UnionDigital Bank, a digital banking subsidiary of UnionBank of the Philippines, is set to launch a microloan program with the Social Security System (SSS) this year, as reported by BusinessWorld.

The program will let micro, small, and medium enterprises (MSMEs) apply for capital digitally through UnionDigital’s banking app.

SSS first introduced LoanLite last September, and the product builds around it.

It offers eligible SSS members loan amounts between PHP 1,000 and PHP 20,000, with repayment terms of 15 to 90 days at an 8% annual interest rate plus a service fee.

UnionDigital Banks’s head of brand and communications, Kimberly Dy-Tenchavez, said the bank could not yet confirm an exact launch date, only that it would happen within the year.

Applications and loan disbursement will run entirely through UnionDigital’s banking app, with funds also available through the MySSS Card. Loan approvals will still go through SSS and the bank’s usual review process, Dy-Tenchavez said.

The program is one of the digital bank’s responses to persistent capital access challenges among MSMEs, particularly sari-sari store owners, according to Dy-Tenchavez.

Mark Joaquin Ruiz, President and Co-Founder of Hapinoy, a network of more than 70,000 microentrepreneurs, said access to capital remains store owners’ central concern.

“Many still rely on 5-6, which has extremely high interest rates,” he said, referring to informal lenders who charge borrowers PHP 6 for every PHP 5 borrowed.

MSME loans made up just 4.73% of the banking system’s PHP 12.143 trillion loan portfolio as of March, according to BSP data.

It is well below the 10% mandatory allocation the Magna Carta for MSMEs once required, before it expired in June 2018, the government has yet to reinstate it.

Extending an Existing Partnership

UnionDigital Bank and Hapinoy have worked together for over a year on financial inclusion efforts for sari-sari store owners, including UD’s Kaya Mo Movement and the Hakot Papremyo rewards program run during Hapinoy Caravans nationwide.

The digital bank has said it uses alternative data to extend credit to microentrepreneurs without traditional financial histories.

Beyond SSS LoanLite, Dy-Tenchavez said that UnionDigital Bank is also developing a separate loan product with Hapinoy, expected to roll out later.

The remarks came during a Hapinoy Caravan in Novaliches, Quezon City, which helped nearly 300 sari-sari store owners build financial and digital literacy skills.

Featured image: Edited by Fintech News Philippines based on an image by thanyakij-12 via Magnific