HKMA Chief Hints at New Data Platform to Facilitate SME Lending

Banks can more precisely and objectively assess SME credit risk with access to more data, such as trading and turnover statistics, says HKMA chief Eddie Yue.

The HKMA (Hong Kong Monetary Authority) is working on a "new idea" that is aimed at enabling SMEs to share their data with banks more easily, in a bid to facilitate their access to financing.

"To address the financing challenge of SMEs, data is the key," HKMA chief Eddie Yue said in a blog post on Tuesday (27 October).

"If there is an easy and effective way for SMEs to share their up-to-date business data, such as monthly or even daily trading and turnover statistics, banks can have a more thorough understanding of the loan applicants' latest business activities and prospects."

Yue laments that SMEs tend to face difficulties when trying to securing a loan, especially when they are smaller or have a shorter operating history. Typically, banks control credit quality by requiring SMEs to first provide their financial information in order to assess their repayment ability.

"However, such financial data often has a time-lag issue and cannot provide a complete picture, making it difficult for banks to accurately assess the SMEs' repayment ability," he said. "Thus, as part of risk management, banks tend to adopt a more prudent stance in handling SME applications and require SMEs to provide collateral or guarantees. This poses a big challenge for SMEs in securing loans."

According to Yue, banks will be able to perform more precise and objective credit assessments with access to more data from SMEs, which in turn will be able to access credit more easily and quickly.

He says the data is available, albeit scattered across different platforms. "What is missing is a centralised, efficient and secure channel whereby SMEs can avail themselves fully of those data in supporting their loan applications."

Yue notes that banks have started embracing new technologies such as artificial intelligence and cloud computing. However, without the support of data, even the best technologies cannot be fully exploited to help finance SMEs.

"We need to expand our financial infrastructure so that SMEs can share their data with banks at their discretion," he said, adding that this will enable banks to apply data science in their SME credit assessments.

"The result is that banks can better manage their risks while also helping SMEs to get a loan more easily. It is a win-win outcome for both banks and SMEs," Yue said. "We are fleshing out the details of this new idea and hope to share more with you soon."