UNIONBANK of the Philippines Inc. is looking to expand its client base to include more micro-, small-, and medium-sized (MSMEs) enterprises as these firms move to digitize their operations amid the coronavirus pandemic.
“It’s a large market and we think that this segment needs attention at this time,” UnionBank Executive Vice-President and Chief Mass Market and Financial Inclusion Executive Manuel G. Santiago, Jr. said in an online briefing.
The market has about 15 million prospective clients that belong to either the banked, underbanked, and unbanked segments, he said. Mr. Santiago noted that 13 million of this total are composed of self-employed entrepreneurs exploring ways to digitize their operations.
To date, UnionBank has about 200,000 MSME clients, Mr. Santiago said, which is higher than the 175,000 seen as of last month when the bank launched an MSME app that allows small businesses to manage their financial operations via an online platform.
UnionBank President and Chief Executive Officer Edwin R. Bautista said their goal is to bring this number up to one million MSMEs.
The bank is working to improve its digital credit underwriting and has partnered with Lazada Philippines to offer loans to sellers within the online platform, Mr. Santiago said.
“The advantage of having a tie-up like that is that you’re able to have access to data regarding sales generated by the seller and therefore you really don’t need to ask to submit documents as long as they authorize the release of information for credit underwriting,” he said.
Amid the crisis, Mr. Santiago said UnionBank’s MSME loans have a default rate of “about 7%.” He said this peaked at 9% but has since trended lower.
MSMEs are seen as a vital part of the economy as they make up for about 99% of businesses across the country.
The central bank has moved to push lenders to extend credit to the sector amid the pandemic, allowing MSME loans to count as alternative reserve requirements.
Latest data from the Bangko Sentral ng Pilipinas showed MSME loans stood at P464.34 billion out of P8.609-trillion loanable funds as of the third quarter in 2020. This is below the 10% credit quota under Republic Act No. 6977 or the Magna Carta for MSMEs. — L.W.T. Noble