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  • Southeast Asia

Deal focus: EMIA rethinks financial services in Cambodia

  • Justin Niessner
  • 28 June 2017
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Emerging Markets Investment Advisors is backing iCare Benefits to develop workable credit schemes for low-income consumers in Southeast Asia through partnerships with employers and product suppliers

Financial services are a popular venture play in emerging economies but suffer from some inherent structural issues that are not easily dispelled. Perhaps chief among them is the risk of loans turning sour due to the implementation of credit schemes that fail to recognize how difficult it can be for low-income workers to take on additional cost burdens.

Emerging Markets Investment Advisors (EMIA) is tackling this dilemma with an investment in Singapore-based iCare Benefits. The company charges no fees for its services, but generates revenue by facilitating commercial transactions, improving margins for local businesses through higher transaction volumes, and providing employers with a convincing option for improving employee retention.

Clients include manufacturers across Southeast Asia with large factory workforces such as Adidas, while product supply partners include the likes of Samsung. Consumer products across white goods, education and healthcare packages are purchased at a discount from the suppliers and are then resold to employees of the corporate clients at retail prices but under more manageable terms.

“ICare seeks to provide similar access to products and services as traditional consumer financing and leasing companies,” explains Joshua Morris, EMIA’s CEO. “Unlike these traditional financial services companies, however, iCare is able to provide this access through interest-free installment finance. Particularly for this low-income demographic, the value proposition of iCare’s model is significant.” 

EMIA is investing via its Cambodia-Laos-Myanmar Development Fund (CLMDF), which was launched last year and recently closed at $65 million. It expands on the firm’s prior vehicle, a $20 million mandate launched in 2010 that was restricted to Cambodia and Laos. CLMDF seeks significant minority stakes for contributions in the range of $1-7.5 million.

Since 2014, iCare has increased the number of workers covered by its programs from 20,000 to 3.2 million, and expanded out its core market in Vietnam to encompass Indonesia, Cambodia and Laos.

For EMIA, this penetration into some of Southeast Asia’s least developed markets is where much of the appeal lies. The firm will focus on developing iCare’s Cambodia business, which is expected to benefit from a strong local credit industry.

“The financial services sector and businesses, which seek to support the financial needs of a growing middle class and a low-income group who are familiar with basic financial services through the very deep MFI penetration in the country, have, we believe, significant growth potential,” says Morris. “Building on the relatively high use of credit-based financial services in Cambodia, there is significant opportunity to develop businesses in other ancillary services offerings such as those provided by iCare.”

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