MANILA — Union Bank of the Philippines and the Bank of the Philippine Islands, two of the country’s largest banks are promoting their lending portfolios for MSMEs (micro, small and medium enterprises) severely affected by the pandemic.
“The default rate start of the MSME sector has been improving over the past few months with the partial reopening of the economy,” says Manuel Santiago, chief mass market and financial inclusion executive at Aboitiz-led Union Bank of the Philippines.
The bank’s current default rate is about seven percent, which had already peaked at nine percent. When they started to see a decline, Santiago said, the bank had to make adjustments in its underwriting processes for MSME loans affected by the pandemic.
“I can attribute the improvement in those adjustments that were made because as I said the underwriting criteria is obviously not the same as pre-pandemic,” he said.
UnionBank has helped its MSME clients in their repayment plan.
A little time was needed to recover. “And right now the portfolios are quite stable. It probably is due to the fact that our credit underwriting processes have been in place ahead of the pandemic,” he says.
Loans disbursed by banks contracted for the first time in 14 years after declining by 0.7 percent to PhP9.18 trillion in end of December, and banks were wary of the borrowers’ capacity to pay amid the pandemic.
The Ayala-led Bank of the Philippine Islands (BPI), meanwhile, entered into a partnership with the Department of Trade and Industry (DTI) to further support small and medium-sized enterprises (SMEs) as they recover from the effects of the global health crisis.
Its business banking head, Eric Luchangco says, “The bank recognizes its role in supporting companies and helping the economy grow as it aims to build a more financially inclusive Philippines.
“We hope that through this partnership with DTI, we will be able to make it clear to our SME customers that they are not too small to be served by a large bank.
“We believe they deserve to have access to the same kind of financial products and services that larger companies already have access to.”
Under a memorandum of understanding, BPI would support DTI programs such as “SME Roving Academy,” “Kapatid,” “Mentor Me,” “Youth Entrepreneurship Program,” including regional trade fairs.
To maintain a good rapport with its SME clients, BPI provides free trainings on ways to secure a business, manage and leverage on loans, and banking in the new normal.
DTI undersecretary Blesila Lantayona, in the same vein, says, “The agency is strongly committed to help MSMEs recover from adversities brought about by the pandemic and to thrive in the new normal business environment.
“As both parties commit to work together in teaching MSMEs nationwide to adapt and possibly pivot their businesses to the new normal, we look forward to the actualization of this MOU by looking at the greater visibility of BPI, especially in the programs and projects of DTI regional and provincial offices.”
Based on DTI’s partial impact assessment survey on the MSME sector, about 52 percent of enterprises have gone back to full operation, 42.8 percent have partially opened, while 4.9 percent are still closed.
Thirty to 35 percent SMEs were reported closed in April 2020. (JSM/JuanManila)