Universal Trusted Credentials Launched to Improve MSMEs’ Access to Lendingby Fintech News Singapore November 14, 2023
A collaborative effort involving the United Nations Development Programme (UNDP), the Monetary Authority of Singapore (MAS), the Bank of Ghana (BoG), the Global Legal Entity Identifier Foundation (GLEIF), and the SME Finance Forum has resulted in the launch of Universal Trusted Credentials (UTC).
This global initiative has been introduced to ease access to financing for micro, small, and medium-sized enterprises (MSMEs) worldwide.
The UTC initiative offers a comprehensive framework for assessing an MSME’s creditworthiness, drawing from both traditional and alternative data sources. These sources encompass a wide array of information that paints a more detailed picture of an MSME’s financial standing.
Source Data, for instance, encompasses information that can be reliably verified from multiple sources, including utility providers, trade platforms, national registries, and data related to trade flows, buyer-seller relationships, as well as the prompt payment of utility and telecom bills.
Complementing this, Derived Data integrates additional indicators into the evaluation, such as an MSME’s commitment to improving financial literacy and its track record of making timely repayments. Taken together, these factors provide a holistic assessment of the MSME’s capacity to repay small loans, thereby boosting confidence among financial institutions.
The UTC initiative’s primary focus lies in enhancing the capabilities of MSMEs and streamlining access to data and financing through strategic collaborations in key emerging markets. This multifaceted approach includes various components that contribute to its overall effectiveness.
Trusted Data Providers, including UNDP, MAS, and their partners, will expand their existing capacity-building initiatives to foster a network of dependable data source providers. These providers will contribute to the creation of alternative data sets for UTC. To identify reliable data sources and evaluate potential international UTC issuers, a steering committee comprising central banks, financial institutions, and multilateral organizations will be formed.
Pilot Testing represents another crucial aspect of the initiative. UNDP, MAS, and their partners will enhance the UTC platform, initially piloted in Ghana, to accommodate a broader range of alternative data. Collaborative efforts with central banks and financial institutions in other emerging markets will be undertaken to refine and test the application of UTCs across international borders.
In addition, Standards Development will play a pivotal role in ensuring the initiative’s success. UNDP, MAS, and their partners will collaborate with a diverse group of international stakeholders spanning both the private and public sectors. Their goal is to establish a universal UTC standard that ensures seamless international interoperability and adapts to the evolving needs of the industry.
A whitepaper on the UTC developed by UNDP is available here.
Marcos Neto, Assistant Secretary General and Director, Bureau of Policy and Programme Support, said,
“The Universal Trusted Credentials initiative has the potential to revolutionise how we tackle the global MSME financing gap in a way that empowers SMEs to support business growth and their green transition, encourages financial institutions to reach to new clients, leaves no one behind, and supports a greener, more sustainable economy.
This is a key priority for UNDP, which already works with thousands of MSMEs across the world on digitalisation, access to financing and integration of sustainability practices, and recognises the role that automated, data-driven digital solutions could play in driving scale.”
Sopnendu Mohanty, Chief Fintech Officer, MAS, said,
“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.
We are excited to join hands with the UNDP, central banks, financial institutions, fintechs and trusted national data partners in empowering each MSME with a self-owned standardised set of UTC credentials.”