Metro Manila (CNN Philippines, November 5) — The Bangko Sentral ng Pilipinas is building a new credit scoring scheme for small and medium-sized firms as it looks to make credit more accessible even to mom-and-pop shops.
BSP Governor Benjamin Diokno announced Thursday that the regulator is in the early stages of its Credit Risk Database (CRD) for SMEs, hoping to diffuse the heavy risk weights assigned to them by banks when they apply for a loan.
The Magna Carta for MSMEs require all lenders to set aside 10% of their loan portfolios as credit to small businesses, which account for 99% of all local enterprises. However, some banks would rather pay the fine rather than lend to SMEs, thinking that they are “high risk” clients due to their relatively low capitalization and lack of credit history compared to the more stable big corporates.
SMEs also cannot provide collateral for loans –– a security which banks can seize if a loan becomes overdue.
“We envision the CRD to reduce over estimation of risk being loans by banks, because this will address information asymmetry,” BSP Acting Deputy Director Ellen Joyce Suficiencia said in a media briefing, adding that it should allow for more accurately priced loan rates for borrowers.
“If you are an SME that’s a categorized as in the ‘lower probability of default’ group, then you should be able to get better loan terms from your bank,” she added.
The scoring system, which is eyed in place in the next three years, will collate data submitted by financial firms and submitted periodically to the BSP. The database will then run the credit scoring and compute how likely the small business will default on their debt.
Preparatory work for the database is underway, with the BSP tapping the help of the Japan International Cooperation Agency.
Data collection begins in the third week of November, Diokno said, with an initial group of 18 banks providing both financial and non-financial data about the SME applicants. The data will then be stored as anonymous entries to the BSP database.
The first batch of lenders joining the project 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 the First Consolidated Bank.
The credit scoring model will be crafted and launched in the third quarter of 2021, and will be refined and reevaluated until March 2023 the latest.
