DESPITE the administrative burden of granting loans to small and medium enterprise (SMEs), outlook on SME loan growth remains positive, on the back of business expansions under the Association of Southeast Asian Nations (Asean) integration.
Rizal Commercial Banking Corp. (RCBC) Senior Vice President for Commercial and SME Banking Segment Maria Angela V. Tinio said they have seen robust growth in lending to SMEs in the past years, and that will continue to happen in the coming years because of the Asean integration.
The bank targets to grow SME loans by 30 percent this year. RCBC’s SME loan portfolio stood at P25 billion as of June. The bulk of the loan went to wholesale and retail; financing companies, like cooperatives; construction and real-estate sector.
Tinio said among the challenges that banks face is the availability of financial statements and collateral, especially in mom-and-pop businesses.
“We just look at their cash flow, as long as it’s strong and profitable and they are not divesting funds, we will lend to SMEs. We consider also the length of time, they are into that business; and if it’s long enough, there’s no need to come out with collateral,” she said in a news conference on Friday.
Since they deal with SMEs, some of the small businesses lack technology and sophistication and, because they are small, they borrow in small amounts. These are factored in to the administrative costs of the bank.
“Lending to SMEs is administratively burdensome, too, that’s why we encourage them to use online channels,” she said.
RCBC First Vice President for Commercial and SME Segment National Corporate Banking Group Arlene Leyco explained: “If a company borrows P100 million, you only need one personnel to monitor that account; compared to small accounts, say, P10 million each for 10 borrowers, that would need 10 personnel. That’s why it is administratively burdensome.”
“We want to reduce transaction cost, so, instead of going over the counter, SMEs can go online,” she added.
Tinio said they support the SMEs because of their need to be competitive, especially when the Asean region is transformed into a single market.
“We want to guide the small enterprise, because we do not want them to be forever small. Eventually, the small enterprise will become medium, and the medium will become a large enterprise. We’re hoping that we can be part of that transition. It’s a fulfillment on our part to see them start out small and, eventually, turned into a big corporation,” Tinio said.
She noted that top banks, like BDO Unibank Inc., Metrobank, Bank of the Philippine Islands, Security Bank and EastWest Bank were aggressively expanding their respective SME businesses.
“SME lending business is very competitive. We’re not the only banks that are running after SMEs. Under Asean integration, we will have foreign banks that are coming in. I don’t know how they will position themselves, but what I’m sure of is that there’s a lot of room to grow the SME lending. We want to make ourselves accessible, as more satellite offices will be put up this year. We want to make ourselves more reachable and visible in many provinces,” Tinio said.