much emphasis being placed on the importance of an independent credit
bureau in helping reduce non-performing loans, such an initiative does
not seem to be taking off in Singapore.
Singapore’s SME Credit Bureau launched its
‘live’ online database in September 2005, response
from the country’s banking industry has been lukewarm. DBS is
the only major bank planning to link up to the database while most
other banks are still assessing its usefulness.
Chartered (Singapore) is one bank still mulling its options. Its
general manager for SME banking, Ho Twon Bah, says his bank is open to
linking up to the bureau’s database and is currently
“monitoring and assessing the benefits of the (SME) credit
bureau”. Ho adds, “Third party (risk index) is
helpful but the bank should not abdicate its responsibility in
assessing the credit.”
OCBC is in a
similar position. Sng Seow Wah, the bank’s head of enterprise
banking, says, “Information in a credit bureau is just one of
the many factors that banks take into account when reviewing a
company's viability for credit.” He explains that apart from
financial information, banks also consider other factors such as the
company’s business model and its viability.
‘live’ database, which stores credit histories of
local enterprises, allows banks to retrieve credit reports that are
updated instantly. Two kinds of credit report are available –
a basic commercial report and an enhanced commercial report that
contains two risk indices developed by Infocredit Dun and Bradsheet
(D&B), which runs the credit bureau.
scores and indices will enable lenders to understand
borrowers’ credit standings objectively. They will also add
value to our clients’ credit (application)
process,” says Audrey Chia, Infocredit D&B
(Singapore)’s director of product development and marketing.
Chia adds these credit indices also help banks speed transaction
processing and increase decision consistency by reducing subjectivity
in the credit analysis process.
One of the indices,
Paydex, is a single numerical value computed based on the sizes and
promptness of loan payments that reflects a company’s payment
behavior. The other index, the New Credit Risk Index, assesses various
aspects of an enterprise such as its financial information and company
size, and assigns it a risk class indicating the business failure rate
in that class.
Such credit reports and indices are
common in other countries such as the United States and are widely used
by banks there in their SME lending technologies. Banks here in
comparison are less willing to make use of these data supplied by third
With most banks here still using
such SME lending technologies that are relationship-, financial
statement- or asset-based, it is not surprising that
Infocredit’s credit reports and indices have not caught on.
These are more heavily used in credit-scoring models, which are
statistically based. Ho says, “Statistical lending
tends to be for much smaller amounts”. Most credit-scoring
models in the US on the other hand are designed for use for only up to
$250,000. Ho adds that his bank usually deals with SME loans that are
in the millions.
But Infocredit’s credit
reports and indices could yet gain popularity. With increasing
competition for SME clients, some banks are already targeting the lower
value segment that can be better analysed using credit-scoring models.
Banks may find relying on data provided by third-party vendors more
cost-effective than to wholly collect them in-house. - H.W. Ng