Retail financing must be a digital product that processes transactions in real time, and one that is integral to and seamlessly embedded into the user’s daily activities.

While the Asian stock markets are in a jittery state, the Pratunam market in Bangkok, Thailand appears t be ready for the Christmas rush. AL PADILLA @tribunephl_al

With the lack of investment capital perennially hounding micro and small retailers, the Union Bank of the Philippines, in partnership with True Money, rolled out a digital mobile end-to-end solution to power micro-working capital loans of sari-sari stores.

Under the retail-financing program, variety-store owners are given access to safe, convenient and affordable credit to expand their businesses.

“The whole point of this program is financial education for the sari-sari store owners,” John Cary Ong, executive vice president and center head for transaction banking center at Union Bank, told the Daily Tribune on “Straight Talk.” “A lot of them, when they hear about loans and credit, they’re very apprehensive. They think it’s high-interest, etc. Actually, you can use credit to your advantage. For small entrepreneurs, they can purchase more goods from the distributor.”

He said clients don’t have to leave their stores to avail of a loan or queue at payment centers. Retail financing, Ong said, must be a digital product that processes transactions in real time, and one that is integral to and seamlessly embedded into the user’s daily activities.

Availing yourself of a loan does not require one to have a smartphone nor an app. And the system runs on 2G, with minimal friction to the user.

Understanding that micro and small enterprises in the Philippines are part of a complex ecosystem that has unique needs, Ong said that, in this program, Union Bank collaborates with distributors who work with their clients to determine their credit scores.

“When you talk about stores, they wouldn’t have a typical financing account statements, they wouldn’t have an income statement or a balance sheet. They won’t have access to traditional forms of credit. So what we’re trying to do is also learn from this experience to come up with a new credit-scoring algorithm, which can then help us to extend credit to other types of micro-institutions in the future, Ong said.”

If not altogether discouraged to avail themselves of a loan, currently, small retailers resort to borrowing from informal money lenders, who charge exorbitant fees.

“(Informal lenders) are there for a reason. Because the banks are not fulfilling that particular need,” Ong said. That’s where I say, with the fintech companies coming in, they’ve really shook things up; we really need to shake things up.”