Fintech Is Emerging as a “Crucial Means of Support” for MSMEs during COVID-19, According to the First Circle Growth Finance Team

Benedict Carandang and Lee-Anne Tobias from First Circle Growth Finance, a company that offers financing services to qualified SMEs in the Philippines that sell to other businesses or government agencies, note in a blog post published on the World Economic Forum’s (WEF) official website that micro-, small- and medium-sized businesses (MSMEs) are considered “crucial to the future economic success” of many South-East (SE) Asian nations.

Carandang and Tobias reveal that the IMF GDP World Economic Outlook expects GDP to decline by around 6% for five of the Association of South-East Asian Nations (ASEAN) including Indonesia, Malaysia, the Philippines, Thailand and Vietnam. The gross domestic product, or GDP, for these countries is projected to fall due to the COVID-19 outbreak and resulting economic problems.

Carandang and Tobias state that Fintech is emerging as a “crucial means of support” for MSMEs during the Coronavirus crisis. It also presents an opportunity to stimulate economic growth in ways that could potentially benefit wider society.

Carandang and Tobias added that ASEAN member nations have focused their stimulus packages on supporting healthcare related issues, money transfers, SME aid, tax breaks and financing loans. But they pointed out that government financial relief packages have not been able to address significant problems for all aspects of society that have been caused by COVID-19 and related global lockdown measures,

They noted:

“One of the main roadblocks hindering the impact of stimulus packages for small businesses has been challenges to their implementation. Delivering incentives to all sectors of the economy was a nightmare. Imagine disbursing money to millions of eligible businesses and individuals claiming cash benefits while safeguarding your health and trying to avoid the contagion.”

They added:

“During the global lockdown, MSMEs needed Fintech to keep business operations going. Fintech companies also provided an intrinsic relief to business owners that were at risk of getting sick by continuing to operate manually. It wasn’t simply the 24-hour convenience that brought Fintech into the limelight but that it simply eliminated the risk of COVID-19 exposure for many people.”

Millions of unbanked and underbanked people in the ASEAN region have been able to gain access to government funding because of innovative Fintech solutions.

Modern banking services, digital or online payments and convenient loan-financing services “greatly propelled the economic wheel forward throughout the lockdown,” according to Carandang and Tobias’ observations.

They noted that Fintech apps were “integral to keeping monetary activities moving and helping balance supply and demand.” For instance, Singapore’s PayNow peer-to-peer (P2P) funds transfer platform saw transactions increase by 2x for two local banks’ clients during Q1 2020 when compared to Q1 2019.

In the Philippines, UBX, the Fintech division of a local bank, teamed up with SE Asian digital commerce solution provider, Lazada, through its local unit, Lazada.ph, to support small businesses on the e-commerce website’s platform with a credit line financing program. UBX, via its lending platform, SeekCap, experienced a 300% surge in the number of loan applications during Q1 2020.

Carandang and Tobias concluded:

“Fintech [serves] as an innovative means for business continuity for many MSMEs….Fintech has proven why it will continue to play a big role in strengthening and rebuilding our global economy. There is perhaps no other industry that can ensure strict social distancing while providing fast, convenient and secure transactions online.”

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