In 2020 and onward, an increasing portion of micro, small and medium-sized enterprises (MSMEs) in Southeast Asia will turn to non-traditional financial sources for their financial needs. These sources of funding will need to be available “on-demand” to enable entrepreneurs to respond to opportunities and threats that quickly arise, according to a new study by GrabFinance, in partnership with Bloomberg.
In a new survey-based study, titled SMEs in a New Decade, New Economy, GrabFinance and Bloomberg Media share findings from a research that sought to understand and capture the views and aspirations of 600 respondents from MSMEs in Singapore, Malaysia, Thailand and the Philippines.
Alternative SME financing set to grow in Southeast Asia
According to the study, the vast majority of MSMEs in Southeast Asia currently fund their businesses with their own savings (90%), or rely on family or friends (40%).
More than 2/3 of respondents expressed the need for a business loan in the future, and over a third believe their need for financial support will only increase moving forward.
With the need for further funding becoming more acute over time, financing options, and most particularly non-traditional ones, will be critical for MSMEs, the report says.
Already, Southeast Asia’s MSMEs are showing great interest in non-traditional financial sources, with more than half of business owners stating that they will likely turn to non-traditional avenues of funding within the next three years. Respondents cited crowdfunding, peer-to-peer (P2P) lending and angel investors as the alternative funding options they were the most interested in.
Currently, only 29% of business owners use non-traditional financing, but over the next 1-3 years, 58% will turn to these funding sources, the research found.
According to the study, Southeast Asian MSMEs have already begun adopting digital finance tools and solutions with more than half of MSME respondents currently accessing online financial products and services, and over one-quarter using mobile wallets for business payments. On average, Southeast Asian MSMEs spend 3.5 hours per day on smartphones for work purposes, the report says.
Among the technologies set to have the most impact on the economy during 2020 and the years ahead, MSME executives cited artificial intelligence (AI), cybersecurity, automation and e-commerce.
Funding business growth and global expansion
Southeast Asian MSMEs named digital transformation as the most important area for business development in the new decade, followed by innovation and securing good talent.
Overseas expansion was also cited as a key business priority amongst MSMEs across the region. Almost half of businesses surveyed have already expanded beyond their own market and nearly 90% of these are planning to enter new markets in the years to come. Key markets cited include China (18%), Singapore (17%), Indonesia (15%), Thailand (15%), and Japan (13%).
GrabFinance is the brand under which Singapore’s ride-hailing giant Grab has been offering loans and credit lines to businesses, allowing local SMEs to access quick and affordable funding.
Grab entered the financial services industry with mobile payments before expanding into rewards, lending and insurance. In 2018, Grab established Grab Financial Group, its fintech arm, which has set out to become Southeast Asia’s largest payments and financial services platform.
The tech giant recently introduced GrabPay Card, which claims to be Asia’s first numberless card, and is one of the contenders for the Singapore digital banking licenses, for which it has partnered with Singtel. The proposed digital bank intends to serve financially underserved consumers and enterprises in Singapore.
Featured image credit: Unsplash
