SMEs with good track records to enjoy cheaper loans

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.

In a press briefing, Bangko Sentral ng Pilipinas Gov. Benjamin Diokno said the proposed credit risk database would generate statistical credit scoring models that banks could use to assess the capacity of SMEs to service their liabilities.

The goal is for each firm to be given a credit score based on several criteria to 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 would 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.