Building a sustainable business model that helps rural Cambodians thrive
Phnom Penh, Cambodia
Two decades of rapid economic growth have turned Cambodia into one of Asia’s biggest success stories in recent years. While a dynamic retail banking sector has emerged to serve people living in cities, it is the country’s many microfinance institutions (MFIs) that support the rural communities that form the overwhelming majority of the population.
Among the most prominent is WB Finance, founded in 2003 and one of only seven fully licensed microfinance deposit taking institutions (MDIs)—meaning it can provide current accounts alongside loans. The MDI pursues a strong pro-poor agenda, offering financial packages that help families to save for their children’s education, and providing millions of dollars in loans to help households purchase sanitation products and enable agricultural cooperatives to buy vital equipment.
Up to two hours faster close of business processes with upgrade
WB Finance has won many accolades for social responsibility and financial transparency from leading global development organizations such as the Consultative Group to Assist the Poor (CGAP). And in June 2018 it received another boost, as Woori Bank, one of Korea’s leading banks, took over the MDI. As well as continuing its work with Cambodia’s rural communities, WB Finance is now looking to become one of the major players in the national market.
How to Maintain an Upwards Growth Curve?
With over 60 separate providers, microfinance is a crowded market in Cambodia and staying competitive is a tough task. For MFIs aiming to remain relevant to customers, there is the temptation to lower interest rates on loans to attract more business, but this erodes profitability. Meanwhile, over-indebtedness among customers is another major challenge and potential curb on growth, especially as financial literacy remains limited in Cambodian society.
Putting in place robust governance structures has therefore been a strategic goal for the government and National Bank of Cambodia. Over time, they have introduced stronger regulations to align the financial sector with international best practices and accounting standards that require rigorous monitoring of areas such as non-performing loan rates.
The latest step in establishing these solid, sustainable foundations for the sector was the introduction of IFRS 9 accounting standards, which require banks and MFIs to move from reporting on incurred credit losses to expected credit losses. The government set a deadline for all Cambodian financial institutions to comply with the new rules by 1 January 2019.
Tackling IFRS 9 With Temenos
The fast-approaching IFRS 9 deadline posed two significant challenges for WB Finance. First, the project team had to break down and understand the full requirements of the new regulations. Then, it needed to implement a solution capable of performing the calculations to meet IFRS 9 standards. To achieve these goals, WB Finance turned to Temenos for an upgrade of its existing Temenos Inclusive Banking core banking systems, including the addition of the new Temenos IFRS 9 module.
Ability to extract daily automated IFRS 9 reports
Meeting Demanding Deadlines
After kicking off the project in September 2018, WB Finance gave Temenos and implementation partner MCB Consulting Services Ltd [MCBCS] just four months to complete the installation. MCBCS took the lead and handled the configuration and testing of the new solutions, with Temenos support. Despite the tight timeframe, the upgrade was ready on-schedule and on-budget, without a single delay.
Mr. Chanveasna Heang continues: “We were extremely pleased with the solution delivery from MCBCS and Temenos. In the past, we have seen many other vendors miss deadlines and exceed budgets. This time, everything ran smoothly thanks to MCBCS’ clear understanding of our requirements and deep knowledge of the Temenos Inclusive Banking solutions, and also how technology can truly add as a business enabler.
“We recognised the new rules would be a steep learning curve for us but we knew Temenos had a proven track record helping many global banks to achieve IFRS 9 compliance, so they could guide us through the process. When we explored the out-of-the-box solution they were offering, we realized we had found just what we needed.”Mr. Chanveasna Heang, Head of Projects
Creating More In-Depth Reports
Using the Temenos module, WB Finance can now classify its assets as amortized costs or fair value contracts in accordance with IFRS 9 standards, before running impairment calculations to determine expected credit losses. By generating reports providing in-depth, forward-looking assessments of asset value within the Temenos solution, the MDI ensures that it can identify and take timely action in the event of non-performing loans.
4 months to complete the installation
Mr. Chanveasna Heang adds: “Without the Temenos solution, we would have to complete the reporting process manually by extracting data from Temenos Inclusive Banking and running the calculations using third-party software, which would take longer and introduce the risk of human error. Equipped with the Temenos IFRS 9 module, we gain the speed and accuracy of automation when preparing our financial reports.”
Looking Ahead to the Full Benefits of the Upgrade
By upgrading to the latest version of Temenos Inclusive Banking, WB Finance gained new capabilities that will help it to achieve operational efficiencies, improve customer service and seize competitive advantage. The MDI has already cut the time it takes to complete close-of-business processes by up to two hours.
Looking to the future, WB Finance is exploring features within the Temenos solution including the 360-degree view of individual customer data, which will enable employees to offer more relevant services and new Arrangement Architecture module workflows that will make it easier to develop and customize new loan and savings products. The MDI is also looking into the Temenos Integration Framework, which it can use to build collaborative projects with partner organizations.
“We are excited to learn more about what else we can achieve with our upgraded core banking solutions and hope to attend the Temenos Community Forum to learn more. Working with Temenos is ensuring that we meet our compliance goals and helping us to establish the robust, sustainable business processes we need to bring our services to rural communities across Cambodia.”Mr. Chanveasna Heang, Head of Projects