Philippine retail bank RCBC has partnered with fintech solutions provider Bizbaz to pilot its artificial intelligence (AI)-driven credit assessment and scoring tool, which aims to broaden access to loans, especially within micro, small and medium-sized enterprises (MSMEs) and the unbanked and underbanked communities.

Notably, in the Philippines, 78% of the bankable population is either unbanked or underbanked, positioning the country among the top 10 nations with a significant unbanked population.

The initiative also aims to support the reduction of non-performing loan (NPL) risks, offering improved predictability assessments.

Southeast Asia has witnessed a steady rise in NPLs in recent years, with the World Bank projecting an increase in the NPL ratio to 5.9% in 2023 from 5.7% in 2022, surpassing the global average of 4.2%. In the Philippines alone, the NPL ratio stands at 4.2%. The World Bank estimates that Southeast Asia incurs an annual loss of approximately US$50 billion due to NPLs.

Bizbaz creates a customer or business risk profile by analysing financials, health, lifestyle and social footprints; and, by leveraging personality- and voice-based risk assessments, the company determines suitability for loans.

This approach results in a more accurate and comprehensive credit scoring system that considers a broader array of data, including alternative sources. The streamlined process facilitates faster and more efficient credit scoring, reducing the time borrowers wait for loan approval and mitigating bank default risks.

Current clients, including a national Indonesia-based bank, have seen increased revenue of between two and three times, and reduced customer acquisition costs by up to 40% and bad debt default by up to 50%.

“The current credit system is broken, with most banks in Asia relying on financial history-based credit risk systems,” says Hayk Hakobyan, BizBaz’s CEO and co-founder. ”With most of the Asian population not even having a credit score, the current system is obsolete. There needs to be an alternative that can harness the latest AI technology and behavioural science data available.

“For MSMEs, this translates to access to a credit lifeline that would otherwise be unattainable. For banks like RCBC, this aligns with their commitment to financial inclusion and innovation, increasing predictability, reducing NPL risks and leading to long-term cost savings.”

Eugene S. Acevedo, RCBC president and CEO, adds: “With this partnership, we can maximize AI’s massive potential and unlock more opportunities for our countrymen, especially within MSMEs.”