Philippine-listed bank Rizal Commercial Banking Corporation (RCBC) has partnered with 500 Startups-backed fintech firm Acudeen Technologies Inc to launch a new 100-billion pesos ($2 billion) fund that targets the country’s micro, small, and medium enterprises (mSMEs) and farmers, according to an announcement.
The Opportunity Fund, a first in a country where mSMEs are a source of livelihood for millions of people, leverages technology to help businesses compete and grow while implementing regulations that reduce financial risks and boost confidence for mSME finance, Gil Beltran, the Philippines’ chief economist, said in a statement.
Acudeen founder and CEO Mario Jordan “Magellan” Fetalino III confirmed to DealStreetAsia the amount of the fund. He added that Acudeen’s role is to be be the exchange of choice for distribution to mSMEs because of its “capability to assess and facilitate receivables discounting/factoring transactions”.
The open-ended fund will provide micro and small businesses and farmers, majority of which are not served by traditional banks, access to finance with the use of movable assets as collateral. These movable assets include account receivables, crops, farm equipment, warehouse receipts, bank accounts, and future harvest.
Agriculture and mSME sectors form the backbone of the Philippine economy. mSMEs account for 99.6 per cent of the country’s enterprises and generate 61.6 per cent of employment, according to government data.
However, capital investment remains low, with mSME loans in the banking system accounting for only 6.2 per cent and 9.2 per cent share in total business loans. RCBC said mSMEs are reluctant to approach banks due to the lack of collateral and credit history for loan applications.
“This pioneering initiative promotes innovation by giving all stakeholders the opportunity to offer creative solutions to sustainability challenges, especially in empowering our entrepreneurs in exponentially growing our MSME sector,” said RCBC president and CEO Eugene Acevedo.
The pilot will initially cover Acudeen Technologies Inc, a receivable factoring exchange that facilitates the buying and selling of SME invoices through its platform. It will be covered by sovereign guarantee through PhilGuarantee to ensure the quality of underwriting and receivables assets.
The launch of the fund comes after the Philippines passed the Personal Property Security Act (RA 11057), which qualifies movable assets as collateral for loans.
This is not the first time that RCBC has collaborated with fintech firm Acudeen. In 2017, Rizal Microbank, a unit of RCBC, signed as $6-million financing deal that will finance the invoices and receivables to the startup’s network of mSMEs in the Philippines.
Both companies share the same goal of financial inclusion among MSMEs, which they claim represent 99 per cent of all businesses in the Philippines.
Founded on March 31, 2016, Acudeen’s digital financing strategy is to finance the receivables of SMEs ahead of time. The company says its platform allows for fast transactions, from receivable uploaded to cash within five to seven days, giving MSMEs better control of their cashflow.