The Great Boom of P2P Alternative Lending in SEA

Introduction

Hi, I’m David Z Wang, CEO and co-founder of Helicap, landing once again with a fresh edition of the Heli-pad for you.

In late October, my fellow co-founder Quentin Vanoekel and I had a blast participating in the distinguished Uniglobal 3Annual Asia-Pacific Microfinance Forum. While Quentin spoke in a panel discussion about the roles innovation and partnership play in tumultuous times, I explored the myriad of opportunities that the microfinance scene in South East Asia had to offer.

In this exciting edition of the Heli-pad, there is a summary report of some highlights of our time at the forum. Below, you will find both a clip of me discussing the growing P2P lending scene in Asia, and other information you will find useful if you are interested in entering the alternative lending space in South-East Asia.

Best Wishes,

Dave

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A Detour: P2P Lending - How can Investors Benefit?

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This report summarises the content that has been presented by Helicap co-founders, David Z Wang and Quentin Vanoekel, at the 3rd Asia-Pacific Microfinance Forum.

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I. [0:03:00] The P2P Lending Space in Asia is Booming:

• Tech-related investment in financial services has seen enormous growth since Covid-19, with a 340% leap in capital invested from 2020H1 to 2021H1.
• Non-Banking Financial Institutions (NBFIs) are booming in SEA and India, with an estimated 45k+ players providing credit to underbanked or unbanked individuals.
• There are 3 main growth catalysts for P2P lending:
• High barriers to entry to traditional banks
• Stricter loan liquidity and capital requirements
• Rising connectivity in a digital world, though only an estimated <3% of the market are digital P2P players.
• Large Asian countries in the P2P game:
• China: was a very large player until governmental regulations shrunk the market by about 40%. Very difficult to get a license now, so future is highly uncertain.
• India: robust NBFI environment, forecasted to reach USD 10.5bn by 2026, CAGR of 21.6%.
• Plenty of potential in South-East Asia:
• Funding gap throughout SEA stands at USD 500bn.
• Singapore: the strongest regional digital hub, well-regulated and a popular place for regional players to incorporate companies here.
• Indonesia: hitting a golden era in the P2P lending space. The target for P2P stands at about USD 7bn for digital online loans alone. Currently a supportive and well-regulated market, with hunger for foreign direct investment. CAGR from 2017 to 2020 is 189.78%.

[0:08:36] Fintech Unicorns: Case studies

Recently, there have been a few newly minted unicorns in the SEA region that are also looking into entering the private banking space. Check out the video for more information!

[0:10:22] Movement towards Inclusive Lending:

• Growing popularity of alternative credit scoring models to understand risk and fraud while providing loans to the unbanked and underbanked.
• Effectively using data to track credit with high levels of granularity.

II. There is Opportunity in Recovery

While Covid-19 has impacted many businesses, it has also provided many opportunities and forced companies to innovate and adapt their business operations.

• 3 main impacts of Covid-19, especially last year:
• Performance. There was a double whammy for the balance sheet. Delinquency rates went up, and originators had to stop disbursement. Lenders had to revitalise their loanbooks with more capital and facilitated the adoption of digital.
• Innovation. The many changes that the pandemic has caused gave rise to forced innovation, especially for traditional lenders. This accelerated new ways of conducting business, especially with cloud technology and architecture adoption.
• Consolidation and partnership. Lenders are forced to look out for new opportunities for strategic partnership, and constantly improve on their business model. For example, FinAccel (Kredivo) had taken a meaningful stake in a bank.

Now, after re-inventing themselves, we are beginning to see some stellar vintage in risk and portfolio for different NBFIs, and as the demand is rising for recovering businesses, so are the growing opportunities.

Because of this digital surge in digitisation, massive 3 megatrends that see increase FI’s reach to borrowers in more remote areas and promote financial inclusion:

• Massive investment into telecommunication infrastructure, leading to a rise in smartphone penetration, and thus, access to loans.
• Top-down institutional push of capital: unlocks pockets of money to fund innovative solutions.
• Massive growth of e-commerce with growing demand for virtual shopping and deliveries.

III. Helicap can Bridge Investors with the SEA P2P Lending Space

“Through creating an agnostic platform, we move processes like field DDs and onboarding online, bringing ease to our customers.

By consistently innovating and improving on our products, we better understand the risk in detail to craft senior structure, and secure loans according to the data that we see through extensive fraud and predictive analytics.”

If you wish to find out more about the alternative investment space in South-East Asia, please drop us a line at https://heli-cap.com/contact

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