bask in the hot breeze. Under her stilted house Tung's grandchild sways in a bamboo basket.
Tung pays 2.7% monthly interest on her loan, her second in five years. Her monthly turnover is $500 to $750, but she isn't worried by the debt and is saving for her children's education. Besides, the loan sharks in town charge 6%, so she's sticking to ACLEDA. "I've got no difficulty to repay this loan. My living conditions are much better than before," she says. And so is Channy's bottom line.
Many entrepreneurs develop a head for numbers in their teens. For In Channy (pictured), a 14-year-old city kid evacuated at gunpoint in April 1975 to labor in Cambodia's infamous Killing Fields, the only numbers that mattered were the 320 cows assigned to him. Losing a cow meant trouble. And under the Khmer Rouge regime, you didn't want any trouble.
Fortunately for Cambodia's stirring financial- services sector, Channy kept his nose clean. In 1981 he fled to a refugee camp in Thailand, where he became a teacher and won a scholarship to study business at a U.S. college. It would be another decade before he returned home. Today the former cowherd is president and CEO of ACLEDA Bank, Cambodia's largest bank, which he cofounded in 1993 as a nonprofit microfinance lender making $10 loans to demobilized soldiers.
Last year ACLEDA (Association of Cambodian Local Economic Development Agencies) reported net profit of $24.3 million, a sharp rebound from recession-hit 2009, and is on track for another bumper year: First-half net was $21.7 million, 130% higher than the year earlier. Foreign banks are starting to wake up to Cambodia's potential. Malaysia's CIMB and Maybank have opened branches and are said to be seeking acquisitions. ANZ Bank has a head start with its joint venture with Royal Group, while the Pung family-owned Canadia Bank, the second-largest lender, is courting strategic investors for a 30% stake.
But none has the reach or reputation of ACLEDA, with 234 branches across Cambodia that are often the tallest buildings in town. Most banks stick to the capital, Phnom Penh, and take a pass on the small entrepreneurs who are the backbone of the economy in rural areas where most people live and work. Of Cambodia's 1.1 million depositors 700,000 entrust their money to ACLEDA. "When people think of banks, they come to us," says Channy, now 50.
Dependent on aid, tourism and garment exports, Cambodia remains one of Asia's poorest countries. During 2000-07 its economy grew at over 9%, sparking interest from frontier funds seeking the next tiger economy. Corruption, red tape and a paucity of investable companies kept many on the sidelines; then the global crisis erupted.
But the tide has begun to turn, says Scott Lewis, chief investment officer at Leopard Capital, which runs a $34 million Cambodia fund and holds an indirect stake in ACLEDA. Vietnam's largest asset manager, part of VinaCapital Group, said earlier this year it wanted to invest $100 million in Cambodian assets, though no acquisitions have been announced.
More funds may flow when Cambodia's stock market gets going. It opened its doors on July 11, but no companies have listed shares. Besides sanctions-hit Myanmar, Cambodia is the laggard in Southeast Asia; even tiny, Communist-run Laos has a stock exchange. Three state-owned Cambodian companies are preparing IPOs, possibly by year-end.
Could ACLEDA follow suit? It has the credentials: solid profits, audited results and credit ratings from Moody's and Standard & Poor's. Bank staffers would benefit because they own 19% of the bank's shares via an employees' trust fund in which Leopard has invested. Other shareholders include several European nonprofits, the IFC and Jardine Matheson, which acquired a 12.5% stake in late 2009.
But Channy is leery of rushing an IPO. "Are we ready? Yes, we're ready. Do we want to do that? Not yet," he says, leaning forward in a carved wooden chair in his modest fourth-floor office. Instead, he wants to build out the business by tapping shareholders for extra capital. His ambitions don't end in Cambodia. ACLEDA opened its doors in Laos in 2008 and is eyeing opportunities in Vietnam, China and Myanmar, where microfinance is still in its infancy.
Not that ACLEDA considers itself a microfinance lender, having long outgrown its NGO roots. Last year it became the first bank in Cambodia to offer mobile-phone services, which 35,000 customers now use to check balances, pay suppliers and transfer funds. Branches remit funds in four currencies (Cambodia is heavily dollarized). Multinationals rely on ACLEDA to make payroll in remote towns.
ACLEDA's average loan is over $3,000, in a country with per capita income below $1,000, reflecting growth in small and medium borrowers. "We grow with our customers. Our micro customers stay with us," says Channy.
So does his staff: Fourteen of the 28 original employees are still with ACLEDA, part of a 7,000-plus workforce. In many Cambodian companies workers follow orders and keep the boss happy. But that's not Channy's way. He believes in teamwork and participation, and encourages employees to speak up. It can be awkward and time-consuming for managers, he admits. "But when they accept [new ways], it's sustained. We can grow fast," he says.
Humility and honesty are also embedded in the bank's culture. Anyone caught for corruption is fired, and loan officers aren't even allowed to accept fruit from customers. "They've taken the best elements of Cambodian Buddhist culture and made it into corporate culture," says Lewis. While Channy credits his colleagues for making the policy stick, Lewis isn't fooled by his modesty. "He's an ‘aw-shucks' guy who drives the business," he says.
The soft-spoken banker is the polar opposite of Kith Meng, the flamboyant CEO of rival ANZ Royal Bank (Read more about Kith Meng, "Bringing Commerce to Cambodia"). But Channy can be steely, too, facing down corrupt officials and meddling politicians. In 2005 ACLEDA agreed to pay $1.3 million for a plot of land in the capital for its headquarters. The landlord went to the tax department and declared a purchase price of only $130,000, but Channy objected. He says the owner alleged that the tax department was on his side and threatened to cancel the sale if ACLEDA didn't go along with the ruse. So Channy wrote to the Ministry of Finance and Ministry of Land Development, explaining his stance. ACLEDA got its land, and the taxman got his cut. "I told the landlord: ‘Now the price is known to everyone, to the minister,'" laughs Channy. He sits on several government committees and has advised the UN on microfinance. Brett Sciaroni, chairman of the American Chamber of Commerce in Cambodia, says, "His quiet confidence and his leadership of the institution he represents gives him considerable clout, which, consistent with his manner, he uses sparingly."
Not bad for a cowherd who never finished high school. The Khmer Rouge didn't believe in education or banking, so they closed the schools, abolished money and dynamited the central bank for good measure. After the regime's fall in 1979 Cambodia had to start from scratch under Vietnamese rule, which meant a centrally planned economy.
As one of only three Cambodians with banking expertise, Chea Sok--today ACLEDA's chairman--joined the reconstituted central bank. He had spent the previous four years planting rice and playing dumb, terrified that if found out he would be killed along with other intellectuals that the regime despised. At night he dreaded falling asleep in case he spoke French in his dreams.
In 1992 Channy returned to Phnom Penh to work as a loan officer for a UN-funded microfinance project. The following year the 28 employees turned the project into a nonprofit that was transformed in 2000 into a commercial bank. At the time Cambodia had plenty of banks, not all of them reputable (the Rich Nation Bank, anyone?). New minimum capital rules drove away the shadiest operators.
The global financial crisis dented Cambodia's economy and checked ACLEDA's growth. Net profit more than halved in 2009 to $9 million, yielding a paltry 9% return on equity (ROE) to shareholders. Still, Channy reckoned that Cambodia's recession would be short and that the bank should position itself for a recovery. So he asked ACLEDA's board to support more staff recruits and training, sharp slowdown or not.
It was a bold play that met with resistance, says John Brinsden, a retired Standard Chartered executive who sits on the board. "We had a robust discussion and met in the middle," he recalls. That was probably what Channy expected, and it gave him enough juice to make 2010 a record year and hike ROE to 20%. "We're now getting the benefits of scale because we did build up the team," says Brinsden.
A trip into the countryside reveals why Channy is confident of continued growth. Kien Svay lies 20 km from the capital, on the busy highway to Ho Chi Minh City. There's plenty of poverty, but signs of progress, too. Last year Tung Savoeung borrowed $1,000 from ACLEDA to buy fertilizer and seeds, and to install irrigation pipes in her vegetable fields. Fragrant basil plants bask in the hot breeze. Under her stilted house Tung's grandchild sways in a bamboo basket.
Tung pays 2.7% monthly interest on her loan, her second in five years. Her monthly turnover is $500 to $750, but she isn't worried by the debt and is saving for her children's education. Besides, the loan sharks in town charge 6%, so she's sticking to ACLEDA. "I've got no difficulty to repay this loan. My living conditions are much better than before," she says. And so is Channy's bottom line.
5 comments:
Hi Simon.
I just want to correct you at the end of your second paragraph that say, " as a nonprofit microfinance lender." It's not true, they have made a lot of profit since 1993 to present. I know because my brother in-law has worked for them since the first day of their business. Again, the Bank is not a charity organization; therefore you shouldn't label it as a nonprofit
lender.
After reading the article and visited Cambodia many times witnessed the growths; I know that Cambodia is heading toward the right direction. Is there poverty in Cambodia? Absolutely, we have alot of work to do to fight poverty that is why it needs time for Cambodia to work itself out as long as we have stability and the government continues to improve the law to support the development and accountability. There are many investors eyeing on Cambodia right now and more are comings; I know that US car maker also planned to put manufacture in Cambodia too. The stock exchange ready to open and people can invest in these companies mentioned. People should study the company carefully before dumping their money on those companies; I am not here to give advice on stock exchange. I read the story yesterday about Cambodian-Australian who returns to Cambodia and now in charge of the GE operations. This is the reaon why I cautious those who wanted to change Cambodia through violence. The dispute between Thailand-Cambodia border also bring the world attention and more people knows more about the Cambodia then before. I realized that Khmerization is the domain for opposition but I am glad that it balance the news so that it is not all doom and gloom all the time. Good job Khmerization.
I agree with the first comment. ACLEDA is a commercial bank and had predatory lending practices and immorally lent a lot of money to poor farmers who can't afford to repay the loans by requesting them to put their farm lands as a security. Many farmers, who had no income but has farm lands, were lent big amount of money. When they can't repay, the bank confiscated their land and sold for a big profit and kept all the money. I know many farmers have become victims of ACLEDA and my cousin was one of them. She had a prime real estate land in the heart of Battambang city which is her ancestral land. The bank lent her $1,500 and requested her to use her land as a security. The land is worth $10,000 or more. But after a few years of repayment she found out that the principal has gone up, not down. Middle of last year she made a panic telephone call to me asking for money to repay ACLEDA's loan by December, if she can't pay, the bank by December, her land will be confiscated and sold and the bank will keep all the money. I sent the money twice, but I don't know if she was able to repay all the loans yet. This is just one case, but I heard and know many cases like these who fell victim to ACLEDA's predatory lending practices. The government should investigate this bank's practices.
I am not surprise with the accusation against ACLEDA. I don't work for ACLEDA and I am not saying the accusation if not worth investigating. But who job? I would say the banking commission of Cambodia. It is normal that ACLEDA requested borrower to put up collateral whether is it land or house because they put up the money. This is normal bank practice. Imagine yourself as the bank, a stranger asked to borrow $50,000.00 dollars. What do you do? What information you wanted from the person before you lend him/her money? How do you ensure that you get your money back? In cambodia it is hard to track a person income, how long a person on the jobs, credits etc. If you borrow the money; you must used have some type of collateral such as house/land etc. The bank will want to know how much the land/house worth if it forces for foreclosure and sale of the land to get the money back. How much it will cost them to hire legal team to pursue the asset. Most banks will approve up to 75% of the equity on the house/land. It is wrong to take the proceed from the profit of the sale of the land but I am not sure if Cambodia law allow the bank to do that. The most important thing that Cambodian public need to understand is what was the term involved when signing that note and take the cash in the first place. You dont want to put all the responsibility to the bank; it should be shared responsibility. If a borrower has the obligation to understand what they are getting themselve into and if it is not in their favor, they can reject the deal. He/she should know the term and conditions before taking the money from the bank. Bank is in the business of making money, let face the fact. There is no such thing as money hand out etc. Bank make money of the interests and it oftens sale their loan portfolios to the investors to free up cash so that it can lend to others. If you are talking about predatory lending then you need to understand what are the sign of preditory lending? is it high interest? is it balloon payment at the end? is the interest rate fixed or adjust? For example, look at the credit card company? It gets the borrow hocked on the teaser rate like 1.9% and if you miss a payment, the real rate kick in 29% etc. It is perfectly legal. The way we can battle it is to educate consumers about the hidden fees, term and conditions, how much it costs to borrow money etc. Offcourse, the big one is legislation to protect consumer. At the end of the day, the consumer is the one that make the final decision. I dont want to write long comment because I am afraid being accused of knowing everything or my comment put for public forum and pushed under the bus by Khmerization engineer.
i had a story about the lady who borrowed the money from that bank and bought a motobike.. guess what is happen next. she lost her land. She is probably the guys'aunt who borrow money from the bank ahaha.. all i got to say this bank is really good. if u need money for doing business not to buying stuff or gambling something like that.
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