Below are some definitions for terms commonly used in relation to microfinance.

Administration Fee

Fee paid to a financial institution for a service or product. All regulated institutions have to give you details of administration and other fees before your buy a service or product. These are sometimes called processing fees.

Adverse Action

The refusal to give credit, or change in the condition and terms of the credit or loan based on information contained in a credit report.

Code of Conduct

The rules and regulations that govern the operation of the credit reporting system. It is an agreement between the NBC and the Authorized Users.

Compound Interest

The interest paid not only on the original loan amount, but also on all unpaid interest. See “Intro to Microfinance” section for the difference between simple and compound interest


A person who purchases goods and services for personal use. Also known as a customer.

Cost of Credit:

The cost of credit shows you the real cost of borrowing. It is the difference between the amount you borrow and the total you will repay including the interest by the end of the loan period. For example, if you borrow $1000 at 10% interest for 2 years, with a $25 loan administration fee, your cost of credit is as follows:

$100 interest in year #1

$100 interest in year #2

$25 administration fee

= $225 total cost of credit.

Credit Bureau of Cambodia:

This is a credit reference agency that maintains information about individual borrowers’ credit histories and issues reports to MFI’s from whom customers borrower.

Credit History:

This tracks your record in repaying loans. Lenders use the Credit Bureau of Cambodia to check your credit history. It keeps files on individual borrowers, and uses the information it gets from lenders to determine each borrower’s credit history.

Credit Information:

Information about an individual’s economic and financial obligations, including payment history, guarantees, publically available information and any other relevant data for credit decision making.


This is when a payment or series of payments on a loan or mortgage are missed. The consequence of defaults is that it may result in an increased interest rate from your MFI, as well as a poor credit history reported to the CBC.

Exit Penalty:

This is a charge applied by a financial institution when you cash in an investment or repay a loan within a set number of years or before a specific date.

Fixed Rate:

This means interest is fixed at a particular rate over a fixed time. If rates fall you can miss out on the benefits. However, if rates rise, you will be happy to have a fixed rate.


This is a person who agrees to pay off a loan if the borrower fails to pay

Interest (loans):

This is the amount you pay to borrow money and is added to the loan. It is important that your know the difference between compound interest and simple interest.

Interest (savings):

You can earn interest on certain accounts. This money is added to your savings.

Negative Credit Information/Data:

Information about an individual’s overdue repayments, past due repayments, charge-off or loan defaults.

Positive Credit Information/Data:

Information about an individual’s loan size, maturity, terms and conditions and collaterals. As a borrower repays a loan on time, positive credit information is reported to the CBC.

Simple Interest: 

The interest paid on the original amount of the loan only. No interest is charged on the amount of loan interest that has been added up.