UnionBank recently sat down with the Bangko Sentral ng Pilipinas (BSP) to discuss the different challenges that the micro, small, and medium enterprises (MSMEs) are facing and how they can collaborate in bridging the information gap, and ease the business climate to be more financially inclusive.
Pia Roman-Tayag, managing director, Center for Learning and Inclusion Advocacy (CLIA) of the BSP said that one of the biggest challenges to the growth and development of MSMEs is the limited access to credit. MSMEs are often reluctant to approach banks due to the difficulty — whether real or perceived — to meet bank loan requirements. Banks, on the other hand, are unable to appropriately gauge the capacity of borrowers due to a lack of formal credit histories and reliable financial statements.
Another factor is MSMEs’ limited knowledge of alternative modes of financing. They mostly rely on their internal funds to finance their investments. A World Bank report also showed that about 81.2% of Philippine enterprises rely mostly on internal funds to finance their investments and only 10.1% use bank financing, which is seen to inherently limit the prospect of growth. Tayag said that this is where technology can play a crucial role in bridging the information gap and unlocking the potential of MSME finance.
UnionBank of the Philippines aims to bridge this information gap and provide MSMEs with the appropriate financial products and services they need to scale up their businesses. One of its solutions is UnionBank GlobalLinker (UBGL), a free online digital platform where entrepreneurs can access financial assistance, connect with other businesses and potential clients, and even create their own free online store.
Through UnionBank GlobalLinker, MSMEs can also save with pre-negotiated deals and offers from the platform’s partner fintech institutions like Taxumo, a tax filing platform that automates the computation, filing, and payment of business taxes; Paynamics for secure e-commerce transactions for merchants and their acquiring banks; Acudeen for invoice financing that helps MSMEs finance their receivables ahead of time; SeedIn, Southeast Asia’s leading business financing platform that connects MSMEs with potential investors for short-term financing and; Esquire Financing which provides tailor-made business loans for additional working capital and business expansion. As of date, the GlobalLinker network consists of 250,000 users worldwide, and 15% of which (or 38,000) are Filipino MSMEs.
UnionBank has also made it easier for business owners to open and maintain their own bank account. This is via the Biz Starter Account, which allows entrepreneurs to open a UnionBank checking account for a minimum deposit of P5,000. A business checking account helps MSMEs gain more credibility with investors, customers, and other businesses and keep their accounting records accurate and organized.
Making these products and connections available on UBGL is consistent with UnionBank’s push for digitization as a financial institution. Beyond providing financial products and services, UnionBank wants to help MSMEs address the constraints to their growth, especially their limited access and knowledge on digitization. In the process, they are also enabling a community of businesses to help each other grow and succeed.
MSMEs make up 99.5% of the total establishments in the Philippines and contribute to 62.9% of employment and 35% of gross value added (GVA) (as reported by the Department of Trade and Industry).