UNDP, MAS and partners launch Universal Trusted Credentials Initiative for MSME Financing

UNDP, MAS and partners launch Universal Trusted Credentials Initiative for MSME Financing

Singapore, 2023 14 November… United Nations Development Program (UNDP), Monetary Authority of Singapore (MAS), Bank of Ghana (BoG), Global Legal Entity Identification Fund (GLEIF) and SME Finance ForumCollectively referred to as UNDP, MAS and partners. announced today the launch of Universal Trusted Credentials (UTC), an open global initiative to improve access to finance for micro, small and medium-sized enterprises (SMEs). UNDP has prepared a background paper on UTC that can be downloaded here .

2 SMEs account for up to 90% of businesses and 70% of employment worldwideILO, https://www.ilo.org/infostories/en-GB/Stories/Employment/SME#power-of-small . Globally, they still face significant challenges in accessing affordable financing to grow their businessesThe World Bank estimates that SMEs face a US$5.2 trillion financing gap each year, even though they are receiving more attention. World Bank, IFC SME Finance, https://www.worldbank.org/en/topic/smefinance . These challenges are compounded when SMEs take advantage of cross-border opportunities that require them to navigate different regulatory frameworks, financial systems and lending norms.

3 The UTC initiative offers a framework for developing robust credentials for MSMEs’ eligibility for finance based on traditional and alternative datasets:

  • Source data: information about the entity can be checked from various sources, such as utility service providers, trading platforms, national register, to include data on trade flows and trade concentration of buyers and suppliers, active and timely payment of utility and telecommunication bills. .
  • Derived data: Combined with source data, derived data or additional indicators such as SMEs’ willingness to advance in financial literature and past repayment behavior of SMEs help to determine MSMEs’ intention to pay. This gives financial institutions more confidence that MSMEs can be trusted to repay small value loans.

4 The UTC initiative will focus on increasing the capacity of SMEs and improving access to data and finance through collaboration in key emerging markets.

  • Trusted data providers: UNDP, MAS and partners will continue efforts to strengthen their existing capacities to develop an ecosystem of appropriate data source providers to contribute to the development of alternative datasets for UTC. A steering committee of central banks, financial institutions and multilateral agencies will be investigated to identify suitable reliable data sources and to verify international UTC issuers.
  • Pilot: UNDP, MAS and partners will improve the UTC platform, currently being tested in Ghana, to provide a broader set of alternative data. Work will continue with central banks and financial institutions in other emerging markets to refine and test the cross-border use of UTC.
  • Development of standards: UNDP, MAS and partners will work with international partners, including the private and public sectors (see Annex A for a full list), to develop a common UTC standard that is internationally interoperable and responsive to changing industries.

5 Marcos Neto, Assistant Secretary-General and Director of the Office of Policy and Program Support, said: “The Universal Trusted Credentials initiative has the potential to fundamentally change how we address the global SME financing gap in a way that SMEs can support business growth and development. the green transition encourages financial institutions to reach new customers, leaves no one behind and supports a greener, more sustainable economy. This is a key priority for UNDP, which is already working with thousands of SMEs around the world to integrate digitalisation, access to finance and sustainability practices, and recognizes the role of automated, data-driven digital solutions in scaling up.

6 Mr. Sopnendu Mohanty, Chief Financial Technology Officer, MAS, said, “UTC is a new opportunity to expand the traditional collateral or asset-backed financing that almost all SMEs face, towards a holistic approach that includes the autonomous non-financial and financial powers that every SME should have. We are excited to partner with UNDP, Central Banks, Financial Institutions, FinTechs and trusted national data partners to empower every MSME to have their own standardized set of UTC credentials. This is an important opportunity to transform SMEs’ access to mainstream financing and financial services, especially in emerging markets. With the emergence of a new global consensus on UTC, many more innovative solutions can be created that will increase the impact of finance embedded in FinTech, digital banking and the cross-border growth of many economies.

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Godfrey Kemp

"Bacon fanatic. Social media enthusiast. Music practitioner. Internet scholar. Incurable travel advocate. Wannabe web junkie. Coffeeaholic. Alcohol fanatic."

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