UOB's value chain financing posts twofold growth in H1 2020

UOB on Monday said it has seen a twofold increase in the number of construction firms obtaining loans under value chain financing (VCF) in the first six months of the year, as compared with the end of 2019.

The growth was driven by the increase in sub-contractors and suppliers obtaining loans under VCF, as part of tie-ups between their main contractors or project owners and the bank to help ease financing challenges brought about by Covid-19, UOB said in a statement.

It added that these sub-contractors and suppliers are typically small and medium-sized enterprises (SMEs).

According to the bank, the construction sector has been among the hardest-hit by the pandemic, with companies - particularly smaller firms - facing cash flow pressures. In Q3 2020, Singapore's construction sector shrank by 44.7 per cent year on year.

UOB's VCF supports construction-sector firms in obtaining loans by assessing the building project and various parties that are involved in its construction, including the main contractor and project owner, UOB said.

This allows the bank to assess each firm's financing needs, enabling it to provide financing support to sub-contractors and suppliers that may have previously been ineligible for bank loans, the lender added.

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Separately, UOB noted that there has been growing interest from main contractors or project owners who are looking to support their contractors and suppliers in easing their cash flow pressures. One such company is Tiong Seng Contractors, a subsidiary of mainboard-listed construction group and property developer Tiong Seng Holdings.

As at 2.57pm on Monday, UOB shares were trading at S$19.93, down S$0.15 or 0.8 per cent, while shares of Tiong Seng were trading at 13.3 Singapore cents, down 0.7 cent or 5 per cent.