There is a shortage of credit data on MSME borrowers — also referred to as ‘thin file’ borrowers, since MSMEs lack access to traditional credit facilities through banks and other traditional lenders. The authors in this World Bank Group blog say that this information asymmetry has paved the way for identifying new ways to assess the creditworthiness of MSME and other thin-file borrowers—including the use of alternative data in credit reporting.

They say some of the key policy areas and issues to look at when promoting alternative data is through improving the availability and accuracy of the information being collected and expanding credit information sharing. Other methods such as enabling cross-border data exchanges, balancing integrity, innovation and competition as well as providing data privacy and cybersecurity are additional policy areas to review.