Like everywhere else in the world, Thailand has been battling the worst pandemic crisis. This does not come as a surprise for Thailand, as in 1997 and 2009, the country fought both the great Asian Financial Crisis and the rapid spread of the H1N1 virus.
With my experience in working with small and medium enterprises (SMEs) in traditional banks for over a decade, as well as working in the Information Technology sector in internet pioneers and a global consulting firm before that, I have been well placed to understand the needs of the SME market in Thailand.
Amidst this crisis, I know that SMEs are particularly vulnerable, and I am working with the Siam Validus team to use technology to help bridge their financing gaps.
SMEs form the backbone of growing economies, and Thai firms are no exception. The Asian Development Bank Institute reported that SMEs contribute about 45 per cent to Thailand’s GDP growth and created 14 million jobs.
SMEs face a recurring challenge, the lack of access to capital and financing. The Bank of Thailand has made efforts to revive the economy during the pandemic by offering billions of dollars at low-interest rates.
These measures allow tax reductions for SMEs and ease rules for granting loans from commercial banks. But despite these efforts, SMEs in Thailand are still struggling with debt loans that could drive them to bankruptcy.
While financial institutions have used collateral-based lending for years, most local SMEs have insufficient collateral. This makes the complex and cumbersome loan application process intimidating for proprietors. This process has been unfavourable to SMEs and challenging for financial institutions to address.
The use of old financial statements of SMEs to assess credibility is also a hindrance for high growth SMEs. Evaluating which firms could be entitled to loans based on the earlier profitability or number of years in operation.
Still, it does not quite capture the capability and potential of SMEs. Thus aside from self-financing and soft loans, SMEs must diversify their sources of financial support.
They can achieve this through digital crowdfunding platforms that use analytics to help them become creditworthy. Since SMEs do not have hard collateral to pledge to banks, they must look at alternative sources of financing their growth.
What could be their saving grace?
Enter digital solutions.
In partnership with the OSMEP, the US-ASEAN Business Council conducted a webinar for SMEs in Thailand on digitalisation during COVID-19.
The seminar explained that digital understanding solutions would help SMEs to take advantage of online payment systems and increase online presence with digital marketing.
But that’s not all. Digital solutions such as fintech-driven lending can also help SMEs’ long battle with financing. This is crucial as Thailand heads into the recovery phase post-pandemic.
Diversifying financial support through crowdfunding
A prominent digital solution is Siam Validus. Since the pandemic began, Siam Validus has seen an increase in loan applications 30 times. In particular, short-term working capital loans are in high demand from the logistics and construction sectors.
Reinforcing its mission to increase access to financial services for SMEs across the ASEAN region, Siam Validus is the Thai arm of award-winning fintech headquartered in Singapore. Validus uses Data Analytics and AI to drive growth financing to the underserved SME sector via debt crowdfunding.
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Crowdfunding is an efficient and proven way for SMEs to raise capital. It is a form of digital financing where anyone can receive financial support for their businesses through an online platform.
The Thai crowdfunding landscape is poised for growth, despite the impact of COVID-19. Some key challenges for SMEs could be treating debentures, which larger companies traditionally issue.
But with crowdfunding regulations, SMEs can take advantage of debenture issuance too. However, they could face challenges in meeting all the onerous requirements of debenture issuance. These requirements could make the process difficult for small loans and high velocity of transactions.
For example, they could not verify relevant information to assess their creditworthiness. This means that some businesses would not be able to access financing to meet their cash flow needs.
How Siam Validus can help SMEs with financing in Thailand
Siam Validus went live in Q1 2021. Siam Validus onboarded and signed with Siam Cement Group (SCG), the largest and oldest cement and building material company in Thailand and Southeast Asia despite the ongoing pandemic.
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This partnership allows us to access affordable financing for SMEs and vendors under SCG. Siam Validus can thus pre-approve unsecured credit limits of up to US$1 million and disburse loans quickly without meeting the customer or even asking for their financial statements.
This means faster cash flows and immediate working capital for vendors, allowing them to increase output or take on more projects. Instalment buying becomes accessible to dealers and distributors, allowing them to buy more with longer credit terms.
Siam Validus was also the first foreign fintech firm to be granted a debenture crowdfunding license by the Securities and Exchange Commission of Thailand (SEC).
We could thus bring our best practices and robust governance framework from our regional operations to Thailand. This affirms our past performance and helps us to make an impact on local SMEs, especially in these crucial times.
To date, Siam Validus has already disbursed close to $10 million and is on track to finish 12 months of go-live with US$100 million in loans disbursed.
Siam Validus thus provides SMEs with an accessible and intelligent platform to access capital. SMEs can offer crowdfunding bonds for sale to investors, while investors can search for these bonds on the same platform. A return on investment will then be received from the repayment of the bond issuer.
The firm is backed by reputed VCs, including AddVentures by SCG, Openspace, Dutch Development Bank FMO, Vertex Ventures Southeast Asia and India, and Vertex Growth Fund.
Validus aims to disburse over US$200 million to Thai SMEs in the first 24 months and support SMEs through this pandemic.
Personally, my proudest career-defining moment happened early in my career when I helped transform and scale the SME segment at Siam Commercial Bank.
So this is my dream to succeed in breaking the barriers to financing for SMEs in Thailand at Siam Validus. Along with my team, we are working towards becoming the top SME financing platform in Thailand, making sure key visions are achieved while maintaining operational excellence.
Growth-oriented SMEs deserve easy access to funding even in an economic downturn. I am determined to help Thai SMEs raise capital through crowdfunding.
I hear stories of SMEs who keep coming back to us, their inspiring growth and their ability to increase jobs translates to employment for the economy.
Every tiny drop makes a difference, and seeing that translates into a ripple effect positively gives me tremendous joy! With an accessible platform that connects SMEs with investors, Thai SMEs are one step closer to relieving their financial burdens and poised for recovery and growth.
And to any fellow aspiring female leaders or anyone who wants to tread an unconventional path, my answer to you is to work with passion, be true to yourself and your team, and make yourself open to learning new things every day.
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