AI-Powered Scoring To Boost MSME Prospects

Step into the future of financial sustainability with ADI, a trailblazer in AI-powered scoring as a service. ADI's innovative solution for Micro-, Small, and Medium-sized Enterprises (MSMEs) taps into AI and unconventional data sources to help address the Philippines' lending gap. ADI urges lenders to reimagine their approach for a future of economic growth and financial sustainability.

A Call for Accessibility and Innovation - MSMEs and SMEs Hurdles

MSMEs and SMEs in the Philippines grapple with obstacles that impede their growth. Stringent criteria and upfront requirements set by financial institutions pose significant challenges, particularly for businesses in their early stages, demanding a reevaluation of current practices.

Take for example an entrepreneur's firsthand account, which amplifies the struggle faced when seeking financial support especially if they are just starting their journey such as 5-6 months into operation. However, traditional banks frequently mandate a minimum of two years of business history. Additionally, MSMEs/SMEs must adhere to stringent criteria concerning credit history, business updates, and completed registration, which can be notably challenging to fulfill.

Frustrated by these hurdles, entrepreneurs often turn to alternative lenders with high-interest rates and limited loan amounts. This narrative underscores the need for accessible and business-friendly financing options that recognize and accommodate the unique challenges of early-stage enterprises.

While promises of loans for MSMEs and SMEs resound across financial institutions in the Philippines, the reality often falls short. The path to securing these loans proves to be an arduous journey, marked by cumbersome application processes and discouragingly high rates. 

This personal experience from one of many entrepreneurs highlights the resilience required to navigate these challenges. Facing rejection, they were forced to turn to personal networks for support, emphasizing the imperative for MSMEs and SMEs to establish robust internal funding.

As we consider this journey, a compelling call surfaces for financial institutions to reconsider their scoring methods, urging a shift toward alternatives that empower small businesses without compromising financial stability. Therefore, ADI aims to assist in fostering a more inclusive and supportive financial ecosystem for MSMEs and SMEs in the Philippines. 

The Future of Financial Inclusion

The financial landscape, particularly in the Philippines, offers a profound opportunity for MSMEs. Representing a staggering 99.6% of businesses, these entities play a crucial role in the economic tapestry. ADI's Scoring as a Service emerges as a strategic advantage for lenders aiming to bridge the $220 billion lending gap prevalent in the country.

The $220 billion lending gap poses a challenge and an opportunity. When Union Bank approached ADI to address this industry challenge, our team of data scientists introduced our SocioGeoAnalysis scoring engine. We understood that reviewing bank statements, financial statements, and bureau data for MSMEs and SMEs is not the complete story of how viable a small business is. After all, these are all lagging indicators that can take a team of analysts upwards of 15 days to verify and review.

The process is manual, prone to fraud, risky, and at the funding levels required by SMEs and MSMEs, not justifiable. ADI’s thesis reviewed SME and MSMEs’ physical location, socio-economic factors, and elevation and mapped against proximity to known points of interest, culminating in our SocioGeoAnalysis alternative credit scoring solution for SMEs and MSMEs.

Furthermore, our data points offer a compelling forward-looking view and are a leading indicator for SME and MSME viability. Upon launching the service, ADI was able to improve UnionBank’s approval rates significantly while cutting down loan processing times by 97% within the same day. 

Alternative Credit Scoring It is an approach used to assess an individual's or business's creditworthiness beyond traditional methods, such as rent history, geolocation, and publicly available social media track activity, among others.

Traditional approaches often lead to exclusion, leaving a considerable gap in the accessibility of financial services. ADI's innovative solution, focusing on pre-qualified MSMEs, is a transformative force. This is a pivotal step in promoting financial inclusivity and sustainability. 

ADI's alternative credit scoring goes beyond technological innovation; it's a catalyst for MSME growth. By offering a more comprehensive view of creditworthiness, it allows lenders to make informed decisions and tap into a market segment previously deemed too risky.

Scoring as a Service ensures that the MSME sector becomes a viable option for financial institutions, propelling both economic growth and financial inclusion.

As we collectively propel the financial industry towards a future of inclusion and sustainability, ADI beckons lenders to reevaluate their approach. Once again, the $220-billion lending gap required by MSMEs and SMEs in the Philippines presents a substantial business opportunity for financial institutions to address.

This issue is a matter of national concern, given that MSMEs and SMEs constitute an astounding 99.6% of all businesses in the country. ADI invites the industry to be part of this transformative journey, where every decision made is not just about numbers but about fostering economic growth and financial sustainability for all.

About Aboitiz Data Innovation (ADI)

Aboitiz Data Innovation (ADI) stands as a pioneering leader in the data science and AI landscape. We provide transformative AI consulting and data-driven IoT solutions, catering to a diverse range of sectors including banking & financial services, power, and smart cities. With numerous real-time data solutions across various industries, our network includes some of the world's most innovative companies and experts in data science and AI.

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