LOLC Holdings Plc, is to sell its stake in their subsidiary unit in Cambodia and use the proceeds to fund acquisition of microfinance firms in emerging markets from Brazil to India, Ishara Nanayakkara Deputy Chairman of the company told a foreign news agency in Colombo.
LOLC Holdings will sell its 70% stake in Prasac Microfinance Institution Ltd., which also counts Hong Kong’s Bank of East Asia Ltd. as a shareholder, he said without disclosing pricing details.
He noted that Prasac is very large as a micro finance institution and it needs to transform to a bank,” Nanayakkara, said in an interview at LOLC’s headquarters in Colombo.
The company’s 30% return on equity in Cambodia, which has a largely dollarized economy, makes it attractive, he said.
For Nanayakkara, who runs two MFIs in Cambodia, selling Prasac, the nation’s biggest micro lender, will help reduce risk as the market saturates, news agency said.
More than 70 registered MFIs push for business in a country with 16 million people. Cambodia, with a median outstanding loan of $3,370 a borrower, has the world’s highest level of small-ticket debt, according to a report released earlier this year.
LOLC’s shares, which have gained 27% this year, fell 3.2% in Colombo, the most since Oct. 15.
Prasac, which reported a 27% jump in its loan portfolio in 2018, had about 400,000 customers that year. About 80% were women. The company had total assets of $2.4 billion.
Prasac’s success -- LOLC first acquired a stake in the company in 2007 -- has emboldened Nanayakkara to expand in the sector across emerging economies. LOLC paid $186 million to boost its stake to 70% from 22.5% in 2017.
Next year, LOLC, which gets about 84% of its pretax income from overseas, plans to expand into Uganda, Kenya, Tanzania, Zimbabwe and Mozambique, Nanayakkara said. The company is also close to acquiring a firm in India’s Tamil Nadu state, and is seeking opportunities in Brazil, he said.
(LI)