BSP starts database project for SMEs

This month, Bangko Sentral ng Pilipinas (BSP) will begin collecting data for its three-year Credit Risk Database (CRD) project that will facilitate small and medium-sized enterprises (SMEs) access to financing from banks.

BSP Governor Benjamin E. Diokno announced Thursday that BSP, with experts from Japan, is developing a CRD to generate statistical credit rating models for banks to use to determine the ability of SME borrowers to pay off loans.

So far, there are 18 banks that will participate in the project.

“The actual data collection will begin in the third week of November,” Diokno said. “An orientation on the data collection process is being carried out for the officials of the 18 participating banks.” He said a credit rating model “will be built, validated and released” between the third quarter of next year through the first quarter of 2023.

“Before the project’s completion in 2023, a governance and business model will have been developed for the sustainable operation of the CRD,” said Diokno, whose six-year term ends in mid-2023.

“The CRD is part of our strategic initiatives to improve SMEs’ access to finance and to support their post-pandemic recovery. (We are) committed to building a sustainable financing ecosystem for SMEs, which is a key driver of inclusive growth, ”he said.

Basically, the CRD will address the “reluctance” of SMEs to approach a bank and apply for a loan due to their lack of credit history and acceptable collateral, and also because banks view SMEs as high risk.

Diokno explained that the data providers, these are the 18 banks, will prepare the data of their SME clients. “The data, which is anonymized, is periodically sent to the CRD for cleaning and consolidation. The CRD will then provide a credit rating for the financial institution, specifically, the probability of default for an SME. To assess the credit risk of current and potential borrowers, CRD members will initially receive independent rating software, ”he said.

Once completed, the CRD will boost the productivity and competitiveness of SMEs through better access to credit, support their post-pandemic recovery, and foster the overall growth of the SME sector, Diokno said.

“Banks, meanwhile, can use the CRD to supplement or validate their internal credit rating cards. This will improve your credit risk management. Banks can also take advantage of the data that the CRD will generate to formulate commercial strategies, ”he added.

The database is a joint project of BSP and the Japan International Cooperation Agency. The BSP is also working with other experts from Japan through the CRD Project Implementation Unit under the BSP Center for Advocacy for Learning and Inclusion.

The 18 banks participating in the project are the government banks Land Bank of the Philippines and Development Bank of the Philippines, and other private banks, namely: Security Bank Corp., Rizal Commercial Banking Corp., Philippine Business Bank, Sterling Bank of Asia, China Savings Bank, Malaysian Bank, Philippine Savings Bank, UCPB Savings Bank, Producer Savings Bank, Sun Savings Bank, AllBank, Overseas Philippine Bank, CARD SME Bank and First Consolidated Bank.