Could Open Data address the SME Funding Gap?
Inspired by the early success of Open Banking, in a paper this week the Bank of England(BoE) explores a vision for open data across the whole economy. The Bank thinks it could help close a £22bn funding gap for Small and Medium Enterprises (SMEs) in that country.
Data has unique properties that make it more beneficial to access rather than own: generally, use by one party does not make it less useful for another, and its value for analysis is maximised when shared. Open Banking has demonstrated that it is possible to have portable, secure financial data that can move around the financial system in a standardised way.
In China we have seen how shared structured data has helped ease access to credit for SMEs – which can otherwise be difficult due to the heterogeneity of business models.
The BoE’s proposal would address the “access to data” problem with an open data platform and ‘portable credit file’. This means SMEs would be able to harness the power of their own data to apply for credit and improve transparency for lenders.
The paper highlights that to succeed, the platform would need identity verification – with the Legal Entity Identifier (LEI) playing an important role – data and messaging standards, and strong platform integrity.
Industry surveyed for the paper suggested that the proposal is achievable, subject to agreeing on a universal set of standards and standardising some of the data fields.
Read more and access the report here.