Credit scoring model for small businesses launched

The Bangko Sentral ng Pilipinas (BSP) and the Japan International Cooperation Agency (Jica) have jointly launched the Credit Risk Database Scoring Model to help lenders better assess the creditworthiness of small and medium enterprise borrowers, including those without credit history or adequate collateral.

According to BSP Governor Felipe Medalla, this latest tool for banks was intended to bridge the funding gap for micro, small and medium enterprises (MSMEs) while enhancing the credit risk management of financial institutions using a data-driven approach.

The scoring model is the main result of a three-year technical cooperation program between the BSP and Jica, and provides additional information for banks to assess the creditworthiness of MSMEs.

In a joint statement, Japanese Ambassador Koshikawa Kazuhiko said that ensuring that promising MSMEs would have access to appropriate financing was essential to fully harness the Philippines’ economic potential and realize its goal of financial inclusion.

In a related development, non-bank financial institutions (NBFIs) remain a key player in the Philippine lending industry as they account for nearly half of loans extended each year to MSMEs, according to Asialink Finance Corp.

Citing data from the Asian Development Bank (ADB), Asialink chief executive Robert Jordan Jr., said loans to MSMEs by microloan organizations, pawnshops and other NBFIs had topped $4.9 billion across the region in 2020.

Meager share

Jordan noted that banks had lent around $10.3 billion to MSMEs which—while bigger than the portfolio of NBFIs— comprised just 2.4 percent of banks’ MSME overall lending.

He said that in 2022, Asialink had released p10.5 billion in total loans, a 25-percent increase from the previous year. These were granted to about 24,000 Asialink clients nationwide, of which 70 percent were MSMEs.

The loans “gave them access to loans at a time when they desperately needed access to funds to keep themselves afloat amid a very challenging environment,” Jordan said.

Formed in June 1997 with a capitalization of just P3 million, Asialink now has over 800 employees, thousands of independent loan consultants and partner dealers, and more than 100 branches nationwide.

The company has lately been focusing on MSMEs who need loans using their used vehicles as collateral.