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‘Alternative data’ provides a solution to widening financial inclusion in Cambodia

Harrison White

Cambodia’s growing financial sector is looking to increase the current level of financial inclusion by providing more access to finance for those without or limited traditional credit data to assess risk for lenders.

To continue widening financial inclusion for those currently ‘unbanked or under banked’ the industry is looking to incorporate ‘alternative data’ for credit score calculations.

According to NBC statistics, 59% of Cambodians do not have access to formal financial services whereas 29% of adult Cambodians are completely excluded from access to formal as well as informal finance.

Currently, Cambodia’s credit score (K-Score) is led by Credit Bureau Cambodia using traditional credit data reported by financial institutions however with the rapid adoption of digitalization, mobile banking, and fintech, there are vast amounts of data generated at multiple customer touchpoints that businesses can analyze to generate smart business insights.

Cambodia’s financial institutions are currently undergoing a digital revolution with Cambodia’s lending sector also ready to take the next step in digitalization by embracing emerging technology such as blockchain, artificial intelligence, and alternative data over the coming years.

To read more about Cambodia digital banking revolution click here.

Alternative data is considered anything outside of the traditional credit reporting system, such as rent, cellphone, and utility payments of bank account cash flow.

While traditional credit scoring is already very robust, banks and microfinance institutions can generate the most value of data when traditional and alternative data are used together for reliable predictive analytics.

Moreover, for those individuals who have never accessed credit or have only limited credit history, blending credit bureau’s data with alternative data shall provide robust analytics for lenders to predict creditworthiness of such customers.   

Kaing Tongngy, spokesman for the Cambodia Microfinance Association.

Building on the success of developing traditional credit scoring and a range of advanced analytical solutions to financial institution, CBC plans on tapping alternative data for developing innovative credit scoring for enabling lender to widen access to financial services.  

Kaing Tongngy, Cambodia Microfinance Association spokesperson told Cambodia Investment Review the local microfinance sector has always been trying to include all types of people into the system, especially low-income people, to ensure they have access to formal financial services with low-interest rates and client protection principles.

“The more data to enhance the quality for the credit system, the better for the financial sector. With more data available from unbanked clients, the microfinance sector will be able to serve them resulting in more financial inclusion in Cambodia,” Tongngy said.

“So far, the microfinance sector has introduced many initiatives to ensure everyone can access formal financial services. One of such is group loans where clients without any collateral can access a non-secure loan in the financial sector. Although this effort is usually not profitable, it is the sector’s commitment to serving the poor and financial inclusion in Cambodia,” he added.

National Bank of Cambodia financial inclusion agenda

In 2019, the National Bank National Financial Inclusion Strategy is a policy tool to support the effective implementation of the Financial Sector Development Strategy 2016-2025 (FSDS), which aims at achieving a stable and effective financial system as well as a diversified inclusive financial market to address the domestic demand for financial.

In Channy, Chairman and Managing Director of ACLEDA Bank.

The Financial Sector Development Strategy 2016‐2025 and with the Royal Government’s Rectangular Strategy‐Phase IV to continue contributing to poverty and inequality reduction in Cambodia, especially for women and SMEs, and will actively support the development of sustainable and inclusive economic and financial sector. 

Cambodia Investment Review has previously reported on the importance of financial inclusion to allowing the banking and microfinance sector is continuing to strengthen economic growth and reduce poverty in Cambodia

To read more about financial institutions roles in Cambodia’s economic development click here.

In Channy, Chairman and Managing Director of ACLEDA Bank has told Cambodia Investment Review that the banking sector has been supporting the economic development and improving the daily lives of Cambodians for almost 30 years.

The work of the banking sector is to improve the living standards of the people, reduce poverty and provide a source of capital for business and social development.

“In Cambodia, the banking sector has been growing steadily,” he said. Along with the growth of this banking institution, we observed that the banking sector has provided capital or credit to the people in large quantities according to the needs of the people and we do this to assist strengthen and enhance the progress of the people.

The non-banking sector is also looking to utilize ‘alternative data’

In addition to financial lenders, telecoms and utilities such as the Royal Group owned Cellcard are also preparing for the advancement of digital technology and the greater use of data has to permanently change the telecom sector.

Speaking to Cambodia Investment Review Cellcard CEO Simon Perkins said: “At Cellcard, we are fully embracing the potential of digital transformation and utilizing alternative data. We are always aiming to understand our customers better to improve products and services offerings and to enhance customer experience,” he said.

Perkins explained that to enhance credit profile and scoring in support of financial inclusion the company could data such as top-ups, usage behavior, and payment history from their customer base.

Cellcard CEO Mr Simon Perkins.

“That said at Cellcard, we must always respect our customer’s privacy and will continue to serve our customers, creating exciting and innovative products and services convenient for them. In partnership with our sister company, Wing Bank, have recently launched digital services to enable customers to self-register their Wing account via the Cellcard APP and make payment via the QR code at all merchants,” he said.

“Many use cases would help access and benefit the companies, including Credit scoring and instant loan approval, Microloan like balance advance for telco products, credit checks for various sign-up processes, eKYC, and targeted marketing across products to ensure that we can offer relevant service to the customers,” Perkins added.

CBC as a key financial infrastructure for data-driven decision-making

CBC is the only credit reporting service provider in the country hosting data of more than 7 million borrowers in the country with more than 176 banks, microfinance institutions, leasing companies and rural credit institutions reporting data to the bureau database on a regular basis.

With rise in potential for alternative data, CBC as the national financial infrastructure can closely work with alternative data providers such as telco, utilities and payment service providers to have a comprehensive data ecosystem for lenders to adopt a true data-driven decision ecosystem in the country.

To read more about Credit Bureau of Cambodia click here.

Oeur Sothearoath, CEO of Credit Bureau Cambodia.

Most recently, CBC announced a commitment of $1 million in support of the National Financial Inclusion Strategy to promote and strengthen financial inclusion over the next five years in Cambodia.

Oeur Sothearoath, CEO of Credit Bureau Cambodia, stated: “We maintain a very robust and secure data and digital infrastructure in the country to manage comprehensive data on credit histories of borrowers from all financial institutions. With our focus to enable our members to improve their data analytics capabilities and promote financial inclusion in the country, we are open to collaborate with alternative data providers in the country to enable an inclusive data ecosystem for serving the industry and society.”  

In many advanced as well as emerging economies, it is common for alternative data providers to report to credit bureaus who process such data to serve the financial institutions and consumers for enhanced access to financial services.

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