How fintech helped Southeast Asia’s MSMEs recover from pandemic

THE Covid-19 pandemic has put millions of micro, small and medium enterprises (MSMEs) in Southeast Asia in peril. This may be one of the biggest tragedies resulting from this pandemic given the size of the sector in the region.

MSMEs are considered crucial to the future economic success of many Southeast Asian (SEA) countries. MSMEs have been growing rapidly in the past decade owing to thriving environments, and they account for almost all of the establishments in Southeast Asia and contribute between 52 and 97 percent of employment in the region.

Covid-19 restrictions, however, mean these enterprises can only continue operating if they provide essential products and services. Even for those MSMEs in essential industries, the pandemic and economic standstill have further disrupted both small and big economies, leaving tough barriers for the Southeast Asian economy to overcome.

Health policies, fiscal policies and stimulus packages have been drafted across Southeast Asia and globally to cushion the rapidly deepening economic recession. Southeast Asian countries provided stimulus budget packages averaging about 6 percent of their gross domestic product, Member countries of the Asean generally focused their stimulus packages on health, cash transfers, SME aid, tax breaks and financing loans. However, the massive problems for every aspect of society caused by a fast-spreading virus and global lockdown could not be solved by government aid. 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.

Soon, large private businesses committed to securing food supplies and donating personal protective equipment, medical supplies, alcohol and hand sanitizers, and food; as well as setting up their own quarantine facilities. In Malaysia, a telecommunication conglomerate, Axiata Group and its subsidiaries launched an RM150-million (about $35-million) cash fund for financial assistance to MSMEs through a micro-financing service.

During the global lockdown, MSMEs needed financial technology (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 it simply eliminated the risk of Covid-19 exposure for many people.

Remaining true to its identity, fintech’s recipe for success was simple: ease, speed, convenience and reach.

Thanks to fintech, millions of unbanked individuals in the region could access government aid during a time that prioritized the containment of an aggressive pandemic. Since many fintech firms are startups, their grit and agility to pivot their operations to provide specialized services as customers needed them strengthened the industry.

Banking, digital payments and loanfinancing services greatly propelled the economic wheel forward throughout the lockdown. Apps provided by a few innovative banks and digital payments companies were integral to keeping monetary activities moving and helping balance supply and demand. Singapore’s PayNow peer-to-peer money transfer platform has seen transactions double for two local banks’ customers during the first quarter compared to the same period last year.

Online financing companies also continued to operate to support businesses who couldn’t afford any disruptions resulting from negative cash flow. In the Philippines, UBX, the fintech arm of a local traditional bank, partnered with popular Southeast Asian e-commerce platform Lazada through its local arm, Lazada.ph, to support MSMEs on the e-commerce site’s platform with a credit line financing program.

The Philippines’ central bank also highlighted fintech’s crucial role in rehabilitating the country’s economy, especially its MSME establishments. Fintech is seen to be a driver in providing financial inclusion to MSMEs as it supports financial access. Fortunately, fintech firms like First Circle complied with government memos that mandated payment holidays to cushion the blow of Covid-19 for businesses. More than that, the company bolstered its efforts to deliver on its mission to enable businesses to achieve their full potential through fast, fair and flexible financial partnership. It also ensured that priority was given to customers in essential businesses, such as distributors of personal protective equipment and medical supplies, to strengthen the fight against the Covid-19 pandemic.

In addition to helping business as usual, fintech has won over the trust of more individuals as it partnered with governments and organizations to create a platform for doing good.

PayMaya, one of the Philippines’ online payment firms, used its platform to provide a way for people to contribute to those on the front line of the pandemic in a seamless and efficient manner. Through partnerships and an app, donors could send donations to organizations including the United Nations Children’s Fund, World Vision, the Philippines Red Cross and 29 others.

The Department of Social Welfare and Development similarly tapped another digital payments platform, GCash, to disburse cash aid to beneficiaries through an online platform that allows them to choose how to receive the aid.

Previously known as a business disruptor, fintech is instead here to stay as an innovative means for business continuity for many MSMEs. The industry is still seen as young but has already had a massive rippling effect on the global economy.

It may have taken time for many to shift to digital financing as individuals tend to repel complexities and choose to remain with familiar processes, but 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.