Asean banks MSME-enhancing financial innovation

Banks and so-called financial technology firms (fintechs) prepare a two-year test of digital financial solutions that widen the markets of micro, small and medium enterprises (MSMEs) in countries grouped under the Asean

With the support of the Asean Bankers Association (ABA), Association of Banks of Singapore (ABS) and Bankers Association of the Philippines (BAP), the International Finance Corp., which is a member of the World Bank Group and the Monetary Authority of Singapore, plan to develop a cloud-based data-sharing technology, along with computer applications, through application- programming interfaces and the digital currency account system known as the blockchain.

The initiative is under the Asean Financial Innovation Network that aims to connect financial institutions and create cost-efficient financial services for underserved individuals, including entrepreneurs.

According to a survey by the Organization for Economic Cooperation and Development in 2015, MSMEs claim they remain undercapitalized because of lack of access to and options for financial services, along with low
financial literacy.

MSMEs account for the largest group of businesses in the Asean, with 88.88 percent to 99.9 percent of total establishments in Asean countries. They also contribute 51.7 percent to 97.2 percent of total employment, 30 percent to 53 percent of national income and 29 percent of total exports in the region.

Through the Fintech Marketplace Sandbox this year, results of the experiment will be continuously discussed by the bank organizations and the central banks of Asean countries to also formulate policies for more streamlined processes of banking services.

“These initiatives will enable banks to access a qualified pool of fintech firms providing various tools and services for banking connectivity and scalability which promotes efficiency and competitiveness. Everything is becoming digital and consumers are now expecting for real-time automated access to their banking services which is why financial institutions are constantly striving to improve and innovate to better serve the public,” BAP President Nestor Tan said.

At a recent meeting for the sandbox, which is organized by the ABA, ABS and BAP, experts from multinational fintechs Percipient Partners, Intel, Apac Fidor AG, Microsoft Asia Pacific and IBM Philippines led the discussion.

“Collaboration and cooperation are also needed to foster deeper understanding of risks, involving appreciation for financial-inclusion goals, and to gauge market experimentation,” Bangko Sentral ng Pilipinas Governor Nestor A. Espenilla Jr. said.

Bank representatives from Cambodia, Lao PDR, Malaysia, Myanmar and Singapore also joined the discussion to promote innovation-led economic growth in the Asean as one of its six initiatives this year toward a united, cooperative, resilient and progressive Asean.

“Asean financial industry’s continued vitality and success are dependent on member-banks that collaborate and embrace change and innovation for the benefit of the Asean Economic Community,” ABA Secretary-General Paul Gwee said.