Empowering the new generation of micro-entrepreneurs and small businesses in Southeast Asia
Southeast Asia has hit an inflection point. Driven by technology, more than 200 million people are expected to join an exponentially growing middle class by 2030. For the first time in their lives, these people will have disposable income, and will aspire towards a better tomorrow.
Technology sits at the intersection of daily life, business, innovation, and change in Southeast Asia. Having gone mainstream; the potential of technology is tremendous, impacting all sectors of the Southeast Asian population, from the street-side food vendor in the bylanes of Jakarta to the micro-entrepreneur who runs a foodtech business in Bangkok.
The pace at which the region is evolving means that a one-shot innovative transformation project is an idea whose time is over. With the time to market for innovative ideas so much shorter, the future for developing countries is in bite-sized innovation that creates sustainable impact.
However, there are struggles; with a remarkable lack of financial accessibility across the region being a cause for concern. A ‘thin’ credit file is the primary reason for this. Inadequate access to working capital often prevents businesses and micro-entrepreneurs from being able to leverage growth opportunities, forcing them to reach out to friends, family or even worse, to informal lenders, in a bid to raise the required funds.
We also understand that the solution gaps being encountered differ according to the size of the business. Micro and nano businesses typically face acute credit gaps, while established SMEs, though largely covered by formal financial services providers, require financing on flexible terms to manage their dynamic working capital requirements in today’s volatile marketplace. So, what does the future hold for them?
Albert Einstein once said that “We cannot solve a problem by using the same kind of thinking we used when we created them”. That’s exactly what we need to change; our thinking and the way we approach problem-solving. We are now seeing the region warming up to more sustainable solutions that bring the ‘credit invisible’ into the mainstream fold; a solution that combines data analytics and mobile technology.
While the ability to analyse financial data of the credit invisible was difficult in the past, traditional and non-conventional data points can be easily leveraged to create reliable alternative credit scores in today’s highly digitalised economy. These alternative data points come from varied sources such as payment histories, social media, online ratings, etc.
From digital banking to online disbursements, the lending paradigm is moving to mobile devices as a core channel. With 63% internet penetration in Southeast Asia and with more smartphones than bank accounts, services such as nano-financing, micro-insurance and working capital loan disbursements are going mobile, lowering barriers to access across Southeast Asia.
Innovative new-age companies are leveraging the power of mobile and data analytics to deliver these everyday utilities and more, in a manner that businesses and consumer want to be served. For example, while you and I still use different apps for different services or purposes, we are seeing a growing shift towards one-stop shops that span mobility, delivery and financial services. The rise of these hyperlocal ‘super apps’ is taking innovation mainstream and in several cases, aiding better financial inclusion by providing micro-entrepreneurs and small businesses better access to financial services and empowering them to dream bigger.
At Experian, we understand the importance of creating a better tomorrow. To make that vision sustainable, we partner for purpose with like-minded partners to drive innovation at scale. Over the years, we have made strategic investments in partners that we believe will help us promote greater financial inclusion and entrepreneurship in the region.
We recently made an investment in Grab as part of its ongoing Series H funding round. Grab has been striving to level the playing field by helping SMEs and micro-entrepreneurs in Southeast Asia to innovate, grow their business and improve their earnings by providing easy payment technologies, affordable micro-insurance and micro-loans. Across developing countries in the region, these innovators are creating jobs and boosting economic development, becoming agents of positive change and sustained prosperity.
Read more about our investment in Grab here.
Managing Director, SEA & Emerging Markets
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