LOLC eyes overseas expansion for micro financing/SME
After the success in micro financing in Myanmar and Cambodia, the LOLC Group is poised to venture with similar operations to nearby regions, top officials say.
“We’re eyeing peripheral markets in Asia Pacific for micro financing and small and medium enterprises,” Kapila Jayawardena, CEO LOLC told the Business Times in an interview. He reiterated that overseas expansion will be the next big wave for LOLC, adding that the micro financing will be the focus in emerging markets in the greater Mekong Region of Southeast Asia.
Having acquired a 60 per cent stake in Thaneakea Phum Cambodia (TPC) for US$ 20.3 million, LOLC's latest ac- quisition was through its fully owned subsidiary, LOLC Micro Investments Ltd (LOMI), which is the microfinance investment arm of LOLC. TPC is the fifth largest microfinance company in Cambodia with a gross loan book of $100 million carrying out its business operations through 52 branches distributed throughout Cambodia, with a total staff of 1,100 personnel and currently has a customer base of 170,000 microfinance borrowers.
This is LOLC’s second overseas acquisition, after its maiden overseas venture in Cambodia in 2006 through its investment in PRASAC Micro Finance Institution Ltd (PRASAC), the largest microfinance Company in Cambodia. LOLC Currently holds 22.25 per cent of PRASAC. In addition to the above acquisitions, LOLC commenced operations of its microfinance company in Myanmar - LOLC Myanmar Micro-Finance Company Ltd (LMML) - in 2013 as a green field operation, and according to Mr. Jayawardena it is doing well. Complying with the Central Bank of (CB) financial services sector consolidation exercise, LOLC bought the controlling stake of BRAC Lanka Finance PLC (BRAC) for Rs. 608 million, a further investment by the group into this company increasing the overall holding to 94.35 per cent. “LOLC’s Commercial Leasing & Finance PLC’s (CLC) strong presence in the regions together with BRAC’s contribution to the overall footprint will enable CLC to increase its micro finance business deriving stronger results in the medium to long term. BRAC will be merged with CLC in the near future in line with the consolidation strategy of CB,” Mr. Jayawardene added.
LOLC Group, for the six months ended September recorded 118 per cent growth in pre tax profit reaching a strong profit signature of Rs. 3.7 billion compared with Rs. 1.7 billion reported for the same period last year stemming from profits from LOLC’s core business, financial services.
“The financial services sector significantly benefited from an aggressive growth in the lending portfolio and the prevalent low interest rates, which has reduced the borrowing costs,” Mr. Jayawardene added.
The company plans to launch more debentures to replay short term debt with low cost long term funding.“We feel there will be stabilising of interest rates. They won’t decline further. This is why we are launching debentures,” he said.
Mr. Jayawardene added that the ongoing development projects in the leisure sector are in line with the estimates and two projects nearing completion and will be commissioned in the near future. The three properties that are in operation are Eden, Dikwela Hotel and Green Paradise. LOLC associate, Brown Hotels & Resorts signed up with Starwood Hotels & Resorts recently to offer the management rights to 5-star Sheraton Kosgoda Turtle Beach Resort and this property will be commissioned in the second quarter next year.