Group Lease strengthens ties with Sri Lankan financial group
SET-listed microfinance company Group Lease (GL) plans to collaborate further with Commercial Credit & Finance, a Sri Lankan financial group, to strengthen its microfinance businesses in Indonesia and Cambodia after GL acquired a microfinance company in M
GL yesterday signed a memorandum of understanding on the transaction with Commercial Credit to buy a 71.9-per-cent stake in BG Microfinance Myanmar, a subsidiary of Commercial Credit & Finance, from BG International Private, a holding company based in Sri Lanka owned by Roshan S Egodage, who is also chief executive officer of Commercial Credit.
GL chairman and CEO Mitsuji Konoshita said the transaction would be made via GL Holdings (GLH), its holding company in Singapore.
The remaining 28.1 per cent will be retained by Commercial Credit, which has been operating in the microfinance sector in Myanmar for two years.
The acquisition is pending due-diligence results of BG Microfinance, which GL expects will be consolidated into its operations from the fourth quarter of this year. Commercial Credit currently has nearly 10,000 customers in Myanmar.
Egodage said he decided to sell shares to GL because of strict restrictions by the Sri Lankan authorities on capital outflows.
BG Microfinance Myanmar is a small firm with a total portfolio of US$1.5 million (Bt52 million) in group loans (five borrowers per group each borrowing $200). Although small, the operation provides a monthly profit of $20,000, GL’s Konoshita said.
For GL, Myanmar is the fifth country in its regional footprint. From a simple motorcycle-leasing company based in Thailand, GL has developed into a digital finance firm and has expanded its digital finance model into Cambodia, Laos and Indonesia.
In its official filing to the Stock Exchange of Thailand, GL stated that the Myanmar firm was providing microfinance to women, as they are considered the focal point of the family unit, and each five-member group is collectively responsible for the others. Loan maturity is fixed at 50 weeks and debt collection is made on a weekly basis.
“Not one bad debt has been incurred by BG Microfinance since it began operating thanks to its group finance model,” Konoshita said.
GL’s successful digital finance business model will contribute to BG Microfinance’s rapid expansion while the Group Finance model will be implemented in all other countries where GL operates, especially Indonesia and Cambodia, where there are enormous growth opportunities, he said.
Commercial Credit does not have a footprint in Indonesia or Cambodia, so collaboration with GL will provide the Sri Lankan firm scope to broaden its operations, Egodage said.
Konoshita said GL was ready to inject $6.8 million into BG Microfinance to have branches in 12 districts in Myanmar, up from only three now.
“We hope that BG Microfinance’s portfolio will dramatically increase to $30 million to $40 million next year, and monthly profit should increase by 10 times from the current total,” he said.
Myanmar is providing a big opportunity for GL as it is an emerging market and only five players including BG Microfinance are there, he said. Furthermore, authorities are not giving out any new microfinance or hire-purchase licences. Therefore, it is a great opportunity for GL to expand its market share.
GL recently announced net profit in the second quarter of Bt255.85 million, raising its total first-half profit to Bt478 million.
