DBS Bank has signed a cross-referral agreement with peer-to-peer lending platforms Funding Societies and Moolah Sense, becoming the first bank in Singapore to collaborate with marketplace lenders in expanding the funding sources open to small business clients.
The partnership enables DBS to refer some of the smaller businesses that the bank is unable to lend to to Funding Societies and Moolah Sense. In return, the p2p lending platforms will refer borrowers who have completed two successful rounds of fund raising to DBS for larger commercial loans and other financial services such as cash management.
Historically, small businesses without audited accounts and personal income statements tend to be underserved as banks find it difficult to credit assess them. Instead, banks prefer to lend to companies which can provide collateral, have an established operating track record and at least two years of audited accounts.
An increasing number of banks are looking at the peer-to-peer sector as a viable alternative for such businesses, retaining goodwill while getting a foot-in-the-door with companies whose needs have outgrown the P2P sector.
Joyce Tee, group head of SME Banking, DBS, says: “DBS’ partnership with Funding Societies and MoolahSense is a good example of how traditional and alternative finance providers can work together to support the funding needs of small businesses. Such partnerships are becoming common in markets such as the UK and we are pleased to partner two leading p2p lenders in Singapore in this pilot programme.”
This latest initiative marks another collaboration between DBS and the fintech scene. Earlier this year, the bank piloted a new way of making credit assessments for small business loans, by working with AMP Credit Technologies. Instead of relying on financial statements, personal income statements and physical collateral, the joint credit assessment takes into account electronically verifiable cash flows to assess the health of the businesses and their ability to repay.