How Entrepreneurs in Southeast Asia Find Solutions in the Digital Economy
The digital economy can provide opportunities for solving problems.
PHOTO CREDIT: Getty Images
The Southeast Asian region is diverse and complex, and so are the development challenges that entrepreneurs are racing to address, such as underdeveloped banking systems, lack of access to credit, and lack of proper digital infrastructure.
But Nick Nash, Group President of SEA Group, Singapore, a leading Internet platform in Southeast Asia, is optimistic that Southeast Asian start-ups are up to the challenge.
“[W]hat gives me so much optimism is ASEAN is good at solving problems,” Nash says at the Asian Business and Investment event held in conjunction with the ASEAN Summit in Manila in November.
Below are some key points discussed during the panel on Entrepreneurship in the Digital Economy:
Technology helps more people get access to financial services
Richard Eldridge, CEO of Lenddo Philippines, says he found an opportunity to help out when he was starting out as an entrepreneur in the Philippines. He recalls how half of his employees would borrow money from him because they weren’t being served by financial services in traditional financial institutions such as banks.
“It made me think why?” he says. “Why didn’t hardworking, educated people who were working for me didn’t get the same chance as me when I was growing up?”
He says he observed the same thing in other developing countries. Around 200 million micro entrepreneurs and 2 billion people also weren’t getting the full range of financial services they should have been getting to grow and to generate more income. When Eldridge asked financial institutions why they wouldn’t serve these people when there was a huge demand, they said they didn’t have enough information about them and they didn’t have the technology to allow them to serve these people at the price point that would economically work for them.
Eldridge again referred to the 2 billion people he observed and said that most of them are under 30 and connected to the digital economy. They used smartphones, had access to the Internet, had email accounts, and used social media. “The question then was why can’t they use this information [and connection to the digital economy] to get access to financial services,” he says. “Share that information through proprietary algorithms to get financial institutions to know more about their customers and allow them to say yes to more people. Yes, you can have a savings product. Yes, you can have a line of credit.”
Eldridge says that today, Lenddo operates in 200 countries around the world, including in Southeast Asia. They will be entering Thailand and Vietnam soon.
Getting ASEAN to adopt digital practices is key
Manny Pangilinan, Managing Director of First Pacific Company Ltd. in the Philippines, says that the reason why they’re developing the digital economy is basically to make people’s lives easier. “We’re a telco — Internet cannot thrive without the proper infrastructure being laid out,” he explains.
Pangilinan says their platform allows the government to give out loans through conditional cash transfers to various families in the Philippines. There are also other forms of loans such as commercial loans. Pangilinan states that 70 percent of the people don’t have a bank account or credit card.
“If you give a debit card or credit card or PayMaya to a farmer for example, first question he will ask is ‘What will I do with this plastic? Part of the challenge of the ASEAN is to inculcate that consciousness and practice of using digital methods.” Part of it isn’t just the infrastructure, but the device and consciousness, and utility of using digital methods of payment.
Pangilinan talks about their other enterprise, PayMaya, where they are on the other side of the loans. He says it’s efficient, saves money, and allows financial inclusion for banks. “It allows banks to lend money to anyone in the Philippines, anywhere, if all conditions are met,” he says.
ASEAN needs the proper digital infrastructure
Pangilinan says this can be done first, by having the proper infrastructure. “Internet by itself cannot exist without an infra,” he says. “Without the highways, without the delivery systems. And the smart devices must be there. And the ability for the device to connect to the Internet.” Pangilinan says only 40 percent in the Philippines have smartphones. This can be solved also by Internet companies opening credit facilities for them to borrow cell phones and even appliances.
Pangilinan says people must also adjust to digital payments and get used to cashless transactions. He says that there are many mobile phone users in the Philippines for example; it’s just a matter of making your phone your wallet.
“By loading on your phone not just what you need to communicate but also to pay for your [fast food, electric bills,] or what payment transactions are needed,” he explains. Pangilinan says the habit of paying via brick-and-mortar or physical stores needs to be broken.
The digital economy can improve lives
Pangilinan also adds how recently, Japanese companies told him while he was in Tokyo how they wanted to lend money to the Philippines. Pangilinan says he told them that he would provide the infrastructure and platform for lending.
“At the end of the day, the Internet should be judged not on the money we make, but if from so many years from today we can say, we have improved the lives of our people. We have less poor people by way of the Internet. Then I think we have done a good job,” he says.