DBS makes over $800 million in loans to micro enterprises in digital banking push

SINGAPORE – South-east Asia’s largest bank DBS has ramped up efforts to help small and micro businesses hit hard by the Covid-19 pandemic secure much-needed funding and improve the way they do business.

The move is part of a broader plan to enhance its digital banking services amid greater competition from non-bank players who will soon be issued licences to carry out such services.

Since March, DBS has approved nearly 10,000 loans to small and medium-sized enterprises (SMEs), it said in a statement on Wednesday (Dec 2).

Of these, more than 5,000 loans totalling over $800 million went to micro enterprises, which translates to an average loan quantum of $160,000. Most of these loans were collateral-free.

Ms Tan Su Shan, group head of institutional banking, told The Straits Times on Tuesday that DBS estimates there is unmet funding of about $1.2 billion to $3.2 billion for micro enterprises, or businesses with an annual revenue of up to $1 million.

A study published last year by Validus Capital found that SMEs in Singapore face a financing gap of $20 billion. The fintech company had also announced it was applying for a digital bank licence.

“While some micro enterprises may have flown under the radar, we’re proactively reaching out to these businesses now. For us, these smaller companies would be better served digitally, end-to-end,” said Ms Tan.

Half of the loans given to micro enterprises since March were for customers who had no prior borrowing relationship with the bank.

“This suggests a preference for micro enterprises to go with a trusted and established lender in taking out their first business loan,” said DBS, which has more than 40,000 micro enterprise customers.

The bank this year launched a collateral-free digital business loan of up to $200,000, to be disbursed within one working day, with no financial statements needed in the application process.

Ms Joyce Tee, group head of SME banking, said micro enterprises have typically flown under the radar of lenders and may not be familiar with the support available to them, even though many have viable business models and potential to grow.

“That is why we have gone out of our way to ensure micro enterprises are well-supported to weather the economic storm, and we are heartened that many businesses we supported through the early days of Covid-19 are beginning to see the green shoots of recovery.”

Besides loans, DBS is intensifying efforts to help firms improve their overall business operations, said Ms Tan.

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Plans in the pipeline include a digital procurement hub that will link buyers and suppliers who have complementary needs. “It’s about helping them to grow their topline with relevant data, reduce transaction costs, and putting them on trade platforms to find their supply chain and get them paid on time.”

“If we know that you’re selling to a buyer who’s our client, and through your transaction history we know that the buyer will pay you on time, we can offer you financing and hopefully at an even more competitive rate than what you would get in the market.

Ms Tan added that the bank has mined and programmed its data trove to give businesses personalised advice.

For example, it uses machine learning to send contextualised alerts to firms on platforms such as corporate banking portal DBS Ideal to advise them on how they can manage interest rate and foreign exchange risk, in response to real-time developments.

It has also partnered the likes of IBM, NTUC Learning Hub and the Infocomm Media Development Authority to conduct webinars to help businesses in sectors most affected by the pandemic, such as tourism and food and beverage (F&B), to digitalise.

More help is also on the way for specific sectors. In March, the bank launched an F&B digital relief package that enabled businesses to set up an online food ordering site in just three business days. It plans to roll out a similar package for SMEs in retail and tourism.

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