Credit Bureau Cambodia (CBC) announced last week that it will launch a new credit reporting system which will transform the current consumer credit report into a commercial credit report that functions as a platform detailing a company’s credit history.
Starting January next year, the CBC will also launch a “Financial Health Check” that will help borrowers understand their credit health and dispute it if the information is incorrect. This will help them to be well-prepared before applying for a loan.
The Post’s Hor Kimsay spoke to CBC CEO Oeur Sothearoath about its new service and development in Cambodia since it began operation in 2012.
What are the functions of the commercial credit reporting system? Is there any difference from the consumer credit reporting system?
They are not very different from each other. While consumer credit reporting captures information from individual consumer transactions, commercial credit reporting reveals the information of the legal companies relevant to their loan transactions.
Commercial credit reports will consist of detailed credit history information under the name of the company – such as company profile, credit summary, previous inquiries, account details, payment cycles and shareholders’, directors’ and officers’ information. These are crucial for credit assessment to ensure effective and responsible decision-making.
Why do you think now is the right time for the CBC to launch the commercial loan reporting system?
In its first six years of operation, the CBC used the Consumer Credit Reporting, which allows our members (financial institutions) to understand their customers well and make effective and responsible decisions on loans.
In addition, this system also helps the individual have better access to their credit information and understand their credit status, which helps them better prepare for loan applications.
We have earned a lot of trust and have been urged to introduce the Commercial Credit Reporting System to the market. Thus, the CBC has committed to respond to the needs and we have been working very hard with our members and stakeholders to bring commercial data into our system.
We believe by having a new reporting system in place, we will help our members and legal entities and pave the way for SMEs to have better access to finance.
By having a commercial credit reporting system in place, does it mean the CBC’s members will need to upload all their clients’ business loans to the platform? And who will be authorised to access the data on the commercial loan system?
Currently, active commercial loans as of December will need to be uploaded into the Commercial Credit Bureau platform, while old commercial loans which have already closed will not be required. The financial institutions that are members of the CBC and currently have commercial loan transactions will be able to access this commercial loan system.
What will be the impact from the CBC’s new commercial credit reporting system?
The system is very important in today’s financial system. Creditors consider information held by credit reporting systems as a primary factor when they evaluate the creditworthiness of the borrowing companies and monitor the credit circumstances of consumers.
This information flow enables the market to function more efficiently and at a lower cost than would otherwise be possible.
For lenders, the system helps in reducing information asymmetries by making a borrower’s credit history available to potential creditors and is, therefore, allowing lenders to accurately evaluate risks and improve portfolio quality in the form of a lower cost of capital for good borrowers.
As information asymmetries are addressed through the system – borrowers are able to borrow more money with competitive terms and conditions and interest rates than under normal circumstances.
Financial supervisory authorities will use credit reporting data for macro- and micro-prudential supervision and to monitor systemic risk levels to produce macro-statistics of financial system performance.
Starting early next year, the CBC will also launch a “Financial Health Check”, initially collaborating with Acleda Bank Plc and AMK Microfinance Institution Plc. How will the system operate and how will it impact lenders and loan takers?
There is currently only one channel for public consumers to request their personal credit report – through the CBC’s office in Phnom Penh. We have worked to offer a more convenient way for people who are living outside of Phnom Penh, such as in the provinces.
The strategic partnership with our two institution members is set to kick off the “Financial Health Check” service at Acleda and AMK Microfinance branches from next year.
To perform a Financial Health Check, the public just needs to bring their original and valid national ID card or passport and go to designated AMK or Acleda branches. (Only five branches each have the service available).
This will help borrowers understand their credit health condition and be able to file a dispute if the information is incorrect. This will help them be well-prepared before applying for a loan.
How would you measure the CBC’s development since its 2012 launch in the Kingdom?
In its six years of operation, the CBC has established a trusted Consumer Credit Reporting platform to support the sustainability of the credit industry. As of December, we have 158 members including banks, microfinance institutions, leasing companies and rural credit institutions that work hand-in-hand in reporting data for our system.
We have produced over 17 million credit reports and obtained around five million consumers in our database, which represents more than 50 per cent of the Kingdom’s adult population.
This interview has been edited for length and clarity.