Union Bank of the Philippines (UnionBank) and its venture studio, UBX, the foremost open finance platform in the Philippines, are reaffirming their commitment to support micro, small, and medium enterprises (MSMEs) in the country. UnionBank’s President and CEO, Edwin R. Bautista, discussed their plans and programs to democratize access to finance for SMEs by leveraging new technologies during the recent SME Innovation Festival held in Iloilo City.
Providing access to capital is crucial in strengthening the business operations of growing enterprises and enabling them to expand further. In the Philippines, MSMEs comprise 99.5% of all establishments and employ 62.8% of the labor force. However, MSMEs face difficulties in accessing credit and financial services. According to the latest data from the Bangko Sentral ng Pilipinas (BSP), loans disbursed to MSMEs only reached P454.31B from January to September 2022, which represents a compliance ratio of only 4.91%, still below the 10% threshold under Republic Act No. 6977 or the Magna Carta for MSMEs.
“The challenge, really, for MSMEs is how to get access to technology. The idea is how to scale the type of technology to the type of business. Although you start off as a small business, you’ll progress and grow, and with that your technology needs growth as well. If you are a business which is still new or you have no credit history and the usual standards and requirements are difficult for you to meet, with SeekCap there will always be a lender for you. As their business grows, they will be given the option to shift to UnionBank itself as a lender who can cater their needs at their certain level,” Bautista said.
SeekCap, an online lending marketplace built by UBX, is one such example of how UnionBank caters to MSMEs nationwide. Disrupting the traditional lending model, SeekCap leverages its partners’ wide user base to offer loans to businesses. At present, it has around 15 partners composed of banks and other financial institutions with a diverse array of loans available for enterprises of all shapes and sizes.
In addition to SeekCap, UnionBank also has the MSME Banking App, which provides digital solutions to businesses, enabling entrepreneurs to manage their accounts and transactions from anywhere. The app caters to enterprises’ specific needs by providing technology for paying bills, transferring funds, and setting up simple to complex business approvals. Mr. Bautista emphasized the significance of payments in the development of smart cities, which is an emerging trend in urban planning. The UnionBank boss believes that a common payment instrument is crucial in connecting various aspects, such as transportation, government services, and private establishments.
“Smart cities such as Singapore and Dubai are too complicated. There is a more practical solution: you start with collection, start with digitizing information, backed up by the government, which can be accessed by the residents. We are at the center of the development of this area because it’s something that we can continue to do because payment is an essential ingredient in the development of a smart city,” Bautista added.
UnionBank kicked off its digital transformation journey in 2016 when interbank fund transfers were still unheard of. From no recorded digital transactions at all to millions in transaction volume at present, UnionBank has exceeded its own expectations and is truly on its way to achieving financial inclusion.
The Philippine government has announced its commitment to achieving digital transformation across the entire country. The Bangko Sentral ng Pilipinas (BSP) has set goals for the country, aiming to increase financial inclusion to at least 70% of Filipino adults and migrate 50% of the total volume of retail payments to digital by this year.