While data is a very wide topic, for the purpose of this debate we would focus on alternate data mainly. The use of alternate data in SME finance has the potential to revolutionize access to credit, particularly for underserved businesses. However, it also comes with challenges related to privacy, fairness, and regulatory compliance.
This debate would consist of two teams (consisting of 3-4 speakers on each side) debating and discussing opposing arguments. The session would be moderated actively in order to keep the interventions brief, lively and ignite core issues to be discussed.
Team 1: Supporting usage of alternate data and advocating for its scale adoption. Potential for leveraging non-traditional data sources such as utility payments, e-commerce transactions, and digital footprints, lenders can assess creditworthiness more holistically and efficiently. This not only accelerates loan processing but also reduces costs, enabling SMEs to access funds quickly. Additionally, alternate data promotes financial inclusion by bringing informal or digitally active SMEs into the formal financial ecosystem, while also allowing lenders to customize financial products to better suit the unique needs of small businesses. Overall, it fosters innovation, supports economic growth, and empowers SMEs to thrive in competitive markets.
Team 2: Opposing using of alternate data and its scale adoption. Team can highlight that despite its potential, the use of alternate data in SME finance raises significant concerns around privacy, data security, and fairness. Non-standardized and potentially biased data sources, such as social media activity, may lead to flawed or discriminatory lending decisions. SMEs without a strong digital presence risk being excluded, further widening the gap between digital and non-digital businesses. Additionally, over-reliance on technology and algorithms can result in errors, while the lack of clear regulatory frameworks creates uncertainty for lenders. The cost of integrating alternate data systems and ensuring compliance with data protection laws adds further complexity, making it essential to address these challenges before fully embracing alternate data in SME finance.
The speakers in this session are very lively and challenge each other's arguments openly. Hence the choice of speakers is key with active moderation.
