The Credit Bureau Cambodia (CBC) has been at the very heart of financial institutions in the Kingdom, providing vital data and innovative measuring tools that help businesses grow and make the right decisions.
Chief Executive Officer Oeur Sothearoath, who spoke to The Post recently, said that the CBC, through its credit reporting system, has helped improve access to finance, and saw an increase of 25.7 per cent in terms of loans to women and a 24.4 per cent increase in loans to those who were self-employed between 2016 and 2017, according to the impact survey on credit reporting in Cambodia.
“The CBC does not only support financial institutions for sound risk management and financial stability but we also help businesse and individuals to access to finances as well.
“The availability of high-quality credit information, reduces problems of adverse selection and asymmetric information between borrowers and lenders. This reduces default risk and improves the allocation of new credit. Information sharing can also promote a responsible credit by discouraging excessive debt and rewarding responsible borrowing and repayment.
“Most importantly, credit reporting allows borrowers to build a credit history and to use this reputational collateral to access formal credit. This is especially beneficial for small enterprises and new borrowers with limited access to physical collateral,” Sothearoath said.
With their customers’ consent, banks and financial institutions draw on CBC system, he said, to screen borrowers and monitor the risk profile of existing loan portfolios as part of their assessment before decisions if they are willing to extend a loan or line of credit, and sometimes also for interest rates consideration.
Sothearoath said that as part the CBC’s efforts to improve its service, it has come up with an innovative tool called the K-Score or Khmer Score that was launched in 2015.
“The K-Score is a number that summarizes all the information from credit report into a single score. It measures the applicants ‘potential credit risk at the point of application and predicts the likelihood of payment default in the next 12 months.”
“It was designed to provide lenders with a bureau-based risk profile to assess new credit applicants and make more informed and accurate credit assessment decisions. It enables credit managers to quickly assess the creditworthiness of applicants that allows the decision to be consistent; therefore, customers can access to finance faster” he added.
He added that K-score subscription has been increasing as observed the awareness in the sector about its benefits especially in the competitive market condition where it requires the faster decisions.
“However, we also anticipated the needs of financial institutions for their internal scoring and they may also look for another version of bureau score called the ‘behavior score’.
“To help our members understand about the internal score model services, CBC organized two workshop inviting the expert company who has intensive experience in scorecard development and related services operating in 13 countries throughout the region to elaborate and showcase directly with more than 300 participants from all banks, microfinance institution, leasing companies in mid-2019”.
“In addition, CBC has kicked-off our K-score generation 2 development project and expects to introduce it into the market in 2020.” he said.
Over the last seven years, since its inception, CBC has been recognized by the financial sector as one of the key contributors in helping it make sound decisions on credit assessment through its various solutions and keeps improving, Sothearoath said.
“As of November 2019, CBC has 167 financial institutions as part of its membership. Within this year, we also successfully launched the commercial credit reporting since July, which is another tool that enables financial institutions to have concrete information for commercial assessment.”
He continued, the credit bureau makes the data availability of both individuals and corporate entities, consolidates it into credit profiles sharing on request to subscribers including financial institutions and public consumer, as well as to the regulator. Such efforts reduce default risk and improve the efficiency.
He said that based on the finding in the impact survey on credit reporting, CBC via its credit reporting service has helped prevent estimated losses of $6.4 million in 2015 and $13.2 million in 2016.
For 2020, he said their top priorities will still focus on data security by investing on new technologies.
“Another priority is to keep supporting our members to ensure they are satisfied with our services and will use working committees to discuss challenges and solutions between CBC and our members,” Sothearoath said.
CBC, with its innovative technology and tools, is expected to ensure that Cambodia’s economy remains robust to ensure a better business environment for domestic and foreign investors.