Peer to peer lending emerged from the rubble of crumbling financial institutions in the western world, yet it has been embraced globally. We take a look at how FinTech innovation has impacted South-East Asia.
A global hunger for change
They say that the best inventions are born out of necessity. Peer to peer lending is testimony to this old adage. Originating with the UK’s Zopa, the fresh idea of creating online financial intermediaries between borrowers and lenders provided the cash flow for businesses and individuals that would otherwise have been left by the financial wayside. The solution was created in the context of a mature banking culture where credit is very much institutionalized and normalized. Not so in South-East Asia, where most people don’t have a bank account. Yet in countries like India, Malaysia, Singapore and Indonesia there are rapid changes taking place which are transforming the financial, as well as the social fabric. It has been speculated that India could emerge as one of the biggest peer to peer lending markets in the world, as 50% of credit is already circulated among families, friends and communities.
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The speed of catch-up
A burgeoning middle class and an ever growing global inter-connectivity mean there is the real possibility that these countries can ‘leap-frog’ a generation of financial development and dive straight into the best of FinTech. Whereas the P2P lending model is well established in the US and Europe, it is still in its infancy in South East Asia, meaning it’s experiencing an explosive beginning. India’s Faircent.com predicts it could be facilitating 4-5 billion USD worth of loans in the next four to five years as the country’s demand and supply mismatch is addressed. In Singapore, when Fundingsocieties.com launched its peer to peer lending platform, it received US$3 million worth of loan applications within its first month. The under-served small and medium enterprises of Indonesia have been estimated to have a credit gap of around US$ 27.5 billion. In countries looking for innovative investment to support their surge in development, where a strong share-culture already exists, the collaborative solutions of the FinTech collective are being embraced as a real boon. It may well be that it is in these countries that we will truly start to understand the transformative power of peer to peer lending.