UnionBank
Small and medium-sized enterprises make up more than 99% of the Philippines’ registered businesses, but courting SMEs has not been easy for the country’s banks. A lack of transparent credit information can make banking these companies difficult.
But UnionBank, under the leadership of president and chief executive Edwin Bautista, has taken a different approach to SMEs, using technology to make assessing credit risk much more reliable.
UnionBank’s focus on digital banking includes the launch of a dedicated app for SMEs, the first of its kind in the country, and a partnership with fintech companies to create an SME marketplace.
These online approaches always seemed like a unique selling point, but during the Covid-19 pandemic they have become all the more important.
UnionBank’s approach to loan applications for SMEs is particularly creative. Traditionally, Philippine lenders have relied on bank statements, collateral and interviews to consider an SME loan application. But UnionBank has cut down on the cumbersome nature of this process, using data science to allow loan applications to be processed in just four hours.
The bank’s process relies on alternative scoring, looking at features that range from the number of ATMs around the SME to its age and the number of its employees, to determine the company’s loan eligibility.
The potential for SMEs in the Philippines is huge but too many small retailers, unable to access the conventional banking system, turn to loan sharks. By helping bring these companies into the financial system, Union Bank is making an admirable contribution not just to its own bottom-line but to the future of its country.