Coming soon: a central platform for SME loans?

Singapore

IMAGINE a single platform where all of some 270,000 small and medium-sized enterprises (SMEs) here can get a loan quote from multiple banks - with just one application.

This could slash the time taken to secure a loan from an average of seven weeks down to two, with SMEs able to track their status online without having to wonder if their request has disappeared into the void. That could take place as soon as early next year, if consultancy PwC has its way.

Irene Liu, Partner, Risk & Regulatory, PwC South East Asia Consulting, said that the idea of an aggregated SME lending platform was in response to the pandemic fallout earlier in the year.

Especially during the ''circuit-breaker'' period, some SMEs were having difficulty getting in touch with banks to secure loans, while banks struggled with the flood of loan requests, she said. This resulted in extended waiting times at a point when SMEs urgently needed cashflow relief.

Ms Liu's proposed central SME platform aims to resolve all these issues, introducing transparency, simplicity and speed into the process. The team consulted government agencies such as Enterprise Singapore, financial institutions and SMEs.

For a start, SMEs specify the banks that they would like to apply a loan from, and then log in to the platform using CorpPass and MyInfo, where their information can be extracted securely for the loan application. This reduces paperwork.

This also saves time for the SMEs on a few fronts. For one thing, they can apply to multiple banks with one application. And for a government-backed loan with fixed criteria, the platform can make the eligibility assessment on behalf of the banks. It will also let SMEs know which criteria they do not fulfil, and what other credit facilities are available for them, added Ms Liu.

The platform also cuts the administrative burden for banks by doing an initial credit risk assessment, which banks can integrate into their existing risk management model. After the application is sent, banks should respond with a tentative offer in five days, she added.

The centralised platform will give SMEs a consolidated view of all the banks' responses and what their varying rates and terms are, allowing companies to compare them effectively.

Data from the platform such as the loan approval rate and more could be provided to the government and banks for real-time monitoring and to analyse how they can better support SMEs going forward, said Ms Liu.

Another aspect of the platform is its ability to connect to other parts of the ecosystem such as fintech firms, for example, to carry out credit modeling, electronic know-your-customer (e-KYC) or even electronic signing to ensure that that the entire loan administration is paperless.

The design of the platform is from PwC, but it should be operated by an independent third-party provider that will put in the initial infrastructure costs, according to Ms Liu.

This differs from previous suggestions of an SME lending platform run by the government or requiring government funding, she said. The aim is for banks to pay a nominal monthly fee to the platform provider, while SMEs pay per application.

Even as competition among banks may be a factor why previous suggestions of the SME platform did not take off, Ms Liu believes that it is different this time. Among the banks that the team spoke to, the two biggest concerns are of the erosion of their SME customer base and a ''race to the bottom'' when it comes to interest rates.

''The platform is just a facilitator,'' she noted. ''Whether or not there is an existing platform in the market, the SMEs who want to apply to several banks are already doing so anyway.''

Banks that are positive about this platform usually want to expand their overall SME customer base and seek to digitalise their entire SME lending process, she noted. With the platform, these banks can do so cheaply as they do not need to fork out investments into the infrastructure of the platform, and can simply plug and play, said Ms Liu.

''We don't want this to be one where only the SMEs win, and the banks are at the losing end whereby they are racing to the bottom to just fight for fees,'' she pointed out.

While the platform uses government-backed SME loans as a key feature product, there could be other types of loans in the future.

Even as some banks remain cautious on whether to join in, Sam Kok Weng, Financial Services Leader at PwC Singapore, said this is about breaking the status quo. ''Once two or three sign up and they see the benefit, then others would not want to lose out,'' he added. ''With more changes, there will be a tipping point.''

Even as the upcoming Singapore digital banks are expected to also target under-served SMEs, he believes that there is room for the platform to benefit companies. After all, the digital banks will need about a year to be operationally ready after being awarded the licence.

PwC is now getting lenders onboard this platform and is hoping to roll it out by early next year. The team is also exploring having this platform cater to other countries.