Why e-commerce firms could replace banks as the region’s leading lenders

From Euan Black on Southeast Asia Globe:

“Peer to peer lending (P2P lending) first entered the wider public’s consciousness when it rose from the ashes of the global financial crisis in 2007. By cutting out traditional intermediaries, such as banks, the lending platforms, were able to offer borrowers lower interest rates and lenders higher returns. They were populist alternatives to the casino capitalism that had brought Wall Street to its knees. Now, they are being mooted as an effective way for Southeast Asia’s emerging economies to overcome the challenge of limited access to funding – and the combination of increasing smartphone penetration and a large unbanked population means it has the potential to dramatically disrupt the regional financial order.

According to data from Singapore-based venture capital fund Dymon Asia Ventures, less than 0.1% of loans in the region currently originate from P2P lending sources, compared with 10% in China and 2-3% in the UK and US. There is, therefore, sufficient growth potential for the Southeast Asian P2P lending market.”

With  large number of underbanked small and medium enterprises (SMEs) in Southeast Asia, P2P lending market leaders who fill in the gap between what traditional financial institutions commit to deliver and what the SMEs desire could potentially reap the benefit of the rising market and rewrite the regional financial order.

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