Credit bureau for overlap in loans

[PHNOM PENH POST]

Overlapping loans continue to plague Cambodia’s small lenders, but plans to launch a credit bureau this year may alleviate these concerns, industry insiders said yesterday.

Cambodia currently has no nationwide method of tracking who has received loans, meaning many people borrow from more than one institution without the lenders’ knowledge, according to Cambodia Microfinance Association Chairman Chea Phalarin.

“The main challenge [the MFI sector] faces is offering loans to a customer who already has loans from a different MFI,” he said. “This can lead customers into heavy indebtedness.”

“Although we support cooperation among the different MFIs and local authorities, we are still confronted with this issue – that’s our major concern.”

He said he expected the launch of the credit bureau to allow different financial institutions to access customer information, to see if a potential borrower has already been extended credit by a separate MFI.

“We are progressing [on launching the credit bureau] – we hope it will materialise by the end of the year,” he said.

In Channy, President of ACELDA Bank, said the situation facing non-performing loans was improving, but said the overlapping loans were still a problem for the sector.

He echoed calls that a credit bureau could help cut down on the problem.

“It will help the lending environment – it means the borrower’s information will automatically be registered into this credit bureau to avoid the overlapping loan,” he said.

In Channy highlighted the unnecessary costs that could be removed with the bureau.

“It saves us time we spend evaluating loans, and customers will also receive loans in a shorter time. In addition, it can reduce our operational cost.”

ACLEDA Bank Senior Vice President and Head of Credit Division In Sithann said the credit bureau was an initiative of the National Bank of Cambodia, with support from the International Finance Corporation.
The bureau itself is a joint venture between Singapore-based Vida Advantage and the Cambodia Microfinance Association and Association of Banks in Cambodia.

“We are progressing with the project, and applying at the Commerce Ministry for registration, before we receive another licence from the NBC,” he said. “We expect it will be officially launched in July, or later, of this year.”

Vida Advantage holds 49 percent, while the remainder is held by banks through the CMA and ABC. ACLEDA holds a 5 percent stake in the venture.

MFIs and Banks are beginning to submit customer data to the bureau, to test software, and to standardise the data from banks, he said.

Prasac MFI CEO Sim Senacheert said his MFI faced many problems with overlapping loans, and applauded the initiative. “The problem will be resolved when the bureau is launched,” he said.

However, he added concerns that some MFIs would still extend loans to customers even if they already had loans in the pursuit of profits.

A CMA report released last week showed the non-performing loan rate was improving at the Kingdom’s 24 microfinance institutions, while outstanding small loans not including ACLEDA had increased 51 percent in the first quarter 2011 compared to the quarter previous.

NBC and credit bureau officials could not be reached for comment yesterday.