Banks urged to use ‘alternative data’ to assess borrowers’ creditworthiness

The Bangko Sentral ng Pilipinas (BSP) has urged banks and financial institutions to use “alternative data” such as social media information to determine the creditworthiness of individuals and companies, as part of efforts to widen the industry’s reach.

Traditionally, banks and financial institutions predict risks by using data from clients’ financial transactions as well as information from credit bureaus, which unfortunately do not capture the data of those who remain unbanked.

Thus the suggested use of alternative data that can be used to determine an ability to pay loans, for instance, such as online transactions and mobile and utilities data.

“With alternative data, a more complete picture of the client is painted thus allowing for more individuals and businesses to be assessed,” BSP Governor Benjamin Diokno said.

The BSP said in a statement that the use of alternative data is expected to help onboard more Filipinos and micro, small and medium enterprises (MSMEs) in the financial system and improve financial inclusion in the Philippines.

Additionally, this may also help improve financial services and their delivery to consumers, especially since many Filipino adults and MSMEs still do not have or have little credit history. INQ