BSP, Jica launch credit database to help small firms acquire bank loans

MANILA, Philippines—The Philippines’ small entrepreneurs, though employing at least a third of the country’s total workforce, account for less than a tenth of transactions in the banking industry and even less in terms of actual funds lent out, according to the head of the central bank.

This, said Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, showed a critical need for centralized credit risk database to improve access by micro, small and medium enterprises (MSMEs) to bank loans they need to support operations and grow.

On Thursday (Dec. 10), the central bank launched the Credit Risk Database project, which is a joint initiative of BSP and Japan International Cooperation Agency (Jica).

The goal of the undertaking is to improve access to finance among small firms by promoting risk-based lending and reducing dependence of banks on collateral during credit evaluation.

This will be achieved through the use of statistical credit scoring models to be developed on the database which can predict the probability of a small company to default. The augmented access to credit of entrepreneurs is expected to result in their enhanced productivity and competitiveness.

The credit database, Diokno said, “is a tangible step in building a sustainable financing ecosystem” for MSMEs, which the BSP chief said was “the backbone of our economy and the driver of the country’s inclusive economic growth.”

Lack of access to credit remains a fundamental obstacle to the further development and sustainability of small companies.

The BSP chief explained that this is primarily attributed to borrowers’ reluctance to apply for bank loans due to lack of credit history and acceptable collateral, as well as banks’ perception that these smaller firms carry higher risks.

Small firms took the brunt of the pandemic’s economic impact as lockdowns forced many of them to cease or limit operations.

According to the BSP, both the government and private sector should provide much-needed support to small companies to help them withstand the crisis and eventually recover and thrive beyond this pandemic.

Thursday’s virtual launch was attended by representatives from Jica, the Chamber of Thrift Banks, the Bankers Association of the Philippines, and the Rural Bankers Association of the Philippines.

Also there were as representatives of the 17 pioneer participating banks.

These are the Land Bank of the Philippines, the Development Bank of the Philippines, Security Bank, Rizal Commercial Banking Corp., Philippine Business Bank, Sterling Bank of Asia, China Bank Savings, Malayan Bank, Philippine Savings Bank, UCPB Savings Bank, Producers Savings Bank, Queen City Development Bank, Wealthbank, Sun Savings Bank, AllBank, CARD SME Bank and First Consolidated Bank.

Edited by TSB