Oftentimes, the bigger picture is an essential perspective — that’s what Credit Bureau Cambodia’s (CBC) CEO Oeur Sothearoath believes. While loan applications aren’t the compelling stuff of action movies, Cambodia’s banking boom shows that it’s an essential process that many Cambodians and all banks will need to navigate successfully in order to survive the nation’s competitive market.
Data specialists are taking what was once a time-consuming and case-by-case process and zooming out, while improving the rate of credit risk, and the country’s banks are noticing. While the Covid-19 pandemic has forced banks and lending institutions to adapt and change certain procedures to better accommodate the industry’s needs, it has also presented new opportunities for development.
On the whole, Cambodia’s financial industry is undergoing a huge change. Among it’s rapidly modernizing ability to make lending decisions, it’s beginning to adopt and leverage data analytics and digitalisation, including Credit Scoring, Portfolio Monitoring and Data Analytics Report.
At the forefront of these efforts is CBC, the only credit reporting institution in the country that is pushing for greater reliance on data analytics as the industry undergoes its transformation.
Used by every financial institution, CBC’s services make loan application processing and money lending practices more comprehensive and safe for both the lenders and the borrowers. While individual financial institutions collect their own data, CBC is the only bureau that amalgamates the data, offering industry-wide data that facilitates lending processes with mitigated risk.
“Despite 2020 being a year of unpredictable economic downturn, we’re pleased to be able to provide reliable data and analytics for financial institutions nationwide,” said Oeur Sothearoath. “Our relationship with each of these institutions means we’re able to give a bigger picture on loan applications as a whole.”
As a financial information service provider to 169 institutions, including commercial and specialized banks, microfinance institutions, leasing companies as well as rural credit institutions, they’re constantly pushed to create better technology for their diverse clientele. But one thing is clear: they’re eager to use data from their more than 7 million consumers to reduce risk in Cambodia’s Covid-hit economy.
In a reliability and statistic-driven initiative, CBC is working to streamline their data analytics approach and encourage all financial institutions to adopt data-driven decision-making and predictive analytics techniques, including Khmer-score, or K-score, which summarizes a customer’s credit report into a single score to reduce precious time for busy financial institutions in the Kingdom.
But they haven’t stopped there. Other services offered are the Data Analytics Report, which allows users to compare their performance to others in the industry, as well as Portfolio Review, which is an offline program that allows members to review information from credit reports for their entire customer base, reducing risk. Additionally, the Portfolio Monitoring Service, which allows institutions to monitor their clients after a loan has been issued has proven to be very useful for lenders in managing their portfolio risk.
The synthesis of cross-industry data allows for an individual’s entire borrowing history to be made available to each financial institution they interact with, an approach that simplifies the entire lending and borrowing process.
“If an individual already has credit history with other banks and they go to a new bank, the new bank can access their entire borrowing history to know the likelihood that they will default,” explained Sothearoath.
“This helps the financial institutions mitigate risk, but it also helps the borrowers only secure loans that they can repay with low financial burden.”
AMK, one of the leading microfinance institutions in Cambodia, uses CBC’s data analytics report for these exact reasons.
“The Data Analytics Report provides extensive data on AMK’s customers and the broader industry about the loyalty and dropout rate, multiple rate of customers, delinquency rate, the market position of AMK, loan growth benchmarking between AMK and the industry, industrial monitoring, acquisition management, account management and delinquency management,” said Kea Borann, CEO of AMK.
Each bank is still responsible for collecting and recording their own data, but CBC compiles these indexes into one centralised database that serves as an industry benchmark for other financial institutions and that their clients can access with ease for each loan application they receive.
Every bank and financial institution in Cambodia needs reliable data to make these lending decisions, and nearly every financial institution in Cambodia uses CBC’s services, but different data packages can be tailored to the different needs of each one. Credit reports are a crucial part of this, which Sothearoath says help banks see industry-wide how likely their applicant is to default on their loan, and if they’ve taken out loans at other financial institutions.
ABA’s Chief Credit Officer, Pandey Bibhu, says that using credit reports, as well as industry monitoring reports, are important in making consistent and quick decisions that condense a client’s application into a broader profile of how big of a risk their new client will be.
“They give lenders a bureau-based risk profile to evaluate new credit applicants and make more accurate credit choices,” he explained. “CBC reports also help a loan officer swiftly examine the quality of a credit application and make a consistent judgment.”
But more than that, in a country where the banking sector is growing at unprecedented rates, lenders echo that it’s vital to uphold the stability of Cambodia’s lending, and Pandey says that CBC is not only upholding it, but improving it with the services they offer.
“Lenders will be more vigilant to see the leverage of any borrower through CBC report, minimizing the credit risks and at the same time preventing borrowers from over lending, which can be harmful to their financial stability,” he said.