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.


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
 
 

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