The double-digit growth of consumer lending in Cambodia has created a need for a comprehensive and centralised database of individual credit histories. The Post’s Cam McGrath sat down with Pascal Ly, CEO of the Credit Bureau Cambodia (CBC), to discuss the role of the Kingdom’s only credit bureau and how it is helping lending institutions manage risk.
What is the role of the credit bureau and how has it performed?
The credit bureau, or CBC, has been around since March 2012, so now we’re already getting into our fifth year of operations. The feedback we’ve received so far is that the credit bureau is crucial in that it helps to manage risk in the banking sector and reduce the number of multiple loans in the market.
Is borrowing from multiple lenders a serious problem in Cambodia?
That is definitely one of the concerns that we’ve been hearing from the market, but when we look into our data, that is not the case. What we realise is that in terms of active loans, in the MFI industry there is only an average 1.2 accounts per person. This means that the amount of multiple loans is not that high.
When we look at loyalty of customers, about 79 per cent of banking customers only use only one institution. That dramatically reduces the risk of multiple loans, and of people taking out one loan to pay off another. So it’s marginal and not a threat to the industry.
Is it possible that due to improved credit monitoring by licensed lenders that customers are being pushed towards informal lenders such as rural NGOs to find money to pay off loans owed to banks and MFIs?
CBC, for now, is not seeing that. We don’t have data on these rural NGOs because it’s not necessary for them to join the credit bureau. However, based on my perception, it would be quite surprising, because when we look into the loans that MFIs are usually providing, we’re talking amounts below $500.
This is something relatively “easy” to recover in the sense that people in the rural areas often send their children, once older, to the capital and other countries, and what happens is they send back money to their families to help them pay back their loans. But that is something that no one can really see because when they go out of the country they’re not being captured by our data.
How much of the credit market does the credit bureau cover?
It’s a huge volume. In terms of active credit accounts, we have 2.5 million accounts, including 600,000 with banks and 1.9 million with MFIs. But if we look in terms of total outstanding loans in the market, which was $10 billion last year, the proportion is flipped around, meaning that MFIs have issued $3 billion out of the $10 billion and $7 billion is coming from the banks.
That means MFIs have the biggest amount of active customers, but the amount that they have issued is much lower compared to the banks. Banks have a smaller number of active customers, but they have a huge amount of loans outstanding.
That $10 billion is the actual amount of loans that the banks and MFIs have given out to the market, and each should have been accompanied by a credit report as central bank regulations stipulate that for any loan given out the institution is required to first check a credit report.
Is the huge growth of financial leasing services increasing the need for consumer credit reporting?
Some of these leasing companies are not licensed by the central bank, so by principle they have not been captured by CBC. However, it is important that those institutions continue to look into credit loan capacity, because when you accumulate a lot of different loans that you need to pay back every month you think, “Hey that’s OK, it’s only $10.” But at the end of the day, with several leased items, it stacks up quite fast.
Companies and institutions need to help by checking that people have the capacity to repay their loans on a monthly basis. But I think it is in the interest of the company to look into whether the person is capable of paying, and getting a credit report from us is one of the ways to assess this risk.
How many credit reports have you issued?
Since inception in 2012 we’ve had over 9 million credit inquiries.
So far, the CBC only offers consumer credit reports. Do you any plans to cover the corporate side?
We are looking into commercial reports, meaning corporate credit data, because corporate finance plays a major role in the country. But we first need to get in touch with the data to understand the entire picture of commercial loans issued by banks and MFIs.
We held a workshop back in December to kick off this initiative, to tell banks what we’re trying to achieve in terms of commercial reporting and to facilitate discussions with the industry to set a template on what commercial reports should look like. We’ve got the knowledge and we’ve got the platform, now it’s just a matter of having the banking industry agree on the format they want.
With so much credit growth, is there a need for more credit bureaus?
The fact that we only have one credit bureau is the reason why we are able to help all institutions like we do. Having others would create more headaches, as each institute would need to split the data.
This interview has been edited for length and clarity.