The results of our regional SME financing market research reflect such friction — while SMEs in Southeast Asia are actively searching for better financial products and trying out solutions offered by financial technology (FinTech) companies, many are also sticking to traditional methods like cheque payments and manual business processes.

To overcome these barriers, FinTech companies need to do more to foster trust with SMEs, facilitate better understanding of alternative financing options, and demonstrate the success of these programmes. SMEs’ piecemeal adoption of alternative finance — instead of a cohesive and systematic approach — also signals an opportunity for FinTechs to offer unified financing solutions to SMEs.

By giving SMEs the tools they need to strengthen cash flow and gain more credibility and leverage with their suppliers, financial companies can become trusted advisors that help sustain and grow SMEs, the lifeblood of the Southeast Asian economy.

Funding from traditional banking and financial institutions remains inaccessible to many, mainly due to difficult requirements and long processing times, and most SMEs have to start their business using their own savings and with help from family and friends. Additional funding typically comes from business term loans and credit card payments. Those who borrow from alternative lenders, however, are not especially brand-loyal: almost half are not highly satisfied with their current providers and are, thus, actively seeking alternatives with a smoother brand experience and lower prices.

These findings reveal a gap in the market for better financing options tailored to SMEs, ones that are more accessible than traditional financing sources and offer a low price, great brand experience, and fast approval.

SMEs’ choice of provider, however, may not boil down to primarily just cost: although most SMEs, with the exception of respondents from Indonesia, prefer low interest rates over a quick processing time, the urgent need for a healthier cash flow to support day-to-day operations and stock up on inventory means there’s space for providers that offer fast approvals. 

Overall, SMEs continue to face the same cash flow-related challenges that SMEs before them have experienced. Innovative digital financing solutions, developed with Southeast Asia’s SMEs in mind, may be what the sector needs to solve these persistent old problems.