Business Credit Database Shifts Advantage to Low Cost Lenders

The credit database for small and medium businesses does not automatically reward every nonbank lender. It weakens one specific advantage held by the bank that manages a business account and observes its activity over time, while giving another lender a broader basis on which to offer credit. For credit providers, this can open a door to customers they could not reach before, but the same door opens to competitors and makes it easier for a borrower to compare prices. The possible outcome is therefore portfolio growth alongside spread compression, not clean growth. The lender that can turn portable information into profit will need low cost funding, efficient distribution, the discipline to reject a poor transaction, and the ability to collect when its risk model is wrong. Recent company reports show that the sector is far from uniform: some lenders finance working capital and short dated receivables, some rely on branches or merchant acquiring, and others finance real estate projects where collateral, budgets, and the developer matter more than a general database. The legislation is complete, but the available sources do not yet establish the operating timetable, scope of data, reporting sources, or consent mechanisms. This is a change in the competitive map, not a forecast of next quarter's earnings.

Portable information opens the door and lowers the price

The Bank of Israel announcement completing the legislation states the objectives directly: narrow information gaps, improve risk assessment, facilitate the entry of additional lenders, and lower financing costs for small and medium businesses. Until now, the bank managing the account has had an embedded advantage. It sees receipts, payments, overdrafts, facilities, and behavior over time. A competing lender can request statements and collateral, but collection is slower and can be incomplete. A shared database is intended to make part of that history portable.

That transition changes where the advantage sits. Possessing exclusive information becomes less important, while the ability to act on information becomes more important. A lender with a good rating system can identify a stable business that has not received a competitive offer from its bank. A lender with efficient sales can reach it at the right time. A lender with cheap funding can offer a price that justifies switching. Conversely, if several lenders see the same profile and compete for the same business, the price falls. Peninsula already describes competitive pressure that reduced the effective cost to clients and compressed industry margins. The database does not create that pressure, but it can accelerate it.

Better information does not make credit safe. It improves the starting point for underwriting and reduces search costs. A credit cycle can still damage businesses, collateral can still lose value, and a check or loan still requires collection. A weak lender could use the database to grow too quickly precisely when price no longer compensates for risk. That is the other side of the reform: shared information should expose more quickly which lender built a genuine advantage and which one mainly benefited from an information gap and a high price.

Exposure depends on the product and route to the customer

Companies operating in business credit do not form a single peer group. The database is most relevant when a decision rests on the quality of the business and its short or medium term cash flow. It is less decisive when repayment depends on a project, collateral, and engineering supervision.

The direct group is itself fragmented. Yaakov Finance had a portfolio of about NIS 2.97 billion and roughly 1,151 customers, most of it solo credit to businesses for working capital. It operates directly with customers nationwide and relies on bank facilities, so a broader database can save some sourcing work without changing the need to select the borrower. Opal Balance reaches small and medium businesses through six branches and short transactions, most of which mature within 90 days. For Opal, the database can complement physical distribution that already exists. Isracard is connected to more than 100,000 business customers at roughly 168,000 points of sale, and has dedicated sales, acquiring data, and internal rating models. It is not a deposit funded bank, but it owns a distribution channel that is difficult to build from scratch.

By contrast, Nawi ended 2025 with 73% of its credit portfolio related to real estate, mainly completion of developers' equity and financing against surpluses and collateral. Luzon Credit reported a platform activity at year end that was largely secured by real estate, while its direct corporate credit activity was still limited. These are not clean exposures to a general business database. The distinction is even clearer for Manif and Michlol Finance: they assess the project, developer, budget, execution pace, absorption capacity, and liens. Information about the developer helps, but it does not replace the work that protects the debt.

Funding cost and underwriting separate growth from spread erosion

The database may lower customer acquisition costs, but it does not lower the cost of the money a lender deploys. That distinction determines who can withstand price competition. Peninsula provides an example of a funding structure able to support competition: commercial paper that, when its annual report was published, carried the Bank of Israel rate plus 0.25% and 0.4%, alongside bank lines, bonds, and equity. Its activity includes working capital, imports, suppliers, orders, and equipment, so it is close to the mechanism the database is designed to serve. It is not immune. Peninsula itself stresses that sector spreads are narrowing and that portfolio expansion requires diversification, customer checks, and collateral.

Melran shows the other side. Its average credit portfolio grew in the first quarter, but net financing income fell from about NIS 28 million to NIS 25 million. The company attributed the decline to replacing older, cheaper debt with more expensive sources and to competition that reduced the average portfolio yield from 18.0% to 14.5%. A new bond issued in March carries an annual interest rate of 7.66%. This is exactly the setting in which a database can generate more opportunities while much of the value passes to borrowers if credit pricing falls faster than funding costs.

Credit quality is not measured by the number of new customers either. S.R. Accord had a customer balance of about NIS 1.8 billion at the end of March, with an allowance equal to about 2.0% of the gross balance and quarterly credit loss expenses of about NIS 3.6 million. At Shoham Business, about 60% of the portfolio matures within 90 days, but quarterly credit loss expenses were about NIS 4.4 million against net financing income of about NIS 21.8 million. A short duration makes it easier to reprice and reduce exposure, but it does not eliminate default. Opal Balance benefits from branch diversification and relatively small transactions, yet specific provisions increased for several overdue customers. These figures do not identify a winner. They define the measures that must improve alongside growth: spread after funding costs, credit losses, arrears, and collections.

The banks start elsewhere. Leumi and Hapoalim have deposit bases of hundreds of billions of shekels, branch and digital networks, and broad activity with small and medium businesses. The database can reduce the information rent they earn from a customer who finds it hard to switch, but it does not transfer their funding cost to competitors. The initial pressure on banks may therefore show up in price and customer retention before it becomes a material contraction in credit balances.

Profit depends on implementation and lender discipline

Completing the legislation on July 16, 2026 is a transition from planning to construction, not the opening date of a revenue channel. Before the database can enter a forecast, the market needs an operating timetable, definitions of the businesses and products included, the identity of reporting institutions, data fields, access pricing, and the customer consent mechanism. It then needs evidence of actual use: how many lenders connect, how many new applications arrive, how many are approved, and at what price.

Company level proof will come in reports after launch. A growing credit portfolio combined with a stable spread, controlled cost of risk, and funding costs that do not jump would support the thesis of an efficient lender advantage. A growing portfolio accompanied by spread erosion and rising arrears would show that the database transferred power to borrowers while the lender paid for growth. Project financiers require a different test because borrower data are only one layer of underwriting. The current conclusion is therefore narrow: the database can expand the sourcing market for direct lenders, but it is likely to widen the gap between lenders that fund cheaply and collect well and those that depend on high pricing to compensate for expensive money or weak underwriting. Until the rules and actual connection become clear, this is a framework for reading results, not an immediate earnings forecast.