Bridging the Gap: Advancing Financial Access
Key Highlights
1. Importance of MSMEs
- Economic Contribution: MSMEs account for 50% of global GDP, 70% of global employment, and 90% of businesses worldwide.
- Funding Gap: An unmet financing need of $5.2 trillion annually affects 65 million MSMEs, primarily in emerging markets.
- Opportunity Lost: This gap represents untapped potential in job creation, innovation, and economic growth.
2. Barriers to Financial Inclusion
- Creditworthiness Concerns:
- Lack of formal credit history among SMEs and underserved individuals deters traditional banks.
- Advanced credit assessment models and alternative data usage can help bridge this gap (e.g., ANEXT Bank’s solutions).
- High Cost to Serve:
- Serving underserved clients, especially in geographically dispersed regions, remains costly for financial institutions.
- Leveraging technology, such as mobile apps and embedded finance, lowers the cost-to-serve.
- Digital Literacy and Trust:
- Many MSMEs lack digital savviness, making adoption of digital tools challenging.
- Transparency, trust, and hyper-personalisation are critical for bringing underserved clients into the financial system.
3. Strategies for Financial Inclusion
- Embedded Finance:
- Seamlessly integrating financing solutions at the point of transaction improves MSME outcomes (e.g., Amazon’s embedded installment offerings).
- Partnerships:
- Collaborating across private and public sectors to align on data sharing, regulatory compliance, and scalable solutions.
- Initiatives like MAS’s Veritas Consortium promote responsible AI and machine learning practices.
- Localised Solutions:
- Products must address unique country-specific nuances, such as cultural differences in trust and financial behaviors.
4. Role of Technology and Data
- Leveraging Alternative Data:
- Using ecosystem data to evaluate SME creditworthiness, reducing barriers to entry.
- Cost Optimisation via Digital Solutions:
- Digital banking reduces dependency on physical branches, enabling scalable operations in underserved markets.
- AI and Machine Learning:
- Innovations like GenAI streamline customer service and improve efficiency in financial operations.
5. Collaboration Between Public and Private Sectors
- Data and Cybersecurity:
- Unified frameworks are required for sharing data securely and combating fraud and cyber threats.
- Initiatives like ASEAN payment connectivity exemplify successful cross-border collaboration.
- Sustainability and Inclusion:
- Government incentives and regulations, such as ESG reporting, foster sustainable practices among SMEs.
6. Emerging Trends and Innovations
Sustainability as a Business Imperative:
- MSMEs adopting sustainable practices improve resilience, profitability, and compliance with evolving regulations.
- Banks like ANEXT embed ESG data and insights into digital platforms, helping SMEs kickstart their sustainability journeys.
Digital Currencies and Blockchain:
- Programmable money and tokenized assets enhance efficiency and liquidity for SME financing.
- Real-world applications, such as collateral tokenization, create lower-cost financing solutions.
Cross-Border Connectivity:
- ASEAN payment systems are becoming increasingly integrated, fostering greater economic collaboration and growth.
Fraud Prevention and Cybersecurity:
- Combatting deepfake scams and unauthorized fraud remains a top priority for financial institutions, with a focus on staying one step ahead.
Conclusion
Financial inclusion for SMEs and underserved retail clients requires a combination of innovation, technology, and collaboration. By addressing barriers like creditworthiness and cost-to-serve, financial institutions can unlock immense potential for economic growth. Public-private partnerships, sustainable practices, and emerging technologies will play pivotal roles in building a more inclusive financial ecosystem.
Watch Full Session
Speakers:
- Ashmita Acharya, Head of Wealth and Personal Banking, Singapore, HSBC
- Henry Choi, Managing Director, Head of Retail TMRW, United Overseas Bank
- Sujit Misra, Director, Amazon Payments APAC, Amazon
- Toh Su Mei, Chief Executive Officer, ANEXT Bank
Moderator:
- Fernanda Lima, Partner, LeapFrog Investments