Access to financing has long been a point of contention for micro, small, and medium-sized enterprises (MSMEs), even before the pandemic. According to industry studies over half of MSMEs across ASEAN are unserved or underserved by traditional lenders.
In Malaysia, it is reported that some of the financing difficulties faced by small businesses include the higher collateral requests by traditional financial institutions (58.8%) and delays in loan approval or disbursement (23.5%). Indonesia, on the other hand, faces similar challenges, as 51% are unbanked while 26% are underbanked.
It signifies a huge gap of financially underserved communities amongst small businesses, which if addressed, could potentially boost the GDP of a country’s local economy by up to over 30%. This is where fintech comes in, to close the gap on financial inclusion and make financial solutions accessible through the power of technology and data.
One such fintech company in Southeast Asia that’s leading the charge in financial inclusion is Boost, a regional full spectrum fintech arm of Axiata, that recently made headlines across the region, alongside its consortium partner, RHB, as one of the five winners of the digital bank license granted by Malaysia’s central bank.
Based on industry case studies of digital banks across the globe, Boost’s upcoming digital bank is considered as a frontrunner due to its distinct advantage as an incumbent fintech player with a comprehensive ecosystem and a proven capability to operate at scale, which meets the criteria of a successful digital bank.
Through its holistic fintech ecosystem spanning its all-in-one fintech app, merchant solutions, AI-based lending business, and cross-border payment platform, Boost has been financially empowering millions of users and merchants across Southeast Asia since 2017.
Boost is also the first fully digital financier in Southeast Asia to secure an investment-grade A1 rating from RAM Ratings, the leading credit rating agency in Malaysia, which underscores Boost’s capabilities and competencies in accelerating financial inclusion through robust alternative data scoring frameworks.
Its AI-based lending business already has an impressive track record of addressing these financial inclusion gaps by serving the underserved at scale with simplified access to digital financial solutions.
Since inception, Boost has disbursed close to US$451 million (RM2 billion) worth of loans to thousands of MSMEs across Malaysia and Indonesia, with nearly half having never received credit from other financial service providers before. Despite this, Boost maintained a low single-digit non-performing loan rate and has seen a high repeat rate on loans, which reaches over 90% in Malaysia.
Imagine Ahmad, for example, a local entrepreneur who runs a small mom-and-pop sundry shop in the rural areas of Melaka, Malaysia. Due to macroeconomic headwinds causing disruption in cashflow, he finds himself in need of immediate financing to keep the lights on.
Considering that the only options available in an average bank typically range from US$67,750 (RM300,000) up to millions, Ahmad discovered that traditional banks were not able to cater to his needs for micro loans. Even if Ahmad could afford the loan, he may be rejected due to lack of collateral and guarantors.
However, through digital micro-lending with Boost, Ahmad is able to have access to immediate financing through a simple 5-minute digital application journey supported by AI and machine learning tools, with fund disbursement within 48 hours upon approval.
Additionally, when Ahmad needs to make orders from distributors to buy weekly stock for his inventory management system, Boost offers lending solutions through an API link for Ahmad to order stock using credit as an alternative to cash within that purchasing module. This is possible through Boost’s holistic fintech ecosystem and technology, where digital financial solutions are embedded within the existing transaction journey and purchasing cycle of businesses.
It is for these reasons that there was no surprise that Boost was a receiver of the digital bank license in Malaysia. All eyes are now on Boost in the coming months as merchants and users alike look forward to its much-anticipated digital bank, which is expected to further revolutionise and democratise access to financial services.