“It’s not easy doing business with SMEs,” says Tham. “Most SMEs are not exceptionally well-capitalised and they need banks who have the resources.”
In February 2020, while Covid-19 was creeping across the globe, UOB announced $3 billion in relief assistance to companies. The relief measures also included allowing affected businesses to rework their principal repayments and to service only their loan interest for up to a year, extending up to one year working capital financing of up to $5 million, and offering financing liquidity against mortgage security.
“When Covid-19 hit, we realised this was something that could become quite serious. We went in quite quickly, to be the first to launch our relief programme. We wanted to assure customers that this was not their fault,” he adds.
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With the help of UOB, along with government assistance, clients were able to ride through the difficult period, says Tham. “Some sectors are still struggling, but others pivoted to make more money than before they had this opportunity. I’m happy to say that our portfolio is very resilient and our long-term credit costs for SMEs have not spiked as expected.”
While UOB does not share a detailed breakdown of the programme’s disbursement across sectors, it is “quite obvious” that construction is the most impacted sector, says Tham.
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Faced with manpower shortages and soaring material prices, the construction sector is under lots of stress, he adds. “The government has done a good job and now, banks must do our part. We have restructured their commitments and given them more time, so companies can find their footing and bounce back from the impact.”
The ‘big boys’
Happening alongside the pandemic, however, is a rising megatrend: sustainability. Here, UOB is working to engage SMEs, as many feel they are not in the crosshairs of the paradigm shift.
“We did a survey of 1,000 of our SMEs across the region, asking them questions on sustainability. Not surprisingly, a lot of them have not heard of it,” says Tham. “That’s understandable because they don’t have the resources. Between grappling with Covid-19 and [adopting] digitisation, they think sustainability should be left to the big boys.”
SMEs may think sustainability is a mandate best left to the multinational corporations (MNCs), but SMEs are the backbone of the economy because there are so many of them, says Tham.
There are also material concerns if SMEs refuse to play by the sustainability book. The supply chain accounts for 73% of MNCs’ total emissions and they plan to halve this figure, says Tham. “The writing is on the wall that even the big boys — for their own survival — want you to comply with ESG (environmental, social and governance).”
“Supplier SMEs will have to go if they don’t fit into ESG criteria. If you are not in compliance, they will find someone in compliance,” adds Tham.
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Hand-in-hand for sustainability
That said, SMEs are keen on adopting sustainable practices if they are offered some guidance. “You ask them whether they want to engage in sustainability if somebody holds their hands, 90% say yes. So, we clearly need to help in sustainability, green financing or ESG modelling,” says Tham.
In October, UOB launched U-Energy, the first integrated financing platform in Asia, to drive adoption of energy efficiency projects for buildings and homes. The U-Energy platform offers nine energy service companies that customers can tap for energy efficiency projects. These partners can help improve chiller and air-conditioning efficiency, install solar panels on rooftops, switch to LED lights, optimise energy and power management systems, and even change building facades to reduce heat absorption.
Adopting solar energy is easier and cheaper than many realise, says Tham. “In the past, solar panels were so expensive. Now, it makes more economic sense; the payback period for solar energy is five to seven years, depending on consumption pattern and electricity prices. A lot of factories have started installing them. I, myself, have installed them in my house; I have to practise what I preach.”
With UOB’s green financing, commercial and industrial building owners can opt for a direct purchase of the new energy-efficient equipment. Under this scheme, building owners may obtain a loan of up to $10 million with a maximum seven-year loan facility.
For homeowners, UOB offers an interest-free instalment plan of up to three years when UOB credit cards are used for these retrofitting projects.
U-Energy is part of UOB’s suite of sustainable financing solutions, offered under the bank’s Smart City Sustainable Finance Framework.
Under the same framework, UOB has also launched U-Solar, Asia’s first integrated financing platform for solar energy; and U-Drive, an integrated value chain solution for the electric vehicle ecosystem.
“The evolution that SMEs are going through is very fast. If they don’t change, they may run the risk of reduced market access,” says Tham.
“I think we’re at the beginning of a wave of ESG; we are riding up this crest. Awareness among SMEs is quite low now, but it’s all the more important for them to embrace ESG. Once you get in, you won’t lose a market,” he adds.
Photo: UOB
