The International Finance Corporation (IFC) has acquired a stake in fintech company First Circle, investing approximately P410 million (US$7 million) to support lending to small and medium enterprises (SMEs) in the Philippines.

A June 15 disclosure revealed that the IFC board approved this equity investment on June 13 in Singapore-registered Carabao Capital Global Pte Ltd., which operates in the Philippines as First Circle.

The private sector arm of the World Bank Group noted that this investment is intended to help First Circle raise funds to expand its operations and loan book in a country where SME credit penetration is among the lowest in Southeast Asia.

According to the IFC,

“With data and technological edge as the cornerstone of First Circle’s strategy, the company is providing unsecured credit lines to SMEs with competitive rates, flexible repayment options, and the convenience of fast digital operations.”

The IFC expects its investment to “promote systemic changes in the SME finance market” in the Philippines, enabling more loans to underserved small businesses and making SME lending more viable for traditional banks and technology-based lenders.

Before the IFC’s equity investment, First Circle’s shareholders included fintech impact investor Accion Venture Lab, institutional asset manager and fintech investor Fasanara Capital, technology venture capital firm Insignia Ventures, and VC Venturra Capital, along with other local and global investors.

In a similar move, the IFC injected US$7 million into fintech firm Salmon in May to enhance financial inclusion through artificial intelligence (AI) in the Philippines. This investment was made in UAE-registered Fintech Holdings Ltd., which operates three Philippine subsidiaries under the Salmon brand name.

The IFC’s investment in Salmon was part of the company’s US$25 million Series A extension round, with the IFC as a lead investor alongside Singapore-based private equity fund Northstar Group, ADQ/Lunate, and other Filipino and international investors.

“The capital will enable Salmon to develop new credit products and a lifestyle banking offering, which Salmon plans to launch in the second half of 2024,”

said the IFC in its statement.

Established in 2022, Salmon currently operates a rural bank in Laguna province, which it acquired earlier this year. The fintech company uses AI-enabled technology and a proprietary credit engine in its short-term consumer loan offerings such as Salmon Cash Loans, Salmon Credit, and Salmon Installment.

The Bangko Sentral ng Pilipinas’ (BSP) 2022 annual report on its national strategy for financial inclusion indicates that only a quarter of adults in the Philippines had access to formal credit, highlighting the significant underserved population by traditional lenders.