For many Cambodians, a loan can make the difference between struggling to feed your family and starting up your own business. And with the Kingdom’s banks and microfinance institutions (MFIs) flourishing, reliable data about customers and their credit history is essential for financial institutions looking to ensure that both sides walk away smiling.
CBC Chief Executive Officer Oeur Sothearoath told Focus Cambodia that he was proud of the hard work that the credit bureau had done since its inception to demonstrate the value of reliable credit reporting for the Kingdom’s finance sector.
“From day one until now, we’ve done a lot,” he said. “The first thing has been awareness-raising and advocacy for the banks and MFIs. The concept of credit reporting is very new to Cambodia. As new as 2012, in fact. So that’s why we spent the first two or three years just educating the market, making sure they know that a credit bureau is, they know the value of a credit report, they know that this is the interface that they can go to to check the credit report for their consumer.”
With the proliferation of microfinance institutions across the Kingdom in recent years, reliable information on the people seeking loans to invest back into their businesses has never been more important. Sothearoath said that while banks and microfinance institutions played an essential role in propelling the Kingdom’s impressive economic growth, a lack of information about their consumers could sometimes make it difficult for them to know just what kind of arrangement they were getting into.
“If you look at the financial institutions, they face a lot of problems,” he said. “One of the main challenges you always see is information asymmetry – meaning that the banks and MFIs do not have enough information from the consumer. The consumer has enough information, but sometimes they don’t tell all the information that they have. So sometimes both the consumer and the financial institutions do not understand together – we call this information asymmetry.”
To this end, CBC has championed consumer credit reporting as an essential way for banks and other financial institutions to access the data they need to make informed decisions about their customers. Later this year, the bureau will also be unveiling its commercial credit reporting system, giving financial institutions the power to track loans taken out not just by individuals, but by companies.
“Monitoring alerts are another solution that we have for banks and financial institutions to monitor their customer behaviour,” Sothearoath said. “For example, if their customer goes to another financial institution to request for a loan, or the loan proposal has been approved by the financial institution, straightaway the credit bureau system will alert that member saying that your customer has gone to another institution to request for a loan. So that is the mechanism to protect the financial sector.”
In the Kingdom’s booming finance industry, knowledge is power – and by providing banks and MFIs with the secure and reliable data they need to make the best choices they can make, Sothearoath said, CBC continues to play in invaluable role in ensuring prudence, transparency and sustainability for financial institutions and investors alike.
“That is the challenge that the banks and MFIs are facing – to know their consumers well,” he said. “From the bureau’s perspective, we are able to provide solutions for them.”