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Aboitiz AI unit, UBX to offer credit scores for small businesses

SINGAPORE-BASED Aboitiz Data Innovation Pte. Ltd. (ADI) and UBX Philippines Corp. have tied up to help finance unbanked and underbanked Filipinos and micro-, small-, and medium-sized enterprises (MSMEs).

“ADI is an artificial intelligence (AI) leader not just in the Philippines but in ASEAN. We are leveraging their AI capability to help us score credit risks for unbanked and underbanked Filipinos and more importantly, for the MSME segment of the economy,” UBX President and Chief Executive Officer John Januszczak said on the sidelines of ADI’s AI Summit.

Under the partnership, ADI will help UBX by providing embedded scoring on its online lending marketplace for MSMEs called SeekCap.

An underserved MSME segment has been identified that offers a big opening for financial institutions, Mr. Januszczak.

“A lot of these businesses don’t even have bank accounts… but it’s also not directly an individual; it’s a set of individuals associated with a business. So, that’s another scoring challenge, and ADI through AI and alternative data is helping us solve that problem so that we can extend credit to people who couldn’t get it and if they could get it we can give it to them at a better rate,” he said.

Meanwhile, Mr. Januszczak expects the number of people employed by MSMEs to go back to pre-pandemic levels.

“I would assume that as things normalize, we’ll get back to those kinds of statistics. If we can provide cost-effective working capital to these businesses as they grow their business, it is going to have a positive and a material impact on truly inclusive financial prosperity,” he added.

Mr. Januszczak also cited a “protection crisis” in the Philippines as insurance penetration as a share of gross domestic product in the country is less than 2%.

The Insurance Commission said that the insurance sector’s contribution to the economy went down by 1.72% in 2022 from 1.93% in 2021.

“In a more developed economy in ASEAN like Singapore, it’s over 8%, or might even be over 10% already, and in other developed markets it is even higher. So, we know that it is drastically unpenetrated,” he said.

Mr. Januszczak identified packaging and the distribution of insurance products as capable of addressing the low insurance penetration.

“A lot of the insurance products that are sold here in the Philippines today are targeted to the affluent, and I am talking about life and health insurance in particular. We need a product that targets the mass market,” he said.

“These insurances traditionally have been distributed through agents and that’s a good thing but we need alternative forms of distribution that could economically reach the rest of the country,” he added.

UBX is an open finance platform launched by Aboitiz-backed Union Bank of the Philippines back in 2018. Meanwhile, ADI is the data science and AI arm of the Aboitiz group. — Justine Irish D. Tabile

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