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MAS, UNDP launch Universal Trusted Credentials Initiative for MSME Financing

credentials sme

Today the United Nations Development Programme (UNDP) and the Monetary Authority of Singapore (MAS) unveiled the Universal Trusted Credentials (UTC) Initiative. The aim is to make standardized data available for micro, small and medium-sized enterprises (MSMEs) which will make financiers more willing to provide funding.

Smaller businesses face a financing gap in general working capital finance as well as trade finance. The World Bank estimates the total MSME financing gap at $5.2 trillion annually.

Narrowing the window to purely trade finance, the Asian Development Bank estimates the gap at $2.5 trillion. That’s up by more than 40% in the past three years. 

This isn’t the first time such a solution has been proposed. In 2020 amid the pandemic, the G20 proposed a similar concept, the Global Value Chain (GVB) Passport. Apart from the G20 it had backing from Business at OECD (BIAC). However, we don’t believe it moved forward.

whitepaper published today by the UNDP focuses on standards for the data to be included in the UTC credential. That includes data such as company names and identifiers, tax references and the like. Companies choose whether or not to share information. One of the goals is to look for unconventional data sources such as whether a company pays its taxes on time.

Apart from standards, there’s a need to establish trusted data providers in each jurisdiction. Central banks, institutions and agencies will form a steering committee to identify suitable providers.

An emerging market focus

According to the World Bank, East Asia and the Pacific accounts for 46% of the finance gap. The initiative is starting with a trial in conjunction with the Bank of Ghana (BoG), the Global Legal Entity Identifier Foundation (GLEIF) and the SME Finance Forum. 

Other planned pilot jurisdictions in addition to Ghana include Cambodia, Indonesia and Rwanda.

“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,” said Sopnendu Mohanty, Chief FinTech Officer, MAS. “This is an important opportunity to revolutionise the way MSMEs can access essential financing and financial services, particularly in emerging markets.”