Struggling Bank to Merge With Micro-Lender in Industry First

Microfinance institution Sathapana Ltd. and its majority stakeholder, Maruhan Japan Bank, announced Tuesday that they would merge to form Sathapana Bank in the first consolidation of its kind in an increasingly competitive finance sector.

Sathapana Ltd. CEO Bun Mony, who will also be CEO of the new firm, said that—subject to approval by Cambodia’s central bank—Maruhan and Sathapana will combine their respective assets of $200 million and $350 million.

Maruhan Japan general manager Yabe Yoshikazu, who will become deputy chairman, said the two institutions would be dissolved after the merger and their respective customers transferred to the new bank, which would offer both commercial banking and microfinance services.

Mr. Yoshikazu said his bank was finding Cambodia’s increasingly congested banking sector difficult to navigate and the micro-lending industry increasingly appealing.

“The commercial banking sector is very competitive, especially recently. Many foreign countries, including Chinese bankers, are very aggressive and it’s very hard to make a profit. So we are struggling to increase the assets,” Mr. Yoshikazu said.

“Microfinance would be more attractive as a business,” he added.

Maruhan says it has only one office in Cambodia focused mainly on wholesale banking. Sathapana, the fourth largest micro-lender by loan distribution, boasts almost 140 branches and nearly 200,000 customers.

Although it is the first merger of two such institutions, the move is just the latest attempt by a bank to cross over into microfinance, which has particular reach in rural areas and is growing rapidly while many banks underperform.

A report on the banking sector released last year by investment firm Mekong Strategic Partners said only five of the country’s 43 banks fared well in 2013 by earning an acceptable return on equity. It cited strong competition and the proliferation of small-scale operations as the main problems, recommending consolidation to improve the state of the sector.

John McGinley, managing partner of Mekong Strategic Partners, said the latest merger was a “very sensible decision.”

“In addition to the fact that it [is] much simpler to run one institution than two, it also permits Sathapana to transform up into a fully licensed bank and leverage from Maruhan’s capital base and expertise,” he said.

“But it also allows Maruhan to provide banking services to a much wider sector of the community, particularly the rural sector, [which has] less access to commercial banks.”

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