THE financing gap for micro, small and medium enterprises (MSME) in South-East Asia is estimated at US$272bil (RM1.15 trillion), according to micro-financing platform Funding Societies.

       In its latest survey, it notes that MSMEs face significant barriers to obtaining the financing necessary to maintain and grow their businesses despite their vast number across the region and their centrality to national economies and employment opportunities.

       Of the MSMEs in South-East Asia, around 39 million (51%) are either unserved or underserved by financing services.

       “Traditional commercial banks cater to large enterprises and typically offer products that do not fit the financing needs of MSMEs. These barriers disproportionately burden young companies which lack business track records and informal MSMEs in developing countries,” it says.

       Small businesses are unique from other business enterprises as they are usually younger, leading to fewer years of cash flow history.

       Additionally, MSMEs generally require smaller loan quantums and tenures and quicker cash disbursal than larger firms. This could make MSMEs an unprofitable segment of the market for traditional banks.

       Such obstacles to credit limit their normal business operations and restrict expansion opportunities, hindering regional economic growth potential.

       This is where platforms such as Funding Societies and other micro-financing providers can play an effective role in bridging the financing gap for small businesses. They largely leverage data to quickly provide MSMEs with smaller loan amounts.

       Funding Societies points out that there are 73 million MSMEs operating in Asean, which comprise about 97% to 99% of total enterprises. They contribute up to 53% of the gross domestic product to their national economies and up to 97.2% of employment.

       “Indeed, MSMEs are a key element of economic growth in Asean.”

       Since 2015, Funding Societies has supported 36,939 MSMEs with over US$743mil (RM3.15bil) in financing through 1.5 million loans across Singapore, Malaysia and Indonesia.

       Many borrowers from Funding Societies take more than one loan. Of its total borrowing base, 59% of the MSME owners are repeat borrowers.“MSMEs, much like any business, have capital needs that frequently necessitate financing. These capital requirements often arise unexpectedly and are needed for a variety of purposes,” it says.

       Among the main reasons that small businesses obtain short-term financing from Funding Societies include for working capital (57%), adding to inventory (20%), pursuing a new business opportunity (9%), purchasing of new property, plant or equipment (7%), training and up-skilling of employees (4%) and hiring additional workers (3%).

       “By addressing the financing needs of MSMEs, Funding Societies is furthering financial inclusion and contributing to long-term sustainable economic growth in South-East Asia.”