Raymond Sia
Being a banker for the past 3 decades; I strongly believe in the principles of “Responsible Banking”.
The need to strictly adhere to this principle becomes more apparent in this day & age where conduct, compliance & governance takes precedence in any banking activity or operations. We often hear the jargon “Responsible Lending” but this only covers one part of the equation; and to ensure comprehensive coverage, we need to advocate and practice “Responsible Banking”.
Responsible Banking require the involvement of two parties; the Lender and also the Borrower. To ensure effectiveness, we need both parties to be aligned and in-sync.
“Responsible Borrower”
1. Borrowers need to ensure they understand all the terms and conditions stipulated in the loan / banking contract.
Seek clarification if there is any ambiquity. Never sign or thumb print any document which one is not sure. Basic financial literacy is important.
2. Borrowers should never over-gear (borrow exceedingly, above their repayment means).
The power of compounded interest works wonder. The genius Albert Einsein once called compound interest the “8th Wonder of the World” due to its exponential impact. While this notion from Mr Einstein was more skewed towards savings, the opposite exponential impact on loan interest is equally felt.
Having too many loans especially when one’s cashflow is already tight has serious negative implications.
3. Borrowers should repay their debts as quickly as possible; subject to one’s availability of cash and individual’s cashflow planning.
This becomes more critical in a high interest rate regime.
“Responsible Lender”
1. Lenders ought to sell appropriately.
The principle is easy for all bankers, i.e. sell only the products & services you would buy yourself.
2. Lenders need to acquire new customers with conscious.
Only lend money to those whom you would lend if it was your own money.
This is the simple principle I often share with my Branch Managers and sales teams. We should never “cut corners” and always ensure proper credit & risk assessments are done prior to any loan approvals.
Similar practise in being a “Responsible Borrower”, lenders need to ask and enquire from the borrower if they are unsure about any of the 5 (or 6) Cs of the borrower.
3. Lenders cannot neglect and forget the community we operate in.
Lenders need to also ensure proper protection of our external environment and also internal environment; within our organisation.
While the agenda on financial literacy (first) and financial inclusion are important, equal emphasis needs to be placed on efforts to preserve our environment for the future generations.
The same notion is observed for “green loans” and ESG initiatives, which are still in its nascent stage in Cambodia and all relevant stakeholders need to play a more participative and inclusive role to build on this important agenda.
Raymond Sia currently serves as the CEO of Canadia Bank and is an experienced speaker & columnist on Banking, Currencies & Foreign Exchange and Leadership
