Interview: Providing affordable housing loans for low and middle-income families in Cambodia

Could you start by telling us about a bit about your background?

After graduating in accounting, my first job was in 2002 in auditing, working for a charity organisation called World Vision Cambodia. I got to experience all the operational activities of the organisation  ̶  it was at this time that I learned about microfinance.

Quite soon I came to realise that my real interest was in the operational side, rather than the numbers. So I joined the Programme Development Team which worked with the support office and the funders, and also got involved in the writing of proposals, which was all very interesting.

In 2007 I moved to Vision Fund (the microfinance arm of World Vision) before moving to a mobile banking company based in Australia. They wanted to do something for low-income people (an initiative from their corporate social responsibility team) and set up a mobile money transfer business which I found particularly exciting at the time. In 2011 I moved to First Finance  ̶  first as CFO, before being appointed to my present position as CEO in 2014.

First Finance provides loans for housing and home improvement. Why is this so crucial in Cambodia?

The first name of our organisation when it was launched in 2006 was actually First Home as the individuals who founded it saw that young salaried workers were at a huge disadvantage in terms of housing loans and access to affordable homes. On the one hand, the younger workers did not qualify for microfinance loans, but were also generally overlooked by commercial banks who focused more on the high-end segment (perceived as lower risk).

So, the concept of micro mortgages was tested  ̶  not in the way that a typical commercial bank would do, but by looking at clients living on lower to middle incomes. The concept proved a success and the organisation was relaunched as a financial institution with a new name to reflect the new situation, our intended social impact and our vision: First Finance.

Could you give an example of how you helped a particular client?

There are many inspiring stories to tell, but one of a mother and daughter springs to mind.

They had their own home but it was taken away from them when the government decided to extend the road. Normally this would be received as a positive development for the community but these women were very unhappy when their land was taken for construction. There was only one metre left over from the land they had, not even enough to build a new house.

The daughter had a shop in the market so they moved there. They lived there for quite a while and while her business was bringing in income, it was not enough to buy a house.

Fortunately, First Finance was doing some promotional work at the same market. After receiving some of our information and learning about what we did, we met with the daughter and a loan was approved. She first took a loan to buy land, paid a number of instalments and later on obtained another loan to build a house.

After the daughter was finally able to move into the new house with her mother, she told me something I will never forget: “Thank you. Because of First Finance I now have a home again.”

It was really touching. A home means everything to a family and the fact that we can bring homes back to families is a very positive thing and it is highly motivating.

What are the main challenges for you in Cambodia?

Mortgage tenures are generally for the longer term. Buying a house is a big decision for everyone. Our clients’ average loan tenure is 10 years. First Finance is quite lucky in a sense that our own loans from our own lenders average out at five years. A typical microfinance institution might only be able to get a loan for three years.

However, we cannot meet the same loan tenure we provide to the client. If this is 10 years, and we can only get a five-year loan ourselves, there is a five-year gap.

The other challenge is that as we are the only microfinance institution doing mortgages, there are fewer people to talk to and learn from. You cannot reinvent the wheel all the time. You need to be able to share, to learn from others  ̶  best practices especially.

We are always questioning ourselves, is this the right thing to do? Could it be better, can we do things differently?

Some people might ask why we only limit ourselves to mortgages. Perhaps if we diversified we would generate a better return. It might be slow, but we are making a difference. And that is what matters. So we might not grow as fast as others or make the returns that they do, but we are not operating just to make a financial return – we exist because of the social impact and that is what motivates our staff.

Over-indebtedness has been an issue in Cambodia in recent years. Are there any specific measures you take to tackle this problem?

There is an association of all the main Cambodian microfinance players that comes up with industry initiatives and regulations. In the past, there was no regulatory limit to the number of loans. People could borrow from five institutions. Concerns about over-indebtedness led the association to set a limit: now individual clients are not allowed to take out a loan from more than two financial institutions. For group loans (generally smaller loans) the maximum number is three.

Similarly, if the client is in default due to short-term financial difficulties, such as a family member becoming ill or a drop in income due to changes in the weather, a short-term solution is found with First Finance which means working with the client to resolve their difficulties. Long-term financial difficulties require close consultation with the client and appropriate measures taken to ensure that the client eventually has the financial capacity to continue repaying the loan.

Around the globe, there is a general lack of women in leadership positions. How does Cambodia compare?

It’s a similar story here, and to some extent it’s even worse. We have about 70 microfinance institutions in Cambodia and 35 commercial banks. But the number of female CEOs is very limited.

In the microfinance sector there are some family businesses setting up, so we see more female CEOs there, because generally speaking if it’s a family business it’s the female who manages the company.

We are raised in a culture where as a woman you take care of the family. So taking care of the children, and the wellbeing of the family is the responsibility of the woman. But there is also an expectation that women cannot lead within the household. It’s the man who leads on the decisions.  

Despite this, we are starting to see more balance in the society. More women are going to school, and entering higher education for example.

Similarly, how is it for you as the CEO of First Finance? Did you encounter difficulties in reaching this position?

I was told when I took up the position that my life would change. Achieving a good work-life balance is easy to say but in practice it is really hard. My husband is very understanding. He is also a full-time employee, so we have less time with the kids. We share the responsibilities within the house. During the weekend I try to devote my time to my family and spend the time with my children.

I also understand that my male colleagues also face the same challenges, the balance between work and family. So at this point I would say that this question might not necessarily be about gender.

From the business side I would say it is ok, because gender equality is accepted and I am not just looked on as a female CEO. Maybe because we have more foreign investors. This issue is changing for the better in Cambodia. There are steadily more women in senior roles.

In what way has Oikocredit been able to support you with some of the challenges First Finance has faced?

Oikocredit does not merely provide funding, but invests in skills trainings for its partners. For example, since 2015 Oikocredit has provided us with risk management training sessions which have included financial risk management, credit risk management and disaster risk reduction management. First Finance also attended Oikocredit’s Responsible Finance Training Workshop (with mentoring on conducting Client Protection Principles self-assessment). We have limited resources, so this non-financial support we receive from Oikocredit is really important.

Likewise, we at First Finance also seek to pass on the benefit of our expertise and provide good advice to our own clients. We go beyond providing a financial service. We use the term ‘housing solution partner’. We want to be an advisor to the client, a partner to the client, so that they can consult us and trust us when it comes to their home or household needs.

Furthermore, in terms of challenges, lessons learned, best practice etc., as an investor Oikocredit might be able to help us connect to the right individual/organisation from which we can learn.

Is there a specific reason that you decided to work with Oikocredit?

We have stayed with Oikocredit because of its focus on social performance. We see how they interact with us, carry out assessments, and do monitoring and reporting; indeed all of these things demonstrate what they care about. The questions you ask an organisation shows what you are looking for, and that’s the reason we wish to continue the relationship.

We feel proud to be part of Oikocredit, because you really do the things that you claim you are doing.