Social Performance Management

How does LOLC translate its policy into practices and impact? Find out more in this section where it showcases the effective translation of an institution’s mission into practice that inline with the accepted social values. LOLC implements the integration of Universal Standard of Social Performance Management into its policy, procedure, training, internal control and implementation.
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1. How do we translate our mission as of December 2021?

As reflected in the institution’s values, LOLC is committed to provide financial services to people with disadvantages in society which include all customers’ especially female customers who earn around or below the national poverty line. It also includes customers that come from important sectors (32 percent of LOLC customers are agriculture and 16 percent are from services) who are looking for financial opportunity to improve their livelihood.

2. Measuring LOLC’s Social Goals

3. Implementing Universal Standard of social performance Management (USSPM)

- Define and Monitor Social Goals:

LOLC has defined social goals and is continuously monitoring the performance of social activities
against targets, and this data is reported quarterly to the management team and Board of Directors.

- Ensure BOD, Management, and Employee Commitment to Social Goals:

The Board of director and the Management of LOLC are accountable for the mission and social goals of
the institution. The staffs know and understand the social goals of the institution. And staff performance appraisals include performance-based social activity indicators.

- Design Products, Services, Delivery Models and Channels That Meet Clients’ Needs and Preferences:

Unsecure loan, secure loan, leasing, saving, and convenience repayment (through agents), and multiple
choices of currency and repayment options.

- Treat Clients Responsibly:

LOLC Cambodia got the CPP certificate in 2015 and has successfully recertified on CPP certification
from Dec 2018 to Dec 2020 from Smart Campaign through M-Cril assessment. However, in December
2020 the certificate was expired; therefore, LOLC conducted the recertification by Microfinanza Rating
(MFR) and received the Gold Level of Client ProtectionCertificate from Cerise and SPTF.
The certificate is secured by February 2025.

- Treat Employees Responsibly:

LOLC provides employees with a right environment, good communication, staff safety considerations, and benefits to staff such as training, year-end bonuses, increase annual salary, health benefits (medication and hospital stays), incentives for CO/RM/DBM/HCO, other compensation, etc. Besides, LOLC routinely surveys employee satisfaction or dissatisfaction and reports to management and board of directors annually. LOLC complies with all applicable labor laws.

- Balance Financial and Social Performance:

LOLC has clearly defined social & financial goals and strategies to achieve them by maintaining the

sustainability of the institution and its clients. In addition, LOLC has implemented reliable financial
service delivery. And to ensure the performance of staff, LOLC incorporates both social and financial performance indicators into the performance evaluation of all staff.
4. How LOLC implements responsible finance and 7 client protection principles?

1. Appropriate Product Design and Delivery:

LOLC Cambodia offers unsecure loan, secure loan, leasing, saving, and convenience repayment (through agents), and multiple choices of currency (Riel, Dollar, Bath) and repayment options. The client repayment capacity is strictly assessed at client’s business area/home.

2. Prevention of Over-Indebtedness:
All loans are conducted rigorous repayment capacity by FSA and reviewed by HSFA and/or BM before approval. Credit Bureau Cambodia (CBC) checking, closely monitor PAR, Internal Audit team monitors verifies loan appraisal actuary, compliance with CMA lending guideline. The loan was approved when client has capacity to repay.

3. Transparency:
Key facts document are given to clients such as repayment schedule, transparency sheet, loan contract, all documents are in Khmer that contains the loan information, total loan amount, pricing, including all fees, APR/EIR, disbursement date, loan term and due dates of all repayment installments. At least two times (during assessment and before disbursement), clients were informed about the product’s features, fee charges, cooling off period, terms, and conditions by using visual aids (A4-Metacard). Client’s right and telephone hotline are also confirmed to clients.

4. Responsible Pricing:
Consistent the industry wide practice of offering a range of interest rate for a product. The loan and saving pricing depend upon the competition and they are reviewed regularly by research team. Staff is not allowed to charge over the product pricing range.

5. Fair and Respectful Treatment of Client:
The Code of Conduct (CoC) incorporates LOLC Cambodia’s mission, core values, professional conduct expected from the employees and prohibited action. All employees agree to abide by the CoC by singing the declaration, implications of violating the CoC, loan recovery process including Do&Don’t activities are also trained to staff. The way of staff reacts or serves client including aggressive sale technique and misleading information are checked and verified by supervisor checklist.

6. Privacy of Client Data:
The privacy policy is in place which is clearly mentioned in Credit Operation Manual. Client was asked for consent before collection their information, photo, and sharing it to CBC or third party. Moreover, the client privacy agreement is in place to maintain the confidentiality, security, and accuracy of clients' personal, transactional, and financial information.

7. Complaint & Resolution Handling Mechanism:
LOLC Cambodia has the Complaint & Resolution Handling Mechanism which the client can provide their complaint or feedback via many channels (suggestion box, telephone hotline, direct verbal, email, website, Facebook). Telephone hotline is managed by Contact Centre team at HO and the hotline number is shown on the counter, repayment schedule, loan plastic folder, and other marketing materials. All complaint and feedback are response properly and comply with the regulation. The clients understand about their right such as the right to get the related information, important documents, refuse to get the product, the right of data privacy, the right of complain or feedback, and the right to be served without any discrimination

SOCIAL DRIVEN MISSION

LOLC Cambodia offers unsecure loan, secure loan, leasing, saving, and convenience repayment
(through agents), and multiple choices of currency (Riel, Dollar, Bath) and repayment options.
The client repayment capacity is strictly assessed at client’s business area/home.

SUSTATNABLE FINANCE

FSS: 145.26%

ROE: 26.38
Green Lending: 6K clients having US$ 11M portfolio recognize as Green Lending. Environmental and social impact assessment for large loan size.

WASH Loan: 6K clients (USS 2.3 M) access to better sanitation and clean water

INCLUSIVE FINANCE

PPI: LOLC is a certified user. Outreach: 25.27% of new group loan clients are very poor and poor categories.

Branches: 81 branches in 25 provinces

Accessible to saving: 462K depositors with a portfolio of US$ 582 million.

Outreach to rural clients: 93%, Urban: 7%

REGULATION COMPLIANCE

Good Corporate Governance

Compliance to Prudential Regulation: Credit risk; solvency, liquidity, large exposure.

Compliance to Regulatory Requirements: taxation, disclosure, ethics, risk management etc.

EMPOWER FIANANCIAL LITERACY

Due to COVID-19, financial literacy awareness in-class training and other face-to-face activities were postponed but we had been producing financial literacy videos to deliver financial literacy messages
to clients/the public by posting in Facebook/YouTube. As of December 2021, 20 videos were produced
and 14 of them were posted, the videos reached 8.6 million people.
5. How LOLC translates Sustainable Development Goals (SDGs) into implementation (as of December 2021)?

Like other institutions, LOLC relies on the Sustainable Development Goals (SDGs) as the blueprint for growth, successes and performance’s indicators. As one of the biggest microfinance institutions, LOLC (Cambodia) Plc. has involved in:
6. Social Product

a. GREEN LENDING
Currently, LOLC is offering Green Lending both leasing and loans through its existing products such as Financial Leasing (FL), and Life Improvement Loan Asset-Backed (LILAB. LOLC got technical support from ResponsAbility and the tools to measure the impact of Green Lending on CO2 emissions and energy saved. LOLC was chosen as the outstanding MFI in providing Green Lending in early 2021. As of December 2021, there are almost 6,000 clients are using Green Lending Product, for a gross loan portfolio, Of US$ 11 million and LOLC has support to decrease the CO2 emission, 73,028 tCO2 through green lending as shown in below graph:

b. WASH Loan
LOLC has served clients with WASH Loan products since 2016. The WASH Loan helps clients to improve water access, sanitation and hygiene in their communities. Target clients are those in good standing with LOLC who want to build or renovate a latrine, well, pond digging, water storage or buy a water filter, etc. As of December 2021, there are almost 6,000 clients are using a Wash Loan product, with gross loan portfolio of US$ 2.3 million.

c. HOUSING Loan
LOLC offers Home Improvement Loan (HIL) to their clients who want to fix or renovate their existing house since 2016. In 2019, LOLC has developed a new convenience product called Housing Loan (HL) for the clients who want to build or buy new house. As of Dec 2021, LOCL is offering HIL and HL loan to 10K clients of USD 51 million gross loan portfolio.

Relevant Social Goals	Annual Measurable KPIs	Annual Target	2019	2020	2021
Increased access to financial services	Number of borrowers in rural areas	>= 85%	92%	93%	93%
Number of borrowers involved in agriculture	>= 30%	39%	34%	32%
Percentage of female borrowers	>= 65%	70%	70.30%	70.56%
Poverty Outreach	Percentage of new group loan borrowers below 150% National Poverty Line	>= 20%	29.40%	27.10%	25.27%
Environmental Sustainability	Result of environmental assessment in Monitoring	Monitoring	Medium Monitoring	Medium Monitoring	Medium Monitoring

7. Environmental and Social Assessment

8. Measuring Poverty Outreach through PPI

Poverty Probability Index (PPI) is an indicator to measure LOLC Cambodia outreach to the disadvantages customers, to determine the transformation of the quality of client’s livelihood, and to ensure that appropriate products are extended to the right clients. Using PPI, LOLC can choose its categories of the client as below:
9. Analyze Portfolio and Profit Breakdown by Client’s Poverty Level
a. Analyze Portfolio Breakdown by Client’s Poverty Level

For the purpose of such analysis, the client’s income is required to keep proper records in the core banking. However, with the current limit of digital data, the analysis of client concentration by its likelihood of poverty level which is benchmarking from Poverty Probability Index (PPI) definition, LOLC uses the average loan size as a proxy for poverty ranking classification as per below table.

Below is the breakdown of its numbers of Loans and GLP as of Dec 2021 by those poverty ranking categories.

b. Analyze Profit by Client’s Poverty Level
With the above classification and its internal assumption to allocate its income and expenses whether by its direct breakdown or its proportion, the profitability breakdown for the year 2021 has been performed for understanding of which product category would provide better margin as well as to understand the risk profile of each category as shown in the below table. The analysis table above reflects that LOLC is doing its best to serve its majority low‐income families, including poor and very poor with its minimal margin due to its high operational cost as well as its high credit risk. However, those clients would have their financial opportunities to improve their living standard and expanding their agri-activities or products and services.
10. Client Rights
LOLC is the legal institution that has the bright vision, mission, and core value. Furthermore, LOLC highly focuses on providing the good financial products and services to the clients. The clients are clearly informed about their rights before or after loan disbursement and it is also mentioned on the loan plastic bag. All LOLC clients are offered the rights as below:
     • Know and understand product terms and conditions and all costs before disbursement.
     • Refuse to accept any product.
     • Complain or ask questions about any service or product offered by LOLC. (To learn more about LOLC    Complain, please watch this VIDEO.)
• Receive the loan schedule and other important documents upon (or before) disbursement and official receipts during loan repayment.
• Receive fair and respectful treatment, no discrimination, from LOLC’s staff.
• Expect LOLC to keep personal and financial information confidential.
(To learn more about Client Rights, please watch this VIDEO.)
11. Financial Literacy

Financial Literacy Video

Due to COVID-19, financial literacy awareness in-class training and other face-to-face activities were postponed but we had been producing financial literacy videos to deliver financial literacy messages, consumer protection, self-motivation and small business management to clients/the public by posting in popular mass-media Facebook pages and the LOLC Facebook/YouTube. In 2021, 8 videos were produced and 2 of them were posted, the videos reached 600 thousand people as of Dec 2021.
12. Other Social Activities

a. Cambodia Red Cross

LOLC contributes to the Cambodian Red Cross every year as a social contribution to the active charity work being done on-site. In 2021, LOLC donated fund to support Cambodian Red Cross charity activities.

b. Child Nutrition Campaign

LOLC contributed fund to the Royal Academy of Cambodia for its “Fresh Milk Nutrition Program.” The program distributed fresh milk to the children of various orphanages through organizations including the Cambodian Children's Fund Organization, Sacrifice and Orphanage Development Association, Orphanage Support Organization, KKEV Cambodia Organization, an Orphanage in Kampong Speu
and National Borey for children.

Environment and Social Assessment	# of loan	Remarks
Low	115	- Client’s risk management quality is high - Client risk level is low Therefore, no action taken is required
Medium	92	- Client’s risk management quality is ranged from medium to high - Client risk level is ranged from low to medium Therefore, monitoring should be tracked to see the progress of the risks.
Total	207

LOLC (Cambodia) Plc. has been serving Cambodian public and society for over 28 years, and has been recognized by both local and international financial authorities. Our products and services are committed to improving the livelihood of Cambodian customers.

#666B, Street 271, Kbal Tumnub Muoy Village, Sangkat Boeng Tumpun 2, Khan Mean Chey, Phnom Penh, Cambodia.