How unique lending platforms boost small businesses in Southeast Asia

Niche lending firms are shaping SMEs in Southeast Asia to boost fintech, AI and other technological sectors

February 24th, 2020 – In a joint report released recently by the International Finance Corporation (IFC) and SME Finance Forum, it was found that the global funding gap for small, medium and micro businesses amounted to US$5.2 trillion per year, with the East Asia and Pacific region representing 58 per cent of the global demand.

A massive figure for a massive market, but one that lies in a severely fragmented region with 11 countries, each with its own unique economy, infrastructure, culture and significant differences in terms of laws and regulations.

While the region has seen exponential growth over the past few decades, financial inclusion remains limited – with only 33 per cent of businesses having access to proper financing.

The SME and startup financing landscape in SEA

Worldwide, financial regulators are enforcing stringent laws on the lending/banking industry when it comes to business loans and lending, requiring specified amounts to be held in the capital at all times to cushion them against financial emergencies.

This has led to stricter risk profile assessments, especially when lending to startups or SME’s who typically can not show constant profits or afford to offer a lot of collateral, making them too “high-risk” to qualify.

In SEA, SMEs employ half of the workforce and contribute between 20-50 per cent to the national GDP. These businesses have little to no resources and some lack even the most basic business skills, such as how to add a markup to products or filling out business loan applications.

Several companies are stepping up to the plate with initiatives to educate and inform young entrepreneurs and SMEs while at the same time investing in flexible and lively cloud data storage strategies in order to provide more personalized services to these business owners.

As the traditional banking relationship model doesn’t find any value in underwriting loans for these businesses, SME lending platforms, online lenders and fintechs are making credit more accessible by trying to address the problem through alternative lending and the use of technology and AI, bringing new solutions and new, digital-first models to assist these business owners in growing their businesses.

More…https://e27.co/how-unique-lending-platforms-boost-small-businesses-in-sea-20200221/

Written by E27