32 Banks Tap BSP's Credit Risk Database

The central bank said there are currently 32 large banks and rural banks participating in the credit risk database (CRD) scoring model developed with the Japan International Cooperation Agency (JICA) to improve small and medium enterprises' (SMEs) access to loans by helping banks assess borrowers’ credit worthiness.

Photo Insert: Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla (fourth from left) spearheaded the launch of the Credit Risk Database Scoring Model with (from left) Monetary Board Member Peter B. Favila, Japan International Cooperation Agency Philippines Chief Representative Sakamoto Takema, Japanese Ambassador to the Philippines Koshikawa Kazuhiko, BSP Deputy Governor Bernadette Romulo Puyat, and Deputy Governor Eduardo G. Bobier.

During the CRD scoring model’s launch, Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla and JICA Chief Representative Sakamoto Takema announced that JICA will also be extending its technical assistance to the project for another year or until March 31, 2024.

Medalla said one “very important” feature of the CRD scoring model is that it is using data based on anonymous equations and data points.

“The CRD scoring model will contribute to bridging the funding gap to SMEs but it will also enhance credit risk management in financial institutions,” he said. With JICA’s continued partnership, Medalla said they will “keep CRD project ever relevant and responsive” in the next years to come.

The CRD uses statistical credit scoring models to predict the probability of an SME to default. The credit scoring model was developed for three years, since 2020.

Meanwhile, Takema announced Tuesday that the Philippines and JICA have agreed to not only extend the project period by another year but also decided to support Phase 2 of the CRD project to further strengthen its effective operation. The Philippines is the first country outside of Japan to adopt the CRD.

The project extension will ensure that credit risk assessment and risk-based lending versus collateral-based lending will continue to prosper and help more SME funding, he said.

About 99.6 percent of all registered businesses in the country are SMEs and they provide about 64.9 percent of the total workforce.

Basically, since the CRD scoring model will help creditors calculate the probability of default, it will also help SMEs get a loan while CRD will ensure better management of risks by banks.

Rizal Commercial Banking Corp. President and CEO, Eugene S. Acevedo, said that as the first bank to participate in the CRD, they recognized early on a need to develop the SME sector because of its crucial role in GDP growth and employment.

“The SME sector faces certain challenges and risk factors that banks usually do not fully understand and appreciate,” said Acevedo, and the on-the-spot CRD scoring model will speed up the assessment side and internal risk validation.

“The best part is that customer experience for SMEs will improve,” he added.

In December 2020, the BSP and JICA first launched the CRD which was intended to serve as an economic stimulus as it will increase the distribution of SME funding. The project, started as a JICA study in 2016, initially has 17 local banks participating which then expanded to 32 by 2023.

WEEKLY FEATURE : MVP Group Keeps Lights On During Pandemic