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The database will use financial statements and loan default information held by financial institutions to generate credit scores and better estimate default risk.
The BSP (Bangko Sentral ng Pilipinas) is in the process of building a credit risk database for SMEs, which it says will encourage lenders to issue more loans with minimum collateral requirements.
BSP is said to be working with JICA (Japan Agency for International Corporations) to collect data and develop a new credit rating model for SMEs, with the help of local banks, 18 of which have agreed to provide data to build the new database.
These include state-owned Land Bank, Development Bank of the Philippines, Security Bank, and RCBC, among others.
“The project for small and medium enterprises will provide banks with tools to support risk-based loans. The loans at the moment are based on collateral, ”said BSP Governor Benjamin Diokno. “Once completed, the credit ratings will not be based on collateral but on some data that will be collected.”
The data collection is expected to end in 2021 and result in a database consisting of anonymously collected financial statements and loan default information held by financial institutions.
Once operational, the database will generate credit scores for SMEs, reducing lenders’ reliance on collateral and helping them better assess the borrower’s credit worthiness and estimate the probability of default.
The BSP has asked more local banks to join the initiative and to provide the data necessary to develop a complete database.
“We would like other banks to join us as well to make the database more complete. They are very encouraged by this because it will actually help them drive more lending to small and medium businesses, ”Diokno said.
Additional information from Philstar, ABS-CBN News.
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Regulation Asia will host a webinar on November 18 that will cover credit risk and collateral management. Find out more here.
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