Micro, small, and medium enterprises (MSMEs) are the real backbone of the Philippine economy. According to preliminary results of the Philippine Statistics Authority’s (PSA) 2021 Updating of the List of Establishments, 99.58% of 1,080,638 recorded businesses operating in the country are MSMEs.
In an interview with early-stage venture capitalist Eric Manlunas, he identified an opportunity for Filipino businesses to embrace new technologies to boost their operations. “Business owners of any size, if they haven’t yet, should seriously consider onboarding technology tools to enhance their competitiveness,” he said.
These digital transformation efforts are estimated to generate up to P5 trillion in economic value annually by 2030, according to a Google Philippines research created by AlphaBeta. However, in a baseline research conducted by the Department of Trade and Industry to determine if local MSMEs are ready for digital transformation, only 6% of respondents claimed they used advanced digital tools for their businesses. Meanwhile, 23% said they did not use digital tools at all.
Merchant platform startup yufin hopes to cater to these small merchants, allowing them to run their businesses more efficiently and become banking and distribution hubs for their customers through a smart and simple mobile app. By addressing the lack of access to affordable and easy-to-use payment acceptance platforms, yufin aims to slowly boost the digital transformation of Philippine MSMEs, starting with the underserved merchants stationed in Visayas and Mindanao.
Built by Miti Ventures, yufin believes that the best way to help MSME owners succeed in their journey toward digital transformation is through a hybrid approach—a combination of in-person and digital acquisitions. The startup created an app to help small businesses grow their income by providing inexpensive and assisted digital financial services.
“Our goal is to add more value to these small merchants’ businesses and their lives,” said Gerald Chua, Head of Merchant Acquiring. “Success for us is helping them bring home an extra P5,000 or P6,000 monthly through our platform.”
A bold rollout strategy
yufin truly believes in the power of MSME owners and has their eyes set on helping what Shubhrendu Khoche, Co-founder of Miti Ventures, calls ‘the missing middle’—small merchants that are often forgotten since most companies either cater only to large businesses or focus on MSMEs located in Metro Manila and nearby regions.
With their mission in mind, the startup deliberately entered the Mindanao market first. According to Chua, yufin will be following a ‘reverse’ rollout strategy and start from Mindanao then expand upwards towards Visayas and eventually Luzon.
Visayas is home to over 186,000 MSMEs and another 211,000 can be found in Mindanao. The top 3 locations are Central Visayas with 77,942; Western Visayas with 73,487; and Davao Region with 60,493.
Currently, the yufin community already has more than 7,000 members enrolled. “By the end of Q4 in 2022, we are seeing more than 70,000 users to our app,” said Chua. “This is one of the milestones that we’re aiming to achieve within the year.”
A merchant platform powered by real-world connections
“Small merchants are great sources of valuable local insights—sometimes they’re even better than Meta or Google,” said Khoche. “If we wanted to help speed up the digital transformation of businesses, we had to start where there’s most friction. And what better way to know than by actually asking the small merchants right in their domains.”
To meet their target user base size, yufin had to get to the heart of the problem by visiting barangays and going door-to-door. The startup’s team is mostly made of field sales ambassadors whom Chua attributed for driving customer acquisition. He added that the insight behind this strategy is small merchants do not easily trust new technology because they don’t know who’s behind it.
“Sadly these [merchants] have sometimes been taken advantage of before when they were introduced to new technologies for their small businesses,” said Liz Servañez, Head of Business Development and Partnerships. “We had to show them that behind yufin was a friendly face who will hold their hand and show them how the app can help their business.”
Chua and Servañez added that field ambassadors help provide useful feedback in improving yufin’s current services while giving them ideas on what new features to prioritize.
“I remember when I did door-to-door in Davao, one of the struggles these small merchants faced was collecting utang and managing soft drink bottle deposits,” said Servañez. “These are just examples of insights that we were only able to gather by talking to the sellers face-to-face.”
Paving the way for digital inclusivity
If the key to a startup’s success is collaboration and understanding its users, then best to ask Chua, Khoche, and Servañez.
Chua and Servañez are strategically located at different ends of the Philippines—the former being in Davao City to closely monitor the market and the latter in Metro Manila to keep watch of trends that could be useful for the startup. The two came from two different backgrounds. Chua has a rich background working previously for FMCGs while Servañez is well-versed in the world of startups.
“I’m confident in our team because we pull our expertise from previous experiences,” said Chua. “We aim to mold yufin into the intersection of the former industries our teammates came from—banking, payments, FMCGs and startups, etc.”
When asked what’s next for yufin, Servañez mentioned that the startup is looking into providing credit lines for MSME owners.
“Imagine how much better these SMEs will be if given access to credit,” said Servañez. “Ideally small merchants should have access to credit because if they do, they can expand their businesses and push the Philippine economy forward.”
Servañez added that yufin is targeting to roll out this feature by early 2023. “We’re also looking into simplifying the credit application process for small merchants to encourage them to grow their businesses with the extra financial support.”