Credit Bureau Brings Rural Lenders Into the Fold

Five rural credit operators signed an agreement to join the Credit Bureau Cambodia (CBC) on Thursday as the watchdog and the National Bank of Cambodia (NBC) ramp up efforts to better monitor the country’s expansive, but largely informal, rural lending industry.

Pascal Ly, CEO of CBC, said at the signing ceremony that the five new members, which are registered as NGOs, would add to the existing 101 members of the bureau.

“There are still about 400 rural credit operators that we want to join with us so that we can have a full understanding of the credit behaviors and usage in Cambodia,” he said.

Mr. Ly said that by gathering information from rural lenders, the CBC would be more effective in preventing borrowers from taking out multiple loans from various creditors.

Oeur Sothearoath, CBC’s head of business development, said rural lenders tend to charge higher interest rates than microfinance institutions, leading to higher rates of nonperforming loans (NPLs) —where borrowers have missed their payments by more than three months.

“If you have a look at the microfinance performance, their nonperforming loan is very low—less than 1 percent. But if you look at the NGOs, their NPL rate is more than 10 percent,” he said.

Mr. Sothearoath said that about 400 rural credit operators have notified the National Bank of their names and operation as a first step to obtaining licenses, which will also require them to standardize lending rates.

“They need to put proposals to the NBC to ask for a rural credit operator’s license,” he said, adding that some 50 rural credit operators have been licensed this year.

Khiev Bophaphuong, director of licensing at NBC, said in a speech at Thursday’s event that expanding oversight of rural lenders would make for a healthier financial sector.

“The National Bank of Cambodia supports more memberships and encourages sharing credit information more widely to enhance the health and strength of the banking system,” she said.

Thao Pheary, director of Community Capital Development Agency Organization, one of the five rural lenders who joined the CBC on Thursday, said the move would make for a more sound future for his firm.

“I think that becoming a member of CBC is very important…to sustain our financial services delivery in the future.”

sothear@cambodiadaily.com, ho@cambodiadaily.com

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