UnionBank, BPI boost MSME loan portfolios

MANILA, Philippines — Two of the country’s largest banks are boosting their lending portfolios for micro, small and medium enterprises (MSMEs) severely affected by the COVID-19 pandemic as default rates start to improve.

Manuel Santiago, chief mass market and financial inclusion executive at Aboitiz-led Union Bank of the Philippines, said in a webinar the default rate of the MSME sector has been improving over the past few months with the partial reopening of the economy.

“Our current default rate for MSMEs is about seven percent. I think it peaked already at nine (percent), but we started to see a decline,” he said.

Santiago said the bank made adjustments in its underwriting processes for loans to MSMEs that were affected by the global health crisis and the default rates are now improving after peaking.

“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 helped clients, particularly MSMEs, in terms of their repayment plan.

“We just need a little time to recover. And right now you know the portfolios are quite stable. It probably is due to the fact that our credit underwriting processes have been put in place ahead of the pandemic and that sort of helped us,” he said.

As banks remain wary of the borrowers’ capacity to pay amid the pandemic, loans disbursed by banks contracted for the first time in 14 years after declining by 0.7 percent to P9.18 trillion in end-December.

Meanwhile, Ayala-led Bank of the Philippine Islands (BPI) 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.

BPI business banking head Eric Luchangco said 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,” Luchangco said.

Under the memorandum of understanding, BPI would support DTI programs such as SME Roving Academy, Kapatid Mentor Me, Youth Entrepreneurship Program as well as regional trade fairs.

BPI is also providing free trainings to SMEs on ways to secure a business, manage and leverage on loans, and bank in the new normal.

DTI Undersecretary Blesila Lantayona said 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,” Lantayona said.

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.

This was a significant improvement from the 30 to 35 percent recorded closed in April 2020.