Consumer credit applications rose 53 percent in the third quarter of 2020, compared with figures for the second quarter of the year, according to a Credit Consumer Index report by the Credit Bureau of Cambodia (CBC). The CBC is the leading provider of credit information, analytical solutions and credit reporting services to banks, microfinance institutions, lending companies, credit operators and consumers in Cambodia. It began operations in 2012.
Consumer credit applications represent consumers’ desire to acquire credit in the form of personal finance, credit cards or mortgages, said the CBC.
This quarter’s rise in credit applications stands in contrast to a decline in credit applications in the second quarter of 2020 compared with first-quarter figures.
The CBC noted that during the third quarter of 2020, personal finance applications rose by 52 percent, credit card applications were up by 83 percent and mortgage applications increased by 50 percent.
A look at the same categories of second-quarter credit applications against first-quarter statistics shows personal finance applications dropped by 50 percent, credit card applications were down by 43 percent and mortgage applications fell by 51 percent.
Oeur Sothearoath, chief executive officer of the CBC, said that the trends of the last few years suggest that this is indicative of a cyclical pattern of a rise in consumer credit applications in Q3 after a fall in Q2. He said that the same pattern extends to credit card applications as well. In addition, the economic slowdown contributed to a much stronger fall in consumer credit applications earlier in the year.
“It is likely that the rise in Q3 2020 was much stronger than other years because of the market showing preliminary signs of stabilising and improvement after the sharp fall in Q2 2020,” Sothearoath added.
PRASAC’s Executive Vice-President and Chief Marketing Officer Say Sony, welcomed the news as a good indication of economic recovery.
He said that as of September 2020, PRASAC’s loan portfolio stood at $2.862 billion, an increase of 14.43 percent compared with 2019 figures. The loan portfolio mixture is 64.31 percent in business loans with the remaining 35.69 percent being personal loans.
“People took on personal loans for a number of purposes. Among them being home improvement, real estate, automotive, green driven and emergency loans among others. However, as of September 2020 the demand for business loans was more robust than the demand for personal loans. That said, the portfolio quality of personal loans performed better than business loans,” Sony said.
According to the CBC report, the ratio of late repayments 30 days past their due date, indicated as 30+DPD as of September 2020, was 2.42 percent on personal finance, credit cards and mortgages. This represents a drop from the 2.64 percent figure in June.
The CBC added that the consumer loan balance by type as of September 2020, was $9.11 billion. The loan balance by category was split roughly 51.51 percent in mortgages, 47.90 percent in personal finance and 0.58 percent in credit cards.
Sothearoath highlighted earlier that with the fast-paced changes in market conditions, the digitalisation of credit-risk management can help financial institutions to speed up and undertake more transparent and effective risk-profiling, risk-based pricing and portfolio management. He said the CBC is committed to delivering data, analytics and knowledge to enhance the efficiency of credit-risk operations, credit decision-making as well as contribute to financial-sector stability. “The CBC introduced two new products that blend data and digitalisation for credit-risk management to members of financial institutions, products that generate a measure of credit-worthiness known as a K-score,” he said.
K-Score is a number that summarises all information in a borrower’s credit history to enable lenders to quickly assess the potential likelihood of default by borrowers.
The second generation of K-Score will be commercially available this year, Sothearoath added.
This article was first published in Khmer Times. All contents and images are copyright to their respective owners and sources.