The digital finance market in Southeast Asia could reach $60 billion by 2025 should it be able to penetrate the small and medium-sized enterprise segment.
Whilst loans make up 60 percent of SME contribution to overall GDP in Singapore, Malaysia and Thailand – compared to the 50 percent amongst OECD economies – the figure plummets to 20 percent in markets like Indonesia, Vietnam and the Philippines, according to a recent report by Google, Temasek and Bain & Company.
This spells a strong potential for digital finance to close the gap by leveraging technology to create more competitive lending solutions and greater reach to the region’s 64 million SMEs. Failure to do so effectively could result in a base case revenue projection of $38 billion, the report added.
Promising Outlook
In addition to a gap in loan contribution, the report surveyed SMEs and found that whilst 80 percent of small retailers need credit, more than half of the broader SME market cited high interest rates as the greatest hurdle to borrowing.
«Many merchants want access to capital, primarily to drive growth, but do not have that as loans are perceived to be too expensive,» Aadarsh Baijal, a Bain & Company partner, was quoted as saying in a «Business Times» report.
«That's really one of the things that's changing, with the advent of much better credit scoring (systems) by leveraging the different sources of data that the fintech players can offer.»
