The LOLC Group announced on Monday that it has sealed a deal that it entered into in January this year to sell a majority stake in a Cambodian company.

In January this year, the LOLC Group announced an agreement to sell it's 70 per cent stake held in Cambodia's largest microfinance company, PRASAC, to the world's sixth largest commercial bank and Korea's biggest commercial bank, Kookmin for US$ 603 million (Rs.120 billion).

Sealing the deal, LOLC this week confirmed that both parties had received the necessary approvals from their respective regulators in both countries, the National Bank of Cambodia (NBC) and The Financial Services Commission (FSC) of Korea to conclude the transaction and the first tranche of $422 million was received by LOLC International Pvt Ltd recently. The balance of $181 million will be due in 2022 and the post transaction value of PRASAC is valued at $862 million.

'Resulting from the PRASAC sale, the balance sheet of LOLC will strengthen further providing tremendous capacity and stability for the next level of growth that the group envisages. The stronger balance sheet of LOLC will also provide the necessary impetus for the local financial services companies such as LOLC Finance PLC, LOLC Development Finance PLC and Commercial Leasing and Finance PLC to grow their businesses further,' LOLC said in a media release on Monday.

This transaction is a significant milestone not only for LOLC but also for Sri Lanka, especially as the nation is facing challenging times. For the LOLC Group, the value that this investment has created portrays its long-term vision and proactive business strategy. The strong partnership which LOLC has established with an entity of the stature of Kookmin Bank undoubtedly portrays the global recognition and reputation LOLC has earned in the microfinance space and gives the group the stability and strength in expanding its global footprint. This transaction is significant to Sri Lanka with the foreign currency inflow, during these dire times beset on the entire world at large.

With this transaction, LOLC exits from its maiden overseas investment, made in 2007 in PRASAC. LOLC's initial investment in PRASAC, an 18 per cent stake, was made at the invitation of FMO, the Nederland Government's Development Finance Company, Belgian Investment Company for Developing Countries and Dragon Capital, a private equity fund. LOLC's expertise as an aggressive but stable practitioner in microfinance and its active involvement in PRASAC made it the largest and most profitable microfinance institution in Cambodia, in less than a decade. Having identified the potential of PRASAC, LOLC subsequently increased its stake to 70 per cent.

'Even though LOLC exits from PRASAC, the company has no plans to withdraw from Cambodia, as it currently has a 97 per cent stake in LOLC Cambodia, the fourth largest microfinance company, in terms of market position, and the second most profitable micro finance institution in Cambodia. With the expertise of LOLC, this company is thriving in its market space of microfinance and has delivered strong performance consistently. LOLC Cambodia holds, in excess of $1 billion in total assets, a $832 million portfolio and a deposit base of $485 million,' the release said.

LOLC's global footprint also includes microfinance operations in Myanmar, Pakistan, Philippines, Indonesia, Nigeria and Zambia together with a few more handpicked destinations in the pipeline.

Speaking of the significant transaction, Ishara Nanayakkara, Deputy Chairman, LOLC Group said, 'We are proud that we were able to secure the required approvals to conclude this transaction swiftly, despite the current challenges across the globe.'

© Pakistan Press International, source Asianet-Pakistan