Japan's MUFG Bank will use artificial intelligence to screen Asian startups for financing, looking beyond balance sheets to forge relationships with promising businesses who otherwise may not yet qualify for bank loans.
MUFG Bank will launch a 50-50 joint venture in Singapore with Liquidity Capital, an investment fund based in Israel that has a track record of incorporating AI into its operations. The venture will house a $80 million fund, financed entirely by MUFG Bank, which will start operating by the end of the year.
The fund will finance e-commerce, education and health care startups. Using AI, the fund will analyze companies' bank accounts, subscription numbers, accounting data and other information to screen them for loans. Such a comprehensive screening process is still rare, MUFG Bank says.
Startups often fall into the red as business expands. Because banks usually make decisions on loans based on corporate balance sheets, this makes it difficult for them to receive financing.
MUFG Bank, a flagship unit of Japanese megabank Mitsubishi UFJ Financial Group, hopes that its new AI-based operation will help it cultivate relationships with up-and-coming businesses in Southeast Asia and India early on.
The group is already working on expanding beyond conventional banking in emerging Asian markets. MUFG Bank is investing about 78 billion yen ($740 million) into ride-hailing startup Grab as early as this year, and will launch joint, smartphone-based financial services.