Singapore, which is in the running to be the world's fastest-growing economy this year, is the nation with the most business-friendly regulations (and, where we at FICO headquarter our Asia Pacific operations). For the fifth year in a row, the World Bank and International Finance Corporation ranked Singapore as the easiest country in the world to do business in their recently released annual "Doing Business" report.
A worthy accolade, to be sure. But, it’s important to note that Singapore didn’t rank at the top of every category.
Most importantly, Singapore needs to improve its ranking in ease of accessing credit. We currently are ranked at No 6. Not bad. But not great either. This could mean possible scenarios of frustration for local businesses who are seeking credit for expansion, for multinational companies planning to set up shop and for consumers looking to spend.
Post crisis, the global credit market has shrunk. While the economies in most parts of the world are still stabilising, it’s important for progressing economies like Singapore to pave the way for a healthier economy that promotes growth, investment and development.
Not to imply that Singapore can fix the global markets and boost credit growth on its own. But we can ensure credit is easier to access at a local level, particularly for small businesses that are the backbone of strong economies. To do this, we need to do more to build a modern credit system based on objective, analytics-based lending decisions.
Ninety nine percent of the registered 160,000 enterprises in Singapore are small and medium-sized enterprises (SMEs), a great sign that entrepreneurship is alive and well. However, as Singaporean entrepreneurs strive to expand their enterprises onto the regional, or even global, stage, they are thrust into competition for precious capital and credit. How can we in the lending community help ease that access, without risking too much?
Lenders here use predictive analysis to get a fast, objective measurement of a would-be borrower's credit risk. They look at factors such as debt repayment history, retirement contributions, tax assessments and one's overall financial picture - and with SMEs, often that assessment is linked to the business owner's track record as a corporate citizen.
The Credit Bureau of Singapore recently partnered with FICO to offer the FICO® SME Score, a credit bureau score designed to assess the credit risk of small and mid-sized businesses. The tool can provide the much needed infrastructure and processes that allow swift and smart underwriting. It also can overcome historical challenges of insufficient data – particularly challenging here in Asia Pacific – and siloed decision-making – still a challenge for banks in Singapore, despite their savvy in other areas. In the end, we think this will help to provide more credit to worthy businesses and consumers.
You’ve heard this before on this blog – the right combination of tools and processes can pave the way for an economy that is robust, efficient and profitable.