BY AIAN GUANZON
Earlier this month, Asialink approved an exploration project on alternative credit scoring for evaluating small businesses. The goal: to approve more loans—or decrease the decline rate. The main idea is simple. If small businesses are rejected on their loan applications due to the lack of formal documentation that lenders traditionally require, alternative credit scoring allows lenders and borrowers to consider other available documents. For example, proof of e-wallet transactions could be used in place of months of bank statements. This is the focus of my project.
Lending companies have been shifting from traditional, interview-based underwriting to more objective models for evaluating credit risk (Einav et al., 2013). With the rise of newer credit-scoring technologies and the increasing demand for stronger risk management, telecommunications behavior-based credit scoring—commonly called telco scoring—has grown more popular than when it first emerged.
Alternative credit scoring helps address the gap in assessing the creditworthiness of unbanked or underbanked loan applicants—those with little to no credit history or basic banking footprint. Telco scores may include data such as airtime consumption, text message activity, social network usage, type of account (prepaid or postpaid), network brand, location, time of transactions, and airtime or plan amounts. This differs from telco payment behavior scores, which are specifically about payment behavior toward telco products and services.
Micro, small, and medium enterprises (MSMEs) play a crucial role in strengthening the Philippine economy. Beyond income generation, MSMEs drive job creation and increase market competition—key factors in economic growth. According to the Philippine Statistics Authority (PSA) 2023 List of Establishments, 99.25% of the country’s 1.2 million registered businesses are MSMEs, with microenterprises making up 90.43% and small enterprises 8.82%. These businesses generated 5.7 million jobs, accounting for 60.21% of the country’s total employment. PSA’s 2022 annual survey also showed that MSMEs contributed P9.2 trillion, or 38.88%, of the total revenues from all establishments.
Despite their contributions, many MSMEs still cannot get past traditional credit evaluations. A report from the Bangko Sentral ng Pilipinas (BSP) revealed that only 1.82% of the P10.8 trillion loan portfolio of big banks was allocated to MSMEs as of June 2024. BSP Circular No. 625 (October 2008) defines MSMEs based on asset size (excluding land), with micro businesses holding assets of P3 million or less, small businesses between P3 million and P15 million, and medium businesses between P15 million and P100 million.
“It is our privilege to continuously serve MSMEs through financing, knowing how important they are to our community and economy,” said Asialink President and CEO Samuel Z. Cariño. “We are currently doubling down on research and projects that will help us support more MSMEs,” he added.
The expected outcome of my study is to develop an alternative credit scoring system for lenders—bank or non-bank—tailored to the available data from MSME borrowers. This system should allow more MSMEs to access substantial loans to grow or expand their businesses. I estimate that 20% of MSMEs who are usually declined could get another shot at approval once this is explored and implemented. But exploration is only the beginning. Much still needs to be done to make this a reality. The participation of businesses and other lenders across the financing ecosystem will be critical to the project’s success.
If you’re a small business owner struggling to access credit or funding, consider financing specific business needs instead. For example, if you need brand-new furniture or a motorcycle unit for logistics, and you’re concerned about the cash flow impact, look into furniture or motorcycle financing products as an alternative.
Hopefully, more efforts will go toward making credit more accessible to small businesses—especially those whose employees rely on the business’s income to support their families. A system or technology that brings clarity and certainty to both lenders and borrowers can make this possible. A good deal, indeed.
