Focus Cambodia spoke with Credit Bureau Cambodia CEO, Oeur Sothearoath, about how CBC makes it easier for Cambodians to borrow, at home and abroad
Since its inception in 2012, Credit Bureau Cambodia Co., Ltd. (CBC) has been at the forefront of breaking down barriers to financial services. Most citizens still don’t have access to credit services, according to the National Bank of Cambodia, but CBC helps reduce barriers to lending by providing financial institutions with reliable credit profiles. The banks can now make informed lending decisions without resorting purely to subjective measures or relying solely upon collateral, helping reduce the risks of customer over-indebtedness, debt cycling and default. Thus the lending environment is increasingly responsible and transparent for both borrowers and lenders.
Last year, the bureau took another leap forward in reducing barriers to financial access for Cambodians as it launched a pioneering initiative with Credit Bureau Singapore (CBS). This allowed the cross-border sharing of credit reporting data, enabling Cambodians living in the city-state to use their track record of repayment in Cambodia to secure access to credit services in Singapore and vice versa. The initiative, first of its kind in the region, marks the initial step towards a future in which Cambodians, wherever they go, will carry the data necessary to fully access financial services.
How has Credit Bureau Cambodia improved access to credit for ordinary Cambodians? What impacts have you seen on the daily lives of Cambodians?
To make progress in financial inclusion, we are upgrading the credit profile of consumers and members of the general public, then making this improved profile available to banks and microfinance institutions. The World Bank reports that Cambodia has already significantly improved access to finance through the presence of a credit reporting system following the establishment of CBC. A second improvement we’ve seen is that having a credit bureau has helped to sharpen the behaviour of the general public in the use of loans, for example, when it comes to paying back loans.
How has CBC changed the landscape of the Cambodian banking sector over the 12 years it’s been in operation?
If you look at the challenges facing the banking sector, one of the biggest ones is information asymmetry, where the lender does not have all the relevant information about the borrower and the borrower fails to fully disclose this information. CBC entered this space in order to bridge that information asymmetry by empowering the banking sector to know more about the consumer and then encourage them to lend responsibly to their end consumer. We’ve already seen a reduction in this information asymmetry issue in the overall financial ecosystem due to our efforts.
What are the challenges in producing reliable consumer credit scores in the Cambodian context? How do you secure reliable information on consumers who are unbanked or consumers who may have taken on loans from outside the formal financial sector?
Two main issues arise – the availability of data and the quality of that data. Credit Bureau Cambodia collects information from all financial institutions, then processes and analyses those data and offers the information to financial institutions in the form of credit reports, credit scoring or analytics reports. The extent to which we can provide these services is based on the availability of information. Some consumers do not have a rich historical credit profile and are thus harder to provide scores for.
When it comes to accessing quality data, there are a few areas of key importance. First and foremost is the financial sector, consisting of banks, microfinance, leasing, and some rural institutions licensed by the central bank.
Outside this sector, two other sectors are important sources of credit for Cambodians. The first is pawn shops, which serve a function in the lending sphere similar to the niche filled by microfinance institutions. The second consists of housing developers who allow the end user to pay for their house in instalments, serving as an alternative to mortgages for many Cambodians.
For lenders outside the financial sector, such as pawnshops and housing developers, we still need to establish an effective methodology for plugging their data into credit reports.
Could you speak to the relationship between CBC and Credit Bureau Singapore?
We launched a strategic cross-border initiative last year. If you look at the challenges of credit bureau operation, cross-border accredited reporting and data sharing are areas where significant work needs to be done, not only for Cambodia but across the globe. The number one challenge is that, when citizens have established a good credit profile within their own country, if they migrate to another country they cannot take their credit report with them. We saw the challenges and decided to work closely with Credit Bureau Singapore to design a mechanism to facilitate cross-border credit report sharing while protecting data privacy.
This is a sponsored article from Credit Bureau Cambodia.
