E-financing can give ASEAN SMEs more access to funds

30 November 2015
The Brunei Times

SMALL and medium enterprises can use e-financing technology such as crowd funding platforms to finance their expansion

According to Fauziah DSP Hj Talib (1st photo), ASEAN Business Advisory Council (ASEAN BAC) Brunei member, this is one way for SMEs in ASEAN to access funds.

This is because conventional lending institutions such as banks are not structured to support the financial needs of SMEs.

Banks are also hesitant to lend to SMEs which don’t have proper record keeping methods.

Fauziah added the traditional method of getting access to finance comes with challenges for SMEs such as having the right collateral.

“What we’re suggesting now (to ASEAN governments) is that we should look to ways of accelerating growth through technology. We’re suggesting that rules and legislation (in ASEAN countries) support the ability to access financing or e-financing,” she told The Brunei Times.

Lisa DP Hj Ibrahim, another Brunei ASEAN BAC member, said creating a platform for SME financing will also develop other sectors.

“With e-financing comes other things such as e-payment and the system of e-commerce,” she said.

Such platform is available in Malaysia following the recent launch of the ASEAN Growth Accelerator Exchange (GAX).

According to ASEAN BAC Chairman Tan Sri Dr Munir Abd Majid, GAX is a digital platform that facilitates peer-to-peer financing and crowd funding.

He said the GAX was established to help SMEs with limited access to finance.

The GAX platform is only available in Malaysia now, but Tan Sri Dr Munir said it will be rolled out in other ASEAN countries.

The ASEAN BAC also proposed the establishment of a regional bank that can help SMEs with their financing needs.

In its 2015 report to leaders, ASEAN BAC called for the recognition of cross-border collateral to be applied for a bank for ASEAN micro, small and medium enterprises (MSMEs).

Legal recognition of cross-border collateral is a critical enabler for the successful operation of an ASEAN MSME bank.

“A critical enabler for the successful operation of the ASEAN MSMEs bank is legal recognition and enforceability for cross-border collateral. No pan-ASEAN financial institution can work effectively in the absence of such an enabler,” the council said in its report.

ASEAN BAC said the establishment of the ASEAN bank will support the backbone of the region’s economy. It will also boost the region’s credibility as the “Third Asian force” between China and India.

ASEAN BAC said some member states may not be able to contribute to the bank’s capital. But this shouldn’t hinder ASEAN from setting up this bank.

The council said what’s important is that the capital base is substantial enough to become a credible source of financing for MSMEs.

Apart from ASEAN governments, ASEAN BAC said the private sector and global institutions can be invited to contribute to the bank’s initial capital and allow them to sit as shareholders.

The council said the bank won’t only provide financing for MSMEs but will also venture into investment banking.

ASEAN BAC said the private sector should also be involved in the issuance of debt and equity instruments and the establishment of MSMEs funds and private equity.

The council said some non-ASEAN member states can also join the bank’s management team. In its quarterly reports, the bank should focus on rejected applications in addition to reporting on normal matters. There should also be no “outside interference” on the management’s daily business who are also answerable to the board of directors, the council said.

- The Brunei Times