The SME Dilemma:  Eliminating Information Asymmetries – A Challenge and Opportunity for the Business Information Industry

BIIA had invited Tony Lythgoe, from the IFC (World Bank Group) to provide an overview of the key findings from recent IFC work on the impact of information asymmetries on SME finance in developing countries, particularly the report titled Scaling-Up SME Access to Financial Services in the Developing World’ released in October last year.

The IFC’s primary objective is Financial Infrastructure Development to improve access to finance for individuals and businesses.  At the root of the problem is the fact that financial sector penetration is only 5% to 25% vs. 70% to 90% in developed markets.   Banks in emerging markets tend to focus on large commercial and top retail clients. 

Mr. Lythgoe gave an overview of the current work of the IFC:  The IFC has been very active in creating a broader public awareness of credit reporting and to work on global standards.  He stated that the paradigm was shifting from a financial services only perspective to a systems point of perspective, embracing the concepts of full file reporting, financial inclusion of Micro and SME, the prevention of over indebtedness and responsible lending.

The IFC is also deeply involved in the G20 SME Access to Finance Initiative.  Tony Lythgoe provided an update of the status of this important initiative and credit reporting case studies which were selected as part of the ‘stock taking’ exercise by the IFC.   Four of the case studies were presented at the BIIA Forum 2011:  SME Corp. Malaysia; Bank Negara, Malaysia, Credit Bureau (CBS) Singapore, SMERA India.  

Suggested action and policy recommendations to the G20 can be summarized as follows:   ‘Establishing a solid financial infrastructure should be a priority in the financial development agenda of most developing countries.’   ‘The aim should be to develop a comprehensive credit reporting system that covers both personal and commercial credit information …. positive as well as negative …. from all relevant players.’

What are the implications for credit reporting?   There will be plenty of opportunities for information providers.

To access Tony Lythgoe’s presentation click on the attachment:  BIIA Forum 2011 Hong Kong 2011