MAS, UN agency launch global initiative to boost micro, SME financing

THE Monetary Authority of Singapore (MAS) and the United Nations Development Programme (UNDP) have launched an open global initiative known as Universal Trusted Credentials (UTC) to improve micro, small and medium-sized enterprises’ (MSMEs) access to financing.

This was also done in partnership with the Bank of Ghana, Global Legal Entity Identifier Foundation, and the SME Finance Forum.

The UTC initiative proposes a framework for creating credentials that characterise an MSME’s financing worthiness based on both source and derived data sets.

Under source data, information about an entity may be verified from a variety of sources such as utility providers, trade platforms and the national registry. This will include data on trade flows, trade concentrations of buyers and suppliers, as well as the active and timely payment of utilities and telco bills. Coupled with this source data, derived data or additional indicators – such as willingness to upskill financial literacy, or past repayment behaviour – would help to derive an MSME’s “intent to pay” track record. 

This would give financial institutions greater confidence that an MSME can be trusted to pay back the small value loans provided, said MAS and UNDP in a joint press statement on Tuesday (Nov 14).

At present, the UTC is tested in Ghana, following which central banks and financial institutions in other emerging markets will fine-tune and test its application across borders.

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MAS, UNDP and their partners intend to extend their existing capacity-building efforts to develop an “ecosystem of suitable data source providers that would contribute towards the creation of alternative data sets for UTC”.

This includes exploring a steering committee of central banks, financial institutions and multilateral agencies, with the aim of identifying suitable data sources and vetting international UTC issuers. They also intend to collaborate with international partners across both private and public sectors to develop a common UTC standard for international interoperability.

“The UTC represents a game-changing opportunity to augment the traditional collateral or asset-backed financing that almost all MSMEs face, towards a holistic approach that includes self-owned non-financial and financial credentials that each MSME should possess,” said MAS chief fintech officer Sopnendu Mohanty.

“With a new global consensus around the UTC, there can be many more innovative solutions which will supercharge impact financing, embedded FinTech, digital banking and cross-border growth for many economies.”

Amendment note: An earlier version of this story carried a typographical error that incorrectly referred to micro enterprises in MSMEs as macro enterprises.