A Member of PhillipCapital Group, Singapore Standard Building of KREDIT Microfinance Institution Plc. ANNUAL REPORT 2013 Contents HIGH INTEREST RATE UP TO Pages 4 Vision, Mission, and Core Values 5 Performance Highlights 7 Operating Provinces 8 Business Environment Review 9 KREDIT's Overview 10 Message from Chairman 11 Message from CEO 12 Organization Chart 13 Shareholders 14 Board of Director's Profiles 17 Committees at Board Level 20 Executive Committee 23 Staff Capacity Development 26 New Core Banking System 27 Our Products and Services 32 Operational Performance 36 Social Performance Management and KREDIT 39 Our Lenders, Partners, and Network 41 Listen to Our Staff, Partners, and Clients Talking about KREDIT 43 Awards Received Within 2013 44 External Audit Report 61 Contact Us ANNUAL REPORT 2013 KREDIT Microfinance Institution Plc. Vison, Mission and Core Value Performance Highlights Vision INDICATORS YEARS Operational Performance 2011 2012 2013 Number of branches 10 12 13 To contribute to the social and economic development of communities by Number of sub branches/units 48 56 66 enabling the economically active poor to improve their lives. Number of districts covered 90 101 110 Number of communes covered 661 745 857 Number of villages covered 4,216 4,631 5,402 Mission Loan outstanding (in mil USD) 44.59 53.498 74.202 Active borrowing accounts 56,519 60,905 73,115 PAR 30+ 0.33% 0.26% 0.28% To be a reliable and well known financial institution that provides diverse and Active saving accounts 1,254 3,358 9,023 innovative financial solutions to communities, serving and protecting our Values of deposit collected (in mil USD) 3.43 8.952 16.217 clients while maintaining organizational sustainability with a commitment Total staff 717 848 1,014 to the poor. Financial Performance 2011 2012 2013 Total assets (in mil USD) 49.03 64.55 87.38 Total equity (in mil USD) 9.79 11.26 16.78 Core Values Return on equity (includes grant) 21.04% 16.37% 18.65% Return on equity (excludes grant) 17.80% 13.91% 16.90% Return on assets (includes grant) 4.12% 3.03% 3.44% Commitment: Working hard to achieve service excellence Return on assets (excludes grant) 3.5% 2.58% 3.12% Integrity: Doing what is right Net profit after tax (in mil USD) 1.76 1.72 2.61 Operational self-sufficiency 123% 118% 123% Team work: Working together to achieve one goal Social Performance 2011 2012 2013 Borrowers from rural areas 71.32% 93% 91% Responsibility: Being accountable for our actions Average loan size compared to GDP per capita 86.80% 94.6% (or USD894) 98% Women borrowers 91.93% 91.96% 90.42% Unsecured borrowers (without collaterals) 22.99% 29.61% 32% Dignity: Showing mutual respect for all Voluntary savers with value below and equal GDP per capital 71.18% 55.84% 83% Women savers 47.53% 74.44% 58% Transparency: Working clearly and ethically Client’s retention rate 88.09% 86% 89% Communication: Relating in an open and friendly way to all With the direction from the board, KREDIT has put more focus on poor clients by making increases on their percentage from one year to another: 22.99%, 29.61%, and 32% for 2011, 2012, and 2013 respectively. This Christian faith: Acting in accordance with Christ’s love market share is big and they are a group who really need micro financial services. 4 5 ANNUAL REPORT 2013 ANNUAL REPORT 2013 ANNUAL REPORT 2013 KREDIT Microfinance Institution Plc. Performance Highlights (Continued) Operating Provinces SOCIAL PERFORMANCE TOOLS AND MECHANISMS Poverty Targeting and Monitoring Bi-Annually produce and share with BoD, shareholders, lenders, and Social performance reporting others through different channels. Customer Care and Product Enhancement Prices, terms and conditions of all financial products are fully disclosed to the customer, including interest charges, insurance premiums, Laos minimum balances , all fees, penalties, linked products, 3rd party fees, and whether those can change over time. Staff are well trained to inform and explain these to clients. Multiple channels for disclosing clear and Oddor Meanchey accurate information: brochures, orientation sessions, meetings, posting Transparent pricing information in the branch, websites, etc. Loan contracts (1) show an Preah Vihear amortization schedule that separates principal, interest, fees; (2) define Banteay the amount, number and due dates of installment payments; and (3) Meanchey Steung Ratanakiri include fees and conditions for early repayment, late payments and Siem Reap Treng default. Debt collection practices are revealed to the borrowers prior to the time of sale. Battambang To n Client satisfaction survey Conduct yearly or every 2 years. le S Staff are assigned to receive complaints via telephone and resolve issues Pailin a Client feedback system p Kampong Thom that are being raised by clients. Client satisfaction, clients’ exit, competitor matrix survey regularly Modolkiri Market research for product development conducted to provide better products and more convenient services for Pursat Kratie the clients. Kampong Non-Financial Services Kampong Cham - 4,533 clients received special agriculture training. Chhnang - 8,751 clients received child education training along with 6,766 of educational reading books given. Phnom Penh - About 4,000 units of helmet produced and given to saving clients Koh Kong Kampong Prey Veng and staff. Daily radio program on safe traffic program is continued with Speu Kandal Vietnam Social responsibility activities National Radio. Become the single Cambodia MFI. - 5% of the yearly net income is set aside to the community development T Takeo Svay Rieng programs. hailand - Outstanding loans from VSU Clients are written off when the borrower passes away; and KREDIT also gives grants to the family to assist in Sihanouk Ville Kampot funeral arrangements. Kep 20,404 clients received finance related training from KREDIT which includes Financial literacy program Operating Provinces saving, budgeting, and household income and expense management. Potential Provinces - Endorsement with Smart Campaign and selected by Cambodia Microfinance Association (CMA) and Agency French Development (AFD) to enhance client protection principles (CPP). - Received 2 Awards from Kiva: Facilitation of Savings and Client Voice Others - Have just become a member of Banking With The Poor (BWTP). - Got “Most Innovative Non - Profit / Social Enterprise” Awards from Singapore Venture Capital and Private Equity Association (SVCA) 21st Anniversary Gala & Awards Dinner for the year 2013. Personnel Policies - Conducted & updated yearly. - Good HR policy in place and yearly updated based on industry study Employees satisfaction survey making sure that our benefits are competitive at the market. - Staff turn- over rate for the last 6 months 7.18%. Other policies Whistle blowing policy and environmental and social policy. 6 7 ANNUAL REPORT 2013 ANNUAL REPORT 2013 ANNUAL REPORT 2013 KREDIT Microfinance Institution Plc. Business Environment Review KREDIT Overview In 2013, Cambodia's economy achieved commendable minimum wage rate for garment workers that will go result with a GDP growth of 7% as forecast by the IMF into effect next year. The Cambodia's manufacturers and the World Bank and 7.2% by ADB even some has also started shifted to higher-value clothing by KREDIT, since its humble beginning in 1993, has grown on the clients lives. KREDIT has continued expansion political issues has yet been solved since the national moving away from producing the most basic clothing to be one of the largest microfinance institutions in of Vulnerable Service Unit (VSU) by working through election in July 2013. However, the ruling and opposition items and diversifying to manufacture more intricate Cambodia. With more than 23 years of experiences, integrated approach with development partners to parties have continued talking for solutions. Despite products for international buyers. KREDIT still focuses on its vision and mission to help provide our clients other complimentary services, forecasting strong growth for Cambodia this year and poor unbanked families ready access to financial help some services provided directly by KREDIT’s staff 7.2% for 2014, IMF also warned of risks posed to the The total weight of cargo transported through Sihanouk to improve their lives. This includes free non- financial while some by our partners based on topics and their country's economy by the anticipated winding down Ville Autonomous Port in the first 10 months of the year service such as cash flow and money management and specializations. You will find our complimentary services of the US Federal Reserve's quantitative easing. The increased 16% compared to the same period last year. starting micro business know-how training under our in below point talking about KREDIT’s social report. total GDP of the countries about USD15.191 bil or About 2.48 million tons of goods passed through the integrated approach with many different development The complimentary services is provided not only to our USD1, 036 per capita. The inflation rate in Cambodia port to the end of October compared with 2.15 million organizations and partners. clients but to non- clients, local authorities, and staff of was recorded at 4.18 percent in October of 2013 by the tons during the same period in 2012, was due largely our partners. National Institute of Statistics of Cambodia. to an increase in rice exports and construction material As of Dec 2013, with a total asset of more than imports. USD87.65 millions, KREDIT has provide loans to Under the partnership approach, KREDIT has Cambodia's trade reached a total of USD15.9 billion in more than 70,000 families, collected savings from innovative products and services that allow our rural 2013, equaling an 18% rise from 2012. Exports were Banks and MFIs Performance 7,800 depositors in 16 out of 25 provinces and cities of clients to have better access to basic necessities for valued at USD6.9 billion, up from USD5.5 billion, with Cambodian bank and microfinance market has garment and textiles accounting for more than 80% of continued its growth with more increase in their Cambodia.