Singapore’s UOB stands out as a leader in serving small and midsize enterprises (SMEs) over the past year. Eric Tham, head of Group Commercial Banking; and Lawrence Loh, head of Group Business Banking, explain why.
Global Finance: How did your long experience serving SMEs help during the Covid crisis?
Eric Tham: UOB has a strong presence in Asean [the Association of Southeast Asian Nations], home to some of the world’s fastest-growing economies. With more than 80 years in the business, we have refined our experience through different economic challenges, including the 1997 Asian financial crisis, the global financial crisis in 2008 and now the Covid-19 pandemic. These first-hand experiences are now embedded in our DNA, so we are closely attuned to our clients’ needs and better able to respond to sudden crises.
GF: How did UOB manage to keep a 1.5% nonperforming loan ratio while growing its SME loan portfolio more than 10% in the past two years?
Tham: UOB kept our nonperforming loan ratio low by being very proactive in our efforts to help our clients’ businesses remain sustainable. We were the first bank in Asia to announce 3 billion Singapore dollars (about US$2.2 billion) of relief assistance to our SME clients in February 2020. We did a comprehensive portfolio review and proactively reached out to clients to understand their challenges so we could work with them on their cash flow and financing needs. We also worked closely with the Monetary Authority of Singapore in providing industrywide initiatives that helped cushion the impact of Covid-19: allowing SMEs to defer principal repayments in 2020 until September 2021.
Similar relief schemes were implemented across Malaysia, Indonesia, Thailand and Hong Kong, with UOB closely partnering with regulators in each market. The regional relief measures included moratoria and multicreditor debt-restructuring programs, some of which have been extended to 2023 and are available to our SME clients.
GF: UOB rolled out a series of targeted digitalization initiatives to help SMEs and startups across Asean. What’s next?
Lawrence Loh: We have always seen digitalization as one of the key opportunities for growth. However, the pandemic has accelerated our clients’ needs to digitalize operations and processes. This is particularly true for those with cash-heavy payment and reconciliation processes or who have bricks-and-mortar operations, as they face business disruptions caused by movement restrictions.
Digitalization initiatives are intended to connect businesses to growth opportunities, such as new streams of revenue with an e-commerce store presence, more collection and distribution channels. Our digital banking platform, UOB Infinity, enables corporate clients to manage their banking needs in a simpler and more personalized manner. For small businesses, our integrated suite of cloud-based solutions, curated under the UOB BizSmart program, enables them to boost operational efficiency and tap additional revenue streams through features such as online food-ordering capabilities and fulfillment systems. Today, 94% of our SME clients are digitally active, while the takeup of digitalization offerings from April 2020 to March 2021 jumped sixfold.
GF: How is technology impacting the design of SME products?
Loh: As one example, UOB BizMerchant is a small-ticket financing solution for online businesses operating on e-commerce platforms. We redesigned our credit-underwriting engine by applying analytics to new pools of data to gain deeper insights into the credit behavior of small businesses operating through our e-commerce partners, including Lazada, Sendo, Shopee and Qoo10. In 2020, more than 550 SMEs in Vietnam benefited from UOB BizMerchant, with a total loan size of 100 million Vietnamese dongs [US$4,400]. UOB also has a 30% market share of e-commerce lending in Ho Chi Minh City.
GF: What future plans to serve the SME market can you share?
Tham: Asean expects to grow to $6.6 trillion by 2030, giving rise to business opportunities for those ready to navigate the diversity within the region. We connect businesses through regional trade corridors within Asean, and between Asean and China. As a strategic partner to our customers, we place them at the forefront of growth opportunities, extending support beyond their financing needs to include areas such as digitalization and sustainability.