A former basketball player, entrepreneur, and banker is now helping transform the lending sector in the Philippines with the use of a mobile app.
Michael Singh, the co-founder and chief executive of AsiaKredit, developed a mobile app that offers immediate and short-term cash loans between P2,500 and P15,000 to customers who need the money for tuition, medical expenses, utility bill or business capital.
Singh says AsiaKredit aims to serve “unbanked” customers who are unable to access formal financial services such as credit and deposits and who rely mostly on friends, family, and informal lenders.
“With those customers in mind, our main competitors are the informal money lenders who charge exorbitant interests rates and penalties, and take little effort for the customer’s experience,” he says.
Singh, a second-generation Filipino-Indian who was born in the Philippines, was an amateur player at the Philippine Basketball league and a varsity athlete of Ateneo de Manila University where he was taking Political Science when his parents sent him to the United States in 1992 to finish his undergraduate course at DePaul University in Chicago.
“I played at UAAP for Ateneo in college while also playing in the Philippine Basketball League. My parents were worried about my studies, so they encouraged me to complete my last two years of undergraduate studies in the United States,” Singh says in an e-mail interview.
“Basketball primarily instilled in me a drive to perform. It taught me that if you want to achieve something, you have to put in the hard work and sacrifice. It also taught me the dynamics and importance of a team. An athletic team environment is very similar to a business. You outline your goals and objectives, you build your team and foster trust and respect, you device your game-plan with precision and science, and you execute,” he says.
In 1995, he co-founded the Nacho King food concept, which now has more than 150 retail outlets nationwide. He also launched the successful start-up pinoyauctions.com, which was later acquired by ABS-CBN Interactive Inc.
Singh obtained a Master’s in Business Administration from Northwestern University-Kellogg School of Management in 2006 and went on to become a banker. He joined Hong Kong and Shanghai Banking Corp. in San Francisco as vice president in 2007. In March 2010, he moved back to Chicago to become the chief operating officer of Alpha USA.
He returned to the Philippines in 2015 and was appointed senior vice president of Rizal Commercial Banking Corp., where he was in charge of retail product and marketing group. In October 2016, he decided to help establish AsiaKredit to provide “a ground-breaking fast and convenient consumer loan product through a mobile app to Southeast Asia’s half a billion unbanked”.
Singh says he decided to leave the formal banking sector because it was largely a corporate lender or a bank for the upper to middle-income segment.
“The banks had little appetite nor the expertise or infrastructure to service the needs of the bottom-half of the pyramid, which happen to be 70 percent to 80 percent of the adult Philippine population,” he says.
He describes AsiaKredit, which he co-founded, as a fully digital consumer lender that is venture-built and funded by Singapore-based Forum, the largest financial technology venture builder in emerging Asia led by serial entrepreneur Greg Krasnov, and Fintonia Group, an early stage fintech investor in Southeast Asia led by Adrian Chng, the former chief executive of JobsDB and current CEO of GoBear.
Other investors are Sig Asia Investments, Reliance Indonesia Group and Space Ventures. Headquartered in Singapore, AsiaKredit currently operates in the Philippines through pera247.ph. The Manila team includes digital marketing and operations experts with world-class experience from the likes of Lazada, Hinduja Global Solutions and Thompson Reuters.
“Our risk, analytics and IT team in Eastern Europe leverages its prowess in alternative data analytics, credit-scoring algorithms and integrated technology solutions from Eastern Europe, where digital finance has reached a level of sophistication,” says Singh.
He says that in a little over six months of operations, pera247.ph has leveraged its digital technology to process over 200,000 applications. “We plan to grow our loan disbursements exponentially in the coming months,” he says.
On why he decided to put up pera247.ph, Singh says: “In the Philippines, there is a clear demand for consumer loans”.
“The Philippines ranks among the lowest in the world in terms of bank account and credit penetration for its citizens. There are only approximately 15 million to 20 million bank accounts in a country with 70 million to 80 million Filipino adults. Worse, there are only approximately 3 million unique credit cards yet, we know that 7 in 10 Filipino adults borrow, mostly from family and friends, or informal lenders, and only 1 in 10 borrow from formal institutions,” he says.
“According to the BSP [Bangko Sentral ng Pilipinas], the Philippines has seen sustainable growth in consumer loans since 2008. Add to that the burgeoning usage of smartphones and there is a clear opportunity to utilize digital channels to close the financial inclusion gap. This is where AsiaKredit comes in,” he says.
“Our ability to use mobile phone data to assess credit risk and issue loans to a segment of the market shun by the traditional banking sector, positions us to contribute to the BSP’s financial inclusion initiative,” says Singh.
“The impact of digital finance is manifold and is exactly what AsiaKredit [pera247.ph parent] intends to achieve—to offer convenient, short-term credit to those who need it most—be it small business owners, families with school-going children, or those with emergency needs,” says Singh.
AsiaKredit currently has 50 employees, including 35 in Manila and 15 in Eastern Europe. Singh says that since operations began in November 2017, “we have hit all the major milestones that we have established for the business, some ahead of schedule.”
“For example in a little over half a year, we have already processed close to 200,000 applications and disbursed over $1 million in loans. We have also already achieved product level break-even. Our repeat customer rate is also over 50 percent. We are gearing up to scale the portfolio to a significant size in the last quarter of the year and into 2019. We also intend to introduce new products such as an instalment loan with larger ticket sizes and longer loan terms,” he says.
AsiaKredit charges a 5-percent processing fee. Interest rate is between 0.7 percent and 0.8 percent daily. It actually depends on repayment terms which range from 10 days to 90 days. A loan of P10,000, for example, will result in total repayment of P11,330 in ten days or up to P17,970 in three months.
On how to avail of AsiaKredit’s cash, Singh says “customers just need to download the pera247 app from Google Play, apply for a loan which takes around 8 to 10 minutes, upload a selfie and ID, give consent to access mobile data, and click submit”.
Loan approval takes less than 24 hours, while disbursements can be done even without a bank account through cardless ATM withdrawal and over the counter cash partners like Western Union or pawnshops. Payments are as easy as paying utility bills, according to Singh.
“Aside from the fast and end-to-end digital transaction, we adhere to a global standard Digital Lending Code of Ethics. This includes appropriate product design and delivery, prevention of over-indebtedness, transparency, responsible pricing, fair and respectful treatment, privacy of client data and mechanisms for complaint resolutions. We are also compliant with the Truth in Lending and Data Privacy Acts and take these seriously,” he says.
Singh is optimistic about the growth of AsiaKredit. He says more than 80 percent of the adult population are currently not served by the traditional financial sector.
“There is great optimism for the future and we plan to expand aggressively. The growth of the Philippine economy is outpacing the growth in financial inclusion. Access to credit is a basic need every growing economy must provide its citizens in order to climb the social pyramid,” he says.
The plan, according to Singh, is to explore expansion to other Asean markets, with Indonesia as the next stop.
Singh advises millennials to become entrepreneurs to fully take advantage of the fast-growing Philippine economy and its highly-talented and educated workforce.
“The Filipino is also very entrepreneurial at heart. Find gaps in the market, and identify ways to innovate. I always like to say there are over a dozen billion-peso businesses that have yet to be formed or started; just waiting for someone to identify the need and fill it. Go out there, take some risk, follow your heart, control your own destiny, and most important, impact society for the better,” he says.