Temasek Trust in Collaboration with Helicap publishes SEA's First Financial Inclusion Report "Accelerating Impact Beyond Access"

Jun 7, 2023
The Business Times
The Business Times

FSPs in South-east Asia tend to perform better for customer satisfaction, driven by easy access to loans with few requirements, low interest rates or fees, and quick loan disbursements.

COMPARED to global benchmarks, financial service providers (FSPs) in South-east Asia performed well for client protection and satisfaction, said the Centre for Impact Investing and Practices (CIIP) in a report on Wednesday (Jun 7).

The report was developed by CIIP, in partnership with the United Nations Capital Development Fund (UNCDF) and fintech firm Helicap.

The authors found that FSPs in the region tended to perform better for customer satisfaction. This was driven by easy access to loans with few requirements, low interest rates or fees, and quick loan disbursements.

Customers in the region also performed better than global benchmarks in meeting loan obligations or not needing to reduce consumption levels, the authors found.

Some 86 per cent of surveyed customers said they did not have a problem paying back their loans and “did not consider them to be a burden”. This surpassed the global benchmark of 65 per cent.

In addition, 88 per cent of them are able to make repayments through their income or wages, indicating the effectiveness of client protection practices and policies of the FSPs, the authors said.

They noted that the implementation of effective client protection policies corresponds to better portfolio health, such as lower default rates for FSPs with loan caps.

Despite “promising” FSP performance in terms of client protection, the authors noted that loan terms and conditions could be made simpler to understand in order to prevent “additional financial pressure or distress”.

In addition, the report highlighted that FSPs in the region performed worse in other dimensions of the impact in comparison to global benchmarks. Such dimensions included access, business, household, agency and financial resilience.

“This indicates that while FSPs in the region are delivering high-quality services in a responsible way, more can be done to deepen the reach and impact of these services on customers’ lives beyond initial access,” CIIP, UNCDF and Helicap said.

Under business impact, 7 per cent of customers surveyed reported increasing employment – lower than global customers at 8 per cent, suggesting a high proportion of sole proprietorships.

As a result, customers may lack the business justifications – such as small customer bases and inconsistent revenue streams – to increase their headcount.

“This indicates a need for business-related support beyond financial and digital literacy education,” the parties said.

Digitalisation and technology play a significant role in expanding access to financial services, the report indicated.

Some 74 per cent of interviewees reported improvements in using financial services because of technology including mobile phones and Internet, and 82 per cent felt safe using technology to access financial services.

To meet customer needs and drive financial inclusion in the region, FSPs are innovating to expand availability and reach of services through new digital channels and partnerships.

This includes designing specialised and customer-centric products, fintechs partnering rural banks to reach rural customers and traditional players digitising their operations.

In a bid to reduce costs and risks to ensure long-term financial sustainability, FSPs are digitalising back-end processes and developing efficient credit-scoring methods.

To further protect their customers, FSPs are establishing guardrails to ensure fair treatment and prevent customer over-indebtedness, the report indicated.

It added that the FSPs are also regularly training employees, implementing loan caps and providing debt management services.

The report – Financial Inclusion in Post-Covid South-east Asia: Accelerating Impact Beyond Access – included contributions from 60 organisations, including industry associations, investors, FSPs and about 6,500 customers across Cambodia, Indonesia, Myanmar, the Philippines and Vietnam.

Quentin Vanoekel, co-founder and chief investment officer at Helicap , said:

“Impact-focused investors can catalyse transformative change in South-east Asia. Whether it is empowering local communities, promoting sustainability, or fostering inclusive economic growth, opportunities abound for investors to drive impact and returns in this untapped market, and contribute to the region’s economic advancement.”

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