Unlocking opportunities for MSMEs through UnionBank Supply Chain Financing
As the Philippine economy continues to open up, businesses, including micro, small and medium-sized enterprises (MSMEs), must further digitalize to streamline operations and financing across their supply chain ecosystems, according to Union Bank of the Philippines (UnionBank).
“Traditional and manual financing processes applied that have once been effective pre-pandemic, now pose challenges to businesses as they restart their operations in the new normal,” said Mon Duarte, UnionBank EVP and Head of Transaction Banking and Platform Development. “With the right financing technology, delays and errors they previously encountered can now be overcome and overall operational efficiency can be achieved.”
With the commitment of innovating the country’s business ecosystem, UnionBank developed its own integrated supply chain financing platform, allowing businesses to confidently operate no matter the economic landscape.
“Our blockchain-enabled Supply Chain Financing Platform supports businesses and their supply chain ecosystems through three crucial points: A community-based approach, Transparent transactions, and Automated financing,” said Duarte. “Through the platform, local businesses enjoy easy cash flow management, real-time processing of payments and loans, and clear visibility of receivables and payables in real time. We’ve also made it easier for MSMEs in these ecosystems to acquire financing through our community-based approach which removes stringent documentation.”
As part of its local “Tech Up” approach, UnionBank has been innovating supply chain financing for businesses even before the pandemic demanded that operations migrate to digital. Back in February and March 2020 when COVID-19 cases were on the rise, UnionBank piloted the Dealer Financing and Payable Discounting programs to reduce credit exposure to vulnerable industries and MSMEs. The following year, in January 2021, the bank also started to commercialize the credit programs to help MSMEs get access to funds and capital as the economy started to pick up.
All these enhancements have further improved the collection and disbursement flow of supply chain communities within the platform. The bank highlighted that digital invoice presentment, payment, loan processing, collections, and reporting have now been minimized to two minutes, compared to manual processing which can take weeks.
UnionBank also recently launched a new credit program for Payable Discounting to support MSMEs in increasing approvals of credit applications. Additionally, UnionBank also launched an Application Programming Interface (API), a set of tools, protocols and definitions for combining application services and software, to allow system integration with the Supply Chain Finance platform to further optimize invoice processing.
“On top of these, UnionBank further enhanced the digital experience of its clients through the platform with new features such as deductions processing, automated tax compliance, self-service and real-time reports,” said Duarte. “We also improved the platform through the inclusion of custom fields, file attachments, auto-debit arrangements, credit notes and debit notes acceptance, and SMS and email notifications for ease of processing.”
There is also a renewable line application for MSMEs without full credit assessment even amidst COVID-19. Suppliers can also experience shorter collection cycles or Days Sales Outstanding while buyers can have longer payment cycles or Days Payable Outstanding.
Collection or disbursement processes across business counterparties were also synchronized further along with improved access to collateral-free and renewable business loans without recourse to the community anchor.
“We also introduced a wholesale approach to MSME lending,” said Duarte. “As we started exploring blockchain use cases, we realized that its immutability and provenance can help mitigate risks for the bank when lending to MSMEs.”
Presently, UnionBank has already facilitated more than 11 Billion worth of invoices and provided almost 6 Billion in loans for almost 19,000 invoices across almost 400 businesses in just a year of its commercialization. UnionBank has reported that the Supply Chain Financing Platform has well exceeded the targets.
In addition, UnionBank now has more than 10,000 MSME leads from its current and target anchors which can bring in more than 4 Billion new business lines, as well as new deposit accounts. With Supply Chain Finance, UnionBank gets access to a robust lead generation mechanism that hits multiple businesses including deposits, cash management, loans and online and digital transactions.
“With the Supply Chain platform, UnionBank has introduced an effective wholesale lending strategy packaged with a retail account and online and app banking enrollment. The platform also allowed the bank to lend effectively to MSMEs and to the agriculture industry, which are required by the Philippine government amongst the local banks. UnionBank continues and will continue to develop new features and products on the platform to further deliver on its digitization and SME lending objectives,” Duarte concluded.
All these novel solutions demonstrate that UnionBank is indeed a bank that anchor companies, enterprises, suppliers, and distributors can trust. For businesses wanting to avail UnionBank’s Supply Chain Finance platform, you can log on to www.unionbankph.com for more information.
