It has been nearly five years since Cambodia established its first credit bureau, and in that time, the independent agency has amassed 2.5 million credit accounts and responded to more than nine million credit inquiries.
Last year alone its credit history reports – which banks and other lending institutions are required to obtain before issuing any loan – covered some $10 billion in consumer lending.
But to date, Credit Bureau Cambodia (CBC) has only provided consumer credit reports, which detail the consolidated personal credit history of individual borrowers. Yet another estimated $4.5 billion in credit was issued to private sector companies last year.
The CBC is looking to fill this gap by launching the country’s first centralised commercial credit reporting service in 2017.
The initiative kicked off last December with the support of the International Finance Corporation (IFC).
According to Pascal Ly, chief executive of the CBC, some 30 stakeholders from the banking sector attended the workshop.
The session provided an opportunity for them to share their views on the requirements and technical aspects of commercial credit reporting, with the aim of establishing a consensus on what information the reports should or should not include.
Ly said the CBC has taken examples from neighbouring countries and will use local stakeholder input – including commercial data samples from nearly a dozen banks – to develop a template for commercial credit reports.
“The next steps are to ask for more data samples from other stakeholders inclusive of MFIs (microfinance institutions), to formulate the commercial data upload specifications, and to customise the bureau system,” he said.
“Consultations with the banking sector are in consideration for every single important step.”
The CBC hopes to finalise the format for commercial credit reports and begin trials by the end of the year. User feedback will help develop a final product, which will go “live” about six months after trial period is complete, according to Ly.
“The most important aspect of this project is that all the stakeholders at the top level we have met are very supportive of the initiative and are urging its launch as fast as possible,” he said.
Nay Sambo, senior specialist for credit information at ACLEDA Bank, said the CBC’s consumer credit reports are crucial to assessing the credit worthiness of the bank’s clients, but the launch of commercial credit reports would have an even greater impact.
“It’s really important for us because most of the loans our clients request are for commercial purposes, not individual use,” he said. “Individuals take out small loans, but when companies come to ask for loans, it involves large amounts, and so there is a lot more at stake.”
A corporate credit history would allow CBC members – comprising more than 100 commercial banks, specialised banks, MFIs and leasing companies – to better identify companies that have outstanding debts to more than one financial institution. It would also give lenders a deeper understanding of the creditworthiness and repayment capabilities of their clients, which in theory reduces the risk of default.
Cambodian commercial and specialised banks logged $234 million in non-performing loans (NPLs) last year, while MFIs reported $24 million of these bad debts.
Ou Sophannarith, chief financial officer of Canadia Bank, said NPLs were not a major issue for banks here as most loans are collateralised.
“In other Asian countries, lenders look at cash flow in addition to collateral, but here in Cambodia most corporate loans are solely on collateral,” he explained, adding that the bulk of these loans are secured using personal assets, usually property titles.
While Ly said this practice is typical in developing countries – particularly among SME owners looking to expand their own businesses – the advent of commercial credit reporting should help alleviate the onus on business owners to put up personal assets as collateral.
Commercial credit reporting is expected to “boost the [amount of] less-or-non secured loans to the SME sector, given those customers are to be recorded and reported by the credit bureau,” he said.
He added that Khmer Score (K-Score), a CBC-analysed credit scoring system under development, should also boost the volume of non-collateralised loans to the SME sector.
Meanwhile, commercial credit reporting will make it more difficult for executives to embezzle or misappropriate company funds.
“We have people taking out company loans, but then the money goes to them personally,” Ly said. “We will definitely close these gaps when we have commercial reporting in place.”