SMEs make up over a third of all bank loans in Asia Pacific, according to a study by McKinsey. Due to this, it is no surprise that Singaporean banks are looking for new ways to attract more customers and encourage more SME lending.

Unfortunately, SMEs often fail to get the necessary support from traditional financial institutions because banks lack the necessary information to assess the creditworthiness of SMEs accurately and often make bad lending decisions. As a result, the risk cost of banks to serve SMEs are often far higher than that of large corporate segments.

Banks such as UOB are taking on the challenge to try and improve the situation. Through the implementation of enhanced credit engines, UOB Singapore is complementing their existing sources of information by including new pools of data. This new engine not only helps to track a company’s day-to-day operations, but also helps reduce processing time of loans by up to 60 per cent.

“Through the enhanced credit underwriting engine, we are able to help more small businesses access financing through products such as our flagship collateral-free loan, UOB BizMoney,”said Mervyn Koh, managing director and country head of business banking for Singapore.

OCBC has adopted a different strategy but is also using a data-driven approach to identify successful people behind businesses and use that information to make loans to their new ventures. Rather than tracking and assessing a businesses financial track record alone, Christine Chu, OCBC head of emerging business, global commercial banking, explains that the bank is targeting serial entrepreneurs.

We realised that we should focus on the serial entrepreneur and recognise his or her journey of successes and failures, rather than assessing a business solely on its financial track record. From taking a serial entrepreneur’s track record in Singapore into account for a loan for his first overseas business, to facilitating takeovers of other companies and otherwise providing assistance toward their goal of becoming a listed company – the pilot has been very meaningful and yielded many successes so far,” she said.

The business is centred on the bank’s new credit approach that takes into account the entrepreneur’s experience, business track record and overall business strategy across his or her group of companies.

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