Banks need new model of assessing SME loan applications

It is sobering to read about the funding realities faced by small and medium-sized enterprises (SMEs) such as Mr Leong Yee Keong's (Risk-averse banking industry hurts SMEs; June 30).

These funding constraints constitute an Achilles' heel and are a drag on innovation capability building efforts.

It would appear that our banks' operating paradigms have not kept pace with digitisation and tech disruption, and are still stuck in old world paradigms, such as requiring private property or alternative ancillary businesses as loan collateral.

These are onerous and unsupportive of innovation capability building by our SMEs.

The time may be right for an overhaul and review of banks' scorecards and credit risk models used to assess SMEs' credit risk and loan applications.

In lieu of onerous measures traditionally used to assess SME loan applicants for credit worthiness, our banks should leverage the robust regulatory sandbox regime and other tools and resources put in place by the Monetary Authority of Singapore to unearth new and innovative alternatives to assess SME loan applicants and support innovation capability building by our SMEs.

Woon Wee Min

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A version of this article appeared in the print edition of The Straits Times on July 03, 2017, with the headline Banks need new model of assessing SME loan applications. Subscribe