BSP creating database to help SMEs with good track records obtain less costlier bank loans

MANILA, Philippines—The central bank will create an information storehouse that will help small and medium enterprises with good prospects and reliable credit track records obtain cheaper loans from participating banks, according to the country’s chief financial regulator.

At a press briefing, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the proposed credit risk database will generate statistical credit scoring models and can be used by banks to assess SMEs’ capacity to service their loans.

The goal is for each firm to be given a credit score based on several criteria which will help banks price their loans according to the borrowers’ risk profile.

Borrowers with a history of paying loans on time will be able to borrow at lower rates, while those with problematic records will have to pay a premium on their loans.

“The credit risk database is part of our strategic initiatives to improve SMEs’ access to finance and to support their post-pandemic recovery,” he said. “The BSP is committed to building a sustainable SME financing ecosystem which is a key driver of inclusive growth.”

According to the central bank, this credit risk database will promote access to finance of well-managed SMEs by providing banks with a robust credit assessment tool that enables risk- based lending and reduces dependence on collateral for credit decisions.

The database is a joint initiative of the BSP and the Japan International Cooperation Agency (Jica). The BSP is working closely with experts from Japan through the CRD-Project Implementation Unit under BSP’s Center for Learning and Inclusion Advocacy.

The BSP said that 18 banks are participating in the project. These are the Land Bank of the Philippines, Development Bank of the Philippines, Security Bank, Rizal Commercial Banking Corporation, Philippine Business Bank, Sterling Bank of Asia, China Savings Bank, Malayan Bank, Philippine Savings Bank, UCPB Savings Bank, Producers Savings Bank, Sun Savings Bank, AllBank, Overseas Filipino Bank, CARD SME Bank and First Consolidated Bank.

Diokno explained that the database will contain “anonymized” credit risk information of SMEs such as data from financial statements, default- related data and non-financial data.

This database will address SMEs’ reluctance to apply for bank loans due to lack of credit history and acceptable collateral; as well as banks’ perception that SMEs in general are high risk.

The project implementation phase will run for three years, with the launch of its credit scoring services targeted in the first half of 2023.

Part of the project deliverable is the governance and business model for credit risk database’s permanent operations. Data collection from the initial list of participating banks will start in mid-November this year.

TSB