As banks retreat, fintech muscles into SME financing
Considered the backbone for most economies within Asia, SMEs (small to medium enterprises) have been for the longest time neglected by the financial system.
That could change. Non-traditional financial companies are attempting to provide support to promising SMEs by offering financing as well as customer-centric tailored services.
Funding Societies based in Singapore is just one of the many P2P (peer-to-peer) providers in the region that aim to connect investors looking for additional yield to SMEs searching for funding. Moreover, Fundnel another Singapore based firm is aiming to help institutional investors discover private companies with promising growth potential. Currently Fundnel was able to raise US$49 million for approved companies on its platform.
According to the Asian Development Bank (ADB), 57% of SME trade finance requests are rejected compared to 10% for multinational companies. In this post global financial crisis (GFC) world of increased regulations and KYC (know your customer) mentality SMEs are increasingly finding it difficult to gain financing to support their expansion aspirations.
“Financial technology, or fintech, can help bridge the financing gap for businesses left out of trade finance,” states the ADB brief. “But awareness of digital finance by small businesses remains low, with 70% of responding companies indicating that they are unfamiliar with these tools. Among firms that were familiar with digital finance, peer-to-peer lending had the strongest uptake rates in developing countries.”
Nonetheless the mentality of banks towards SMEs has begun to shift as well. Speaking at a conference in the Philippines last week, Mario Lamberte, program lead at USAid stated “that banks are now moving to the small enterprise market because the large market is so crowded already”. OCBC Malaysia for example has been willing to offer customized financing packages for its SME clientele. Moreover, Standard Chartered Bank has offered smaller companies real-time transfers and collections, services normally reserved for larger clients. In the case of DBS, the bank has been able to guide SME clients via its working capital advisory product.
23 Dec 2016