PH banks and insurers face MSME credit gap, AI fraud, climate risk

Nearly 8 in 10 MSMEs still face barriers to accessing loans, an expert said.

Meeting the credit needs of small businesses, combating AI fraud, and addressing environment risk are just some of the issues faced by Philippine banks and insurers, market experts and senior financial executives said during the afternoon session of the Manila leg of the Asian Banking & Finance and Insurance Asia Summit 2025.

Patricia Buenaventura Nichol, partner and office head for Bain & Company, kicked off the afternoon session with a discussion on the future of wealth management, focusing on the retail and mass affluent segments.

Succeeding in this segment requires finding opportunities in their paradoxes, Nichol said, one of which is that they do not trust relationship managers (RMs) even as they seek human support for certain points of their customer journeys.

“Most of these customers are overrepresented and underserved,” Nichol told the attendees at Makati Shangri-La, 11 March. “There is a lack of differentiation amongst wealth management players.”

Generative artificial intelligence (gen AI) can help address these needs. But it is not a silver bullet; traditional AI solutions will continue to play a crucial role, and they will exist complementarity together, Nichol said.

AXA Philippines’ Chief Operating Officer Kate Driz followed with a discussion on how they revamped their Emma by AXA app to transform how they engage with their customers.

“This was our chance to ramp up our digital capabilities and shift the role from being just a payer but a true partner in our customers’ health and financial journeys,” Driz said.

MSME focus
Afternoon speakers made a particular focus on micro, small and medium enterprises (MSMEs) in the Philippines, which make up over 99% of all businesses in the country, as per government data.

Despite this, 79% of MSMEs face challenges in accessing financing, said Fei Yong, Manager, YCP. This is in part due to their lack of credit records and limited financial documentations, which causes banks to perceive them as high risk customers.

Yong highlighted Bank Rakyat Indonesia, who has 82% of its total loan portfolio being MSMEs, whilst maintaining a 2.78% default rate. This proves that MSME financing can be a very lucrative segment, she said.

Yong suggested three solutions to bridge the financing gap: first is a credit guarantee scheme, where corporations cover a portion of the loan for MSMEs who lack the collateral and credit history to be traditionally approved for a loan.

The rise of digital lending platforms also presents opportunities for MSMEs to access credit easier, as they often offer less stringent document requirements.

Banks can also collaborate with B2B digital lending platforms and fintechs to fulfill some gaps. For example, overseas, Citigroup collaborated with Numerated to refine its credit risk models and speed up the lending process.

Alternative credit scoring models can also address the issue of MSMEs lacking records, Yong said.

AI vs AI
The rise of AI has also led to the rise of new cyberthreats— to the point that bankers and insurers are saying that you can no longer trust videos and audio as easily due to the rise of deep fakes, said Marlon Sorongon, Chief Information Security Officer, Maybank.

Sorongon said that managing and leading AI should not be limited to one leader, but is a team effort.

“Yes, you trust, but you also verify,” said Roland V. Oscuro, Chief Information Security Officer, Data Protection Officer and First Senior Vice President, Philippine National Bank (PNB).

Oscuro recognized that the quality of deep fakes are such that it was hard to spot if they are talking to an actual person or not. The solution is expensive: invest in AI to counter AI.

Extending a program of awareness to their employees and customers is also needed, said Rosanna Canlas, Head of Information Security, Allianz PNB Life.

At the end of the day, AI is a tool— and it can be used to boost productivity but can also lead to negative productivity, said Carlos Tengkiat, Chief Information Security Officer, RCBC.

“However you look at it, the genie is out of the bottle,” Tengkiat said. “The thing that is most important is to tell the people— your users, your organisation— the proper use for AI. There’s nothing stopping them from whipping out their phones, taking a picture, typing secrets from your company.”

Redefining branches
The COVID-19 pandemic heralded whispers of branches going obsolete, but the opposite happened, said Maria Cristina L. Go,  EVP and Head of Consumer Banking, Bank of the Philippine Islands (BPI).

BPI is currently at the center of a three-year bank transformation process, Go said in a fireside chat where she talked about how BPI is redefining their customer service.

One change is assigning what they call “customer delight officers” per business unit. These officers are tasked with determining the biggest challenges that our customers face and coming up with initiatives or projects that will address that pain point.

As an example, BPI is working on a rapid queuing project on their branches after their officers took note of customers’ queuing process.

They have also adapted a platform enabling their branch frontliners to see all the campaigns offered to a customer. With this data, they can determine which campaign has the highest propensity to be taken up.

“We are able to track each life stage of that cross-sell journey—from being offered to the level of interest, and eventually the decision of the client to take it up,” Go said.

Addressing environmental risk
Integrating climate risk in Philippine banking and insurance operations involves a tightrope between meeting net zero goals and considering the growth needs of the market, market experts said.

Sun Life Philippines, for example, is looking to do less carbon operations and sustainable investing, said Ria Mercado, Chief Risk Officer, Sun Life Philippines.

ING, meanwhile, considers its clients’ transition plans in managing their portfolio as they transition it to net zero, said Jun Palanca, Country Manager for the bank’s Philippines operations.

Palanca said that net zero compliance can also be a way to attract talent, especially from the Gen Z and the younger populace.

“Many have that mindset of looking into what you are doing as an institution and how you adapt to climate change,” Palanca said.

UnionBank of the Philippines’ Chief Risk Officer Erwin Wiriadi said that the biggest challenge is in integrating climate risk into banking operations itself.

“The tools have to be upgraded. Even the team has to be upgraded,” he said.

UBP, for their part, is working to expand their products to reach various customer segments. For example, they are working with the Department of Education to lend to teachers, and to various government agencies to give loans to federal employees.

They also worked with the International Finance Corporation (IFC) to offer social bonds, and channel these to the MSME sector, noting that they are the most vulnerable to climate change.