BDO Network Bank: Lending a helping hand in times of crisis
Jesus Antonio S. Itchon, president of BDO Network Bank, Ramon Militar, head of Community Banking Network Group, and Karen L. Cua, senior VP, and head of MSME loans.
The lingering economic impact of the Covid-19 pandemic has left many businesses on the brink of shutting down operations.
This holds true when drastic quarantine measures were implemented and reimposed in Metro Manila and nearby areas in a bid to curb rising infection rates, but not in the case of rural areas where economic activities continued, if not restricted at all.
BDO Network Bank (BDONB), the rural bank arm of BDO Unibank, could attest to that given its improved business performance amid the ongoing health crisis.
The company posted 35 percent and more than 400 percent growths in loan portfolio and net income, respectively, in the first three months of 2021 compared with the same period last year.
"It turns out that our mission seems to be immune from the virus because if you follow [our first quarter] results, we're doing even better than pre-pandemic," BDONB President Jesus Antonio Itchon told the BusinessMirror in an online interview.
Spared from the bad health situation that the rest of the country has been facing, however, the bank has not been complacent to fulfill its very thrust to lend a helping hand and find ways to reach out and better serve customers in these trying times.
In fact, it has kept its operations running even during the imposition of the enhanced community quarantine in March 2020 up to this day when curbs have been implemented again in the National Capital Region Plus bubble due to the recent resurgence of the coronavirus.
"While other banks were closed, we are proud to say that BDO Network Bank remained open throughout this pandemic. So our clients or the public were very happy," noted Ramon Militar, senior vice president (SVP) and head for community branch banking.
Financial inclusion for all
In any crisis, businesses have no one to turn to except the lending institutions. The loans that they provide services as a lifeline, especially for micro, small and medium enterprises (MSMEs), to withstand difficult times.
"We know there's at least a million—I think this number is underestimated—MSMEs in the Philippines. The majority of them are micro and small. You could say like 90-plus percent of them," cited Karen Cua, SVP and head of MSME Loans. "[Unfortunately], they are underserved, especially from a bank's perspective, because they are undocumented."
Left without a formal loan provider to go to, they usually end up borrowing from an informal lender that usually has limited amount to shed yet payable in short term with high interest rates.
So what happens, Itchon said, is that they roll out the capital only to payoff the lender. He said that "these entrepreneurs are working for the borrowers" because they pay higher than the original loan amount and nothing is left as a profit that can be reinvested to grow their business.
This informal lending set up had pushed the BDO Unibank to develop and establish a micro-finance business through its acquisition of the One Network Bank from the Consunjis in 2016, which, eventually, became the BDONB.
"Our vision is to be the leading bank that can promote financial inclusion among unbanked and underserved communities," said the company's president.
Relatable, not intimidating
SARI-SARI stores, wet market vendors, hardware, bakery, or even junk shops—these are just some of the MSMEs that the bank has been serving in remote and even far-flung areas nationwide.
BDONB, despite being a leading microfinance player in the countryside, is really changing the way this segment is able to access credit in a simple, relatable, and approachable manner. Seeing how informal lenders serve their clients, the rural bank has adapted some of their practices.
First of which is going onsite like the wet market where the businesses are concentrated, to do oculars with potential borrowers. Just like the informal lenders, BDONB's account officers are normally seen there walking around, talking to prospective clients. Unlike the former, however, they are more presentable wearing a T-shirt with blue and yellow colors distinctive to the company.
They then assess the income of the borrowers so that they will know their capacity to pay. What makes BDONB's loan facilities more palatable is that they do not require any collateral nor any other documents like the audited financial statement or income tax return that usually make them shy away from the banks and other formal lenders. Even better, its interest rate versus informal lenders is much lower than 120 percent.
Since some of its borrowers are first timers to deal with the banks, they're not familiar with the requirements. Because of that, BDONB's account officers are in the market to assess and gather what they have so they can determine how much the bank could lend to them, which usually range from P30,000 up to P500,000 that is payable in three years, and repayment is monthly.
"We have a commitment of three to five business days as a turnaround time—from the time that you apply to the time that you get approved and disbursed; and, yes, I guess we do meet this," Cua said of the entire loan process that is fast with high approval ratings.
Apart from the account officers, field tellers are likewise regular visitors in the marketplace to collect the borrower's monthly dues.
Seamless collection process
"We actually had to go out to them," Itchon said of their initiative to directly go to the stores of their customers to collect their payments rather than have them settle their obligation over the counter at their branches. "It's part of our inclusive activities."
The field tellers bring with them point of sales, or POS machines, to automatically debit their dues from their deposit accounts.
"The vendors are given receipts and their accounts are immediately credited with the bank," Militar explained.
This way, he said, they don't just teach them how to borrow but also build a complete banking relationship with them by opening a savings account to keep their hard-earned money and avail other investment opportunities.
"This is our way of also teaching them how to be safe and financially savvier," noted the SVP and head for community branch banking.
Responsible borrowers
Because BDONB aims to make a profit to continue operating, the company tries as much as possible to prevent its MSME borrowers from being delinquent.
"So we make sure that during or upon approving the loan, we give them a loan orientation to make sure that they understand what they're obligated to," Cua pointed out.
Knowing how busy their enterprising customers are to their businesses, she said that their officers make sure that they call them or send them an SMS to remind them of how much is their dues.
"And when they become delinquent for many reasons, so, some are given more time to pay back," she added. "If it's a capacity issue, let's say temporary disruptions this pandemic, we are able to give payment arrangements. We find ways to make it more affordable, [like if they committed to pay monthly] P10,000, and because of some disruptions, we find ways to lower that installment every month [so as to settle the] loan."
The rural bank, per the top executive, also had complied with the Bayanihan grace period requirement and, on top of that, gave credit extensions to allow them to recuperate. Cua said: "We know and we hope that the economy will recover faster because MSMEs can only take so much disruptions."
Well established in its pursuit of financial inclusion going into the countryside, BDONB has many success stories to tell about its business borrowers to transform and grow their entities, especially during this time of crisis.
"Definitely during the pandemic, we helped transform and extend some of their businesses," siad the SVP and head of MSME Loans.
She cited, for instance, their client who produces hollow blocks and diversifies into other trade. Because of the decrease in the demand for such construction materials amid this health crisis, this customer has shifted to seeing essential goods like cooking oil with their loan facility.
Another inspiring account, according to her, are the sports uniform-makers-turned-manufacturers of personal protective equipment or PPE from Davao. The bank was able to provide them with a loan just before the hard lockdown that, in turned, enabled them "to switch to a new business line."
BDONB also has helped convert stranded overseas Filipino workers here to become entrepreneurs and stay for good instead of going back to their host countries for the proverbial greener pastures. Some of them have put up their own sari-sari stores. She noted that these OFWs now realize that they can work in the Philippines and be with their family without the need to go abroad.
"From a bank, considering we do have deposit funding, we are able to provide an amount that they need, if they want to grow their business, [or] invest in business assets like delivery trucks. So that is, in a way, the mission of BDO Network Bank, vis-a-vis the BDO Group, we are the platform to really reach to the underserved for the sake of financial inclusion," Cua stressed.
BDONB is the largest rural bank in the Philippines in terms of assets, with a network of over 300 branches and loan offices and 277 automated teller machines nationwide. Manned by a competent pool of almost 3,800 employees, the bank offers a wide array of financial products and services, including loans, deposits, cash management, remittances, and bills payment in areas considered unserved or underserved by banks.