A priority initiative of the new digital payments transformation roadmap is to establish a credit risk database to improve the access to finance of micro, small and medium enterprises (MSMEs), according to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno.

Diokno in his message at a recent e-forum on the Philippine credit information system said one of the policy initiatives under the roadmap is the development of a credit risk database on MSMEs to “help inform credit assessments and reduce reliance of lending institutions on collateral.”

A credit risk database helps in the evaluation of SMEs’ credit worthiness and improves their access to finance by addressing the problem of information gap between MSMEs and financial institutions.

Diokno said the BSP believes a reliable and comprehensive credit information registry in the country is key to providing financial access to the unserved and underserved Filipinos.

“The BSP supports the creation of a credit information system in the country to address the need for reliable information on borrowers while ensuring the protection of consumer rights.”

He added that “this critical infrastructure will lower transaction and borrowing cost [and] it will also greatly improve the availability of credit to a wider range of the populace especially to micro, small and medium enterprises as well as other productive units which have yet to have access to financial services.”

The BSP chief said the agency is also collaborating with partners on other important projects that will facilitate access of MSMEs to credit.

He said BSP is promoting supply chain finance (SCF) in the banking sector, an innovative financing approach that “leverages on the receivables, inventory flows and supply chain relationships of MSMEs.”

Essentially, SCF provides efficient financing of the value chain by connecting buyers and sellers with financing institutions. Under this arrangement the buyer’s credit rating is utilized to allow buyers longer payment terms while suppliers are provided the option to receive payments earlier.

Diokno added that all of these initiatives are aimed at facilitating access to credit and reducing transactions cost.

“This shows that our commitment to pursue our financial inclusion agenda did not waver amid the COVID-19 crisis. We see this crisis as an opportunity to further our cause for greater inclusiveness.”

The BSP launched the Digital Payments Transformation Roadmap 2020-2023 last month with the aim to convert 50% of retail payments to digital platforms and increase the number of Filipino adults with transaction accounts to 70% by 2023.

The roadmap outlines priority policy initiatives geared toward building an efficient, inclusive, safe and secure digital finance ecosystem that supports the diverse needs and capabilities of individuals and firms, said Diokno.

The government official also urged the financial industry to use the opportunity provided by the current health pandemic to mainstream digitalization and accelerate financial inclusion by using advances in technology.

“Financial institutions may leverage on recent innovations to improve data collection and management including information sharing across the industry. All these are seen to equip lending institutions with more granular and valuable information in optimizing business opportunities, tapping new markets, and adapting to changes in the business environment.”