When the enhanced community quarantine (ECQ) was implemented last March 17, 2020 to combat the spread of the novel coronavirus disease (COVID-19), many micro, small and medium-sized enterprises (MSMEs) had to halt operations for over two months.
Now that the restrictions have been eased, and these MSMEs have begun to reopen their businesses, they face new challenges – lack of working capital, restricted supply sources, and, for some, lower demand.
Bank of the Philippine Islands (BPI), one of the country’s biggest lenders, is continuously engaging with their SME clients to help their businesses survive and thrive with the Bank’s business solutions.
“We recognize the challenges being faced by the SME community during these challenging times, and want to help them keep their businesses going. On the loan side, this has included adjusting loan repayment schedules in order to accommodate our borrowers’ capacities, and even, for some of our borrowers that really need it, offering reduced interest payments,” said Eric Luchangco, Business Banking Head.
“We constantly work with them for solutions to help them with their cash flows, and programs to help them adapt and operate in the new normal. We also have our regular BizTalk Online webinar series that provide insights and advice on various business topics and best practices across different business industries,” Luchangco added.
MSME loans growing
In its latest financial results, BPI said net loans as of December 31, 2020, declined by 4.6 percent but the mortgage and microfinance loan segments ended the year with moderate growth rates of 6.6 percent and 5.7 percent, respectively.
BPI further said that mortgages recovered as housing remains to be a basic need and loans for end-user housing is a substantial portion of our mortgage loan book. Operations at SMEs are also recovering as mobility improves and people return to work.
Due to the uncertainties in the economy brought by the various stages of lockdowns, many MSMEs need additional funding.
The increase in the Bank’s microfinance loan segments means the Bank is always willing to help the small business segment of the economy.
BPI said about 70 percent of the workforce is employed by MSMEs, contributing 1/3 to total GDP.
The Bank has also increased its loan loss provision to P28 billion in 2020 because of the pandemic. This provision is 5x more than the P5.6 billion set aside in 2019.
“We have consistently maintained our lending standards. We booked additional provisions in the fourth quarter of 2020 as we expect non-performing loans to peak in 2021, though total provisions in 2021 is expected to be lower than 2020,” said Luchangco
BPI Direct BanKo, the microfinance arm of the BPI, is also offering various programs that include the newly launched term extension and loan rehab programs to help its micro-entrepreneur clients cope with the pandemic.
BanKo also provides its clients with an easy, hassle-free online banking tool.
Through the BanKo mobile app, clients can conveniently monitor their NegosyoKo loans, send payments, and check their balance and transaction history anytime, anywhere. With a few taps, accountholders may also buy prepaid load in any network with rebate, transfer money, and pay bills.
Even in these trying times, BanKo’s sales associates, the BanKoPares and BanKoMares, also continue to check the situation of their clients and teach them ways to sustain their businesses.
Since its inception in 2016, BanKo has already served over 145,000 clients nationwide and released P18 billion in loan disbursements.
According to BPI, now is the best time for MSMEs to re-assess their business models.
By analyzing the strengths of their business versus competition, they can assess how to differentiate themselves, and identify areas for innovation. During tough times like these, it is essential to know the fundamentals of running the business.
Many SME clients have also adapted to digital platforms. BPI has introduced its digital solutions for businesses, BizLink. It helps clients manage their cash flow and keep track of their finances digitally, thereby making their operations optimum and efficient.
MSMEs must also take care of everyone involved in their business.It is more important than ever to build,or further enhance, good relationships with the various stakeholders and counterparties of the business. Engaged employees have a stronger commitment to their work, and can more easily establish positive emotional connections with their customers.
Businesses need to focus on establishing long-term relationships with their suppliers and distributors by earning their trust and keeping their word, which will help them achieve preferred status with these counterparties.
At the same time, knowing and listening to their clients is vital, the Bank said. MSMEs need to create customer-driven and customer-driving business strategies. It’s important to identify core clients and know their behavior.
The Bank also reminded their MSME clients to be open to changes and build their own personal and business reputation. MSMEs must be prepared to pivot and innovate when necessary. It’s time for them to adapt to changing times as this is critical for their business’ survival. It would be prudent for them to establish a solid payment track record to build their reputation as a responsible entrepreneur with prospective suppliers and distributors.
Lastly, as the uncertainties remain, the Bank said it is important for small business owners to develop financial discipline. Personal money and business funds should be managed independently. Opening a separate bank account for each will help business owners monitor cash flows and understand the true profitability of their business.
BPI is taking advantage of the stronger connections with clients, and being more attuned to their changing needs in this pandemic, to help them in their recovery.