Security Bank targets to double MSME loans with Business Banking segment

SECURITY BANK Corp. (Security Bank) aims to double its loans to micro, small, and medium enterprises (MSMEs) this year after the launch of its Business Banking segment.

Security Bank President and Chief Executive Officer Sanjiv Vohra said in a speech at the segment’s launch on Tuesday that the lender recognizes MSMEs’ importance to the Philippine economy and their “great potential for growth.”

“We realize, however, that MSMEs lack the support to thrive as the pandemic restrictions eased and economic recovery picked up,” he said.

“For the target volume for 2023, we’re looking to double what we did in 2022… Security Bank has been looking at MSMEs for some time. In the past, before the Business Banking segment was born, SMEs were served by various teams,” Security Bank Senior Vice-President and Micro and Medium Head John David G. Yap said at the same event.

He added that the new segment aims to raise the total outstanding loans from last year by 30% to 40%.

“Security Bank’s Business Banking Segment hopes to capture 20% of MSMEs in the next 3 to 5 years. This will be done through enhancements in various customer touch points such as branch banking, telesales, social media, client support, and business development,” the bank said in a statement.

The lender saw demand for financial services from the MSME sector increase after the reopening of the economy, Mr. Yap told BusinessWorld on the sidelines of the event.

“They have a growth mindset again while they’re still cautious of the inflation issues and other economic concerns at this time. We see a good return in terms of folks wanting to open up and grow their business. That’s what gives us confidence — especially in late 2022, as the pandemic dwindled down, we saw increased business activities,” he said.

“In 2023, that gives me the confidence to go out into the market and say that we have these offerings because of those successes that we observe in our sales activities,” Mr. Yap added.

He said credit demand from MSMEs is expected to increase as inflation is expected to ease, with Security Bank forecasting inflation to average 5.4% in 2023 and 3.5% in 2024, both within the central bank’s 2-4% target.

Headline inflation eased for a second consecutive month in March to 7.6% from 8.6% in February. For the first quarter, inflation averaged 8.3%, higher than the central bank’s 6% forecast and 2-4% target for the year.

The bank’s new Business Banking segment offers two key products, including the Business Mortgage Loan, which offers 80% of the appraised value with a P30-million loanable amount with terms up to 20 years. It has a minimum add-on rate of 1.2% for 12 months.

Meanwhile, the Business Express Loan is a non-collateral loan with a P5-million loanable amount with terms up to 36 months. The bank will offer a promo fixed rate of 7.5% for two to three years.

Mr. Yap said rates are subject to change depending on competition and the economic situation.

“We are not working on a full floating rate, but we do take into consideration how the market is pricing and how much margins we may be giving up should the cost of borrowing internally goes up,” he said.

Mr. Vohra said its Business Banking segment will also offer other services, such as cash management, insurance products, digital channels, and focused support.

“The new segment is powered by experienced business professionals knowledgeable and capable of customizing services for small businesses no matter where they are in their journey. They are equipped to provide valuable inputs and unique business insights at every stage of their growth,” he said.

Security Bank saw its net income increase by 53% year on year to P10.6 billion in 2022, driven by the growth of its core businesses.

The lender’s shares went down by 60 centavos or 0.65% to end at P91.40 each on Tuesday. — Aaron Michael C. Sy