UOB's value chain financing sees doubling of clients in H12020

Singapore

UOB on Monday said it has seen a doubling 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.

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 Covid-19 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, advance estimates released by the Ministry of Trade and Industry earlier this month show.

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, UOB added.

Separately, the bank 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.

UOB shares closed at S$19.850 on Monday, down S$0.230 or 1.15 per cent, while Tiong Seng shares closed flat at 14 Singapore cents.