Read about the ASEAN Access to Digital Finance Study.

Digital financial services advancing financial inclusion in ASEAN region

8 December 2022

The article at a glance

Joint study by University of Cambridge and the Asian Development Bank Institute reveals how individual consumers, households and small businesses use digital finance channels to access credit or raise funds in five ASEAN countries.

Joint study by University of Cambridge and the Asian Development Bank Institute reveals how individual consumers, households and small businesses use digital finance channels to access credit or raise funds in five ASEAN countries.

The Cambridge Centre for Alternative Finance (CCAF) at the University of Cambridge Judge Business School and the Asian Development Bank Institute today jointly published ‘The ASEAN Access to Digital Finance Study’, which aims to provide insight on how users in the ASEAN region – individuals, households and micro, small and medium-sized enterprises (MSMEs) – utilise digital finance channels to access credit or raise funds. 

The study reveals that digital financial services contributed to advancing financial inclusion for both individual consumers and business users. This was illustrated by the high proportion of respondents that reported initiating use or increasing their use of a savings or checking account after receiving funds from online alternative finance platforms; more than half of respondents using peer-to-peer (P2P)/marketplace consumer lending platforms reported these behaviours. Additionally, the survey findings showed that female business borrowers made up a greater proportion of business respondents (54%), indicating that fintech plays an important role in contributing to gender parity in the financial system. 

Fintech platform finance affects business growth

The findings also show that there is a correlation between having received finance through a fintech platform and business growth (net profit, revenue and employment) and performance. It was further noted that these borrowers defaulted less compared to the non-performing loan average in ASEAN countries (more than 3% according to the World Bank), reporting a default rate of 1%. 

MSMEs indicated that their use of P2P/marketplace business lending was strongly influenced by better customer service, more flexible terms, the ease of getting funds compared to traditional sources and the speed with which they received the funding. 

A move to P2P/marketplace lending for daily habit borrowing

From an individual consumer perspective, the findings show that nearly half of the users of P2P/marketplace consumer lending platforms borrowed to meet daily expenses or short-term needs – such as buying groceries, paying utility bills or airtime top ups. The main types of purchases made using Buy Now Pay Later products (BNPL) were related to fashion or apparel, closely followed by home appliances, mobile phones and other electronics. 

Most individual consumers indicated that prior to turning to P2P/marketplace lending platforms for financing, they had first approached friends or family and banks unsuccessfully. This experience was mirrored by MSME respondents, more than half of whom had already sought funding from banks, microfinance institutions, or family and friends prior to accepting an offer from a P2P/marketplace business lending provider. 

The role of fintech in supporting individuals and businesses

“Over the last few years, the ASEAN region has experienced greater penetration of fintechs into their markets, serving a larger range of customers, from low-income populations to more mature businesses,” says Bryan Zhang, Co-Founder and Executive Director, CCAF. “Fintech can play a vital role in supporting individuals and businesses to overcome shortcomings in the traditional banking system and offer innovative products and services, ensuring that basic financial services reach the most underserved populations in the financial system.” 

“A correct understanding of the underlying situation of fintech markets is vital for developing policies to foster and regulate the sector,” says Peter Morgan, Senior Consulting Economist and Advisor to the Dean, Asian Development Bank Institute. “This timely report provides a detailed and comprehensive view of the use of fintech platforms for finance and fundraising by individuals, and micro, small and medium enterprises (MSMEs) in the ASEAN region.” 

“This report helps us better understand how fintech can more quickly and nimbly deliver where formal systems will take longer to adapt,” says Sian Parkinson, Inclusive Digital Finance lead, Foreign Commonwealth and Development Office. “We look forward to continued developments in digital finance to ensure fintech benefits reach those financially excluded and help accelerate prosperity in the region.” 

The report

The report “ASEAN Access to Digital Finance Study” report can be downloaded for free.