Alternative Lending in Southeast Asia

This assignment examines the burgeoning alternative lending sector in Vietnam and Singapore, comparing their respective markets within Southeast Asia. It analyzes the factors driving growth in Vietnam, including financial inclusion and internet penetration, while acknowledging challenges like inflation. The study contrasts Vietnam's approach with that of Singapore, highlighting key differences and opportunities for investors.

ALTERNATIVE LENDING LANDSCAPE IN SOUTHEAST ASIA

Table of Contents
Introduction....................................................................................................................................................3
PART 1:.........................................................................................................................................................3
PART 2:.........................................................................................................................................................4
PART 3:.........................................................................................................................................................6
PART 4:.........................................................................................................................................................7
Recommendation...........................................................................................................................................8
Conclusion.....................................................................................................................................................8
References......................................................................................................................................................9

Introduction
Alternative Lending is a broad term used to describe the wide range of loan options available to
consumer and business owners outside of a traditional bank loan. These alternative options are
most commonly used when an individual or business owner cannot obtain a traditional bank loan
for any number of reasons.Alternative lending refers to a growing industry of digitally based
lending platforms for differently borrowing needs, including consumer, small and medium
enterprise, student loan and mortgages.
The alternative lending platform provides a loan experience digitally, which includes delivery
from application and organization to underwriting and services. The efficiency, digital
capabilities as well as reduced cost provide a clear advantage to customers when compared with
the traditional bank that could take multiple days for generating a loan. this study would be
evaluated in the following paragraphs.
PART 1:
Identification of the gap to key findings
Determining the credit gap in Vietnam:
1.1 The rise of alternative finance is attributed to two reasons. First, the inability of traditional
monetary institution to cater to convinced segments of the marketplace that required access to
secure economic services. As opined by Khan et al (2017, p.90), the second, because financing
domain have documented these gaps, fruitfully experimented and developed solution to fix these
gaps.
1.2 Lack of access to basic financial services has created major barriers for people to overcome
poverty, huge income gap and poor standards of living in the society.
1.3 The traditional financial service players are limited in executing the crises so their lies a huge
opportunity for alternative lending institutions to take the mission to improve the livelihood of
the unbanked by providing them with innovative financial platforms that will create
opportunities for them to improve their standards of living.
A. Relevant demographic statistics of Vietnam:
A.1 Mobile device dominance and the use of Smartphone is growing in a vast level Vietnam,
with over four in five online consumers accessing the internet daily on smart phones as estimated
by research firms.
A.2 Mobile connection in Vietnam is higher by 21% than the global average of 103%.
A.3 According to reliable to data only 27 percent of Vietnam population has bank accounts.
About 438 million do not have any bank accounts.
A.4 In Vietnam GDP rises and the country becomes richer there is a trend of a widening of
income inequality. According to relevant research works Vietnam has income inequality profile
more than the third world countries despite being good GDP per capita income.

A.5 According to relevant data Vietnam’s nominal GDP growth fell to 1.3%, yet loan growth
picked up to 19.2%. Vietnam’s credit-GDP growth rate is largest in Asia as loans growth
exceeded the nominal GDP by 18.0 percentages.
A.6 As per the reliable data is can be seen that Vietnam consists of total inhabitants of 5.61
Million, generally it has a population compactness of 7,797 per square kilometer. As opined by
Nguyen et al (2017, p.20), the average age of the sum populace is 40 years and life anticipation
at birth is 82.7 years. The gross monthly income of the whole population is 3,949$.
B. Estimation of credit gap in Vietnam:
B.1 According to data four in ten SMEs in Vietnam is without banking support. Small and
medium industries in Vietnam despite contributing more than 50% of jobs and account for over
35% of GDP are underserved by financial institutions.
B.2 The study showed that about 60 percentages of SMEs in Vietnam rely only on bank loans for
financing, leaving the remainder unnerved by financial institutions.
B.3 High-tech SMEs in Vietnam lack funding to finance growth. The banking sector in Vietnam
is not sophisticated enough to accommodate the needs such as heavy assets as collaterals,
additionally private equity markets are underdeveloped and cannot compensate the difficult
access to debt.
PART 2:
Database of the start-ups involved in alternative lending sector
1. Geographical Coverage of Loans: In recent time’s country such as Vietnam has cumulative
money around VND2.5 trillion from the lending partners.
Vietnam is working with 967 lenders such as financial units, investors and credit institutions.
More than two million cumulative transactions have happened through this platform.
2. Types of loans:
There are usually six types of loans in the alternative lending sector. They are-
2.1 Working capital loan
2.2 Lines of credit
2.3 Start up Loans
2.4 Merchant Cash Advances
2.5 Bad credit loans
2.6 Equipment loans
3. Sector and Sub-category of loans:
There are eight sector and sub-sector loans in the market. They are-
3.1 Business-Business lending or B-B lending: generally this enables medium or small sector
enterprises SMEs to get the require funding for the growth and development directly from a

position of online investors. As opined by Lebovics et al (2016, p.60), B-B lending principally
offers aggressive rates and stipulations of finance along with the simplicity as well as
competence.
3.2 Debt-based securities: this preliminary enables long-term savings and emphasize on
renewable territory .
3.3 Community shares and microfinance: These types of substitute are focuses on empowering
SMEs by enhancing the contribution of neighbouring population.
3.4 Peer-Peer lending or P2P lending: In an open market, generally personage borrowers takes an
unsafe loans from other individuals, which is considered as the P2P lending. This allows an
individual to contact low-cost speedy loans at reasonably priced charges.
3.5 Invoices trading: Invoice trading deals with a new area that has enabled small industry to sell
the organisational invoices to many investors as well as individuals at a economical rate for
functioning resources (Lebovics et al. (2016, p.59).
3.6 Reward- based crowd funding: It provides an opportunity to score early-stage savings, to
obtain market justification and social proof. Moreover, it also helps to secure creative ideas,
engage clients, company and to construct loyal population.
3.7 Equity-based crowd funding: Equity-based crowd funding is a fast growing sub-segment. It
enables startups and enterprises to raise early-stage capital in an online marketplace directly from
individual investors.
3.8 Donation-based crowd funding: It generally allows the donors to hold up the charitable
causes for the non-financial returns.
4. Estimated average loan size:
The sum of online alternative economic market volume in Asia-pacific region as well as
Vietnam is approximately $108.81 billion USD, as long as finance regulars, start-ups, small and
intermediate enterprises(Chan et al 2017, p.84)
5. Effective Interest Rates for borrowers:
The effective interest rate for borrowers in alternative lending platform is 9 percentages.
6. Effective Interest Rates for lenders
The effective interest rate for lenders in alternative lending platform is 4.5 percentages.
7. Loan Volume Disbursed so far:
Loan volume disbursed is VND 30 trillion.
8. Management Team Analysis of alternative lending sectors in Vietnam:
Alternative lending platform has vast opportunity in Vietnam with growing market share of
credit approach to vast population who are earlier outside the credit scenario. Alternative lenders
perform the credit underwriting process and approve or decline loan application based on the
borrower’s score in real time.

With the maturation of industries, scepticism increases leading to focus on the lending model,
which can endure a down cycle, augmented regulatory oversight and challenges with the credit
with underwrite strategies.
Alternative lenders have built their base around a set of core competencies, which will continue
to be key trends that sustain the sector's growth.
9. Funding Model of the startup in Vietnam:
According to report, the alternative lending segment attracted $67.6 million in funding across 22
deals in the first six months, propelled by $25 million fund-raising and $32 million respectively.
9.1 Funding from Business Incubator and accelerators incubators: The programs run for 4-8
months and need time promise from the commerce owners.
9.2 Raising funds by winning contests: As opined by Tran (2016, p.84) opportunities are
maximised based on increasing number of contestants that have further helped in raising fund
encouraging entrepreneurs with innovation of new business ideas.
9.3 Raising money through bank loans: there are two ki9nmfs of finances for the business, which
are capital loana, and money deposited through bank loan. Working capital loan is defined as the
loan for generation of one cycle of revenue. However Lebovics et al. (2016, p.60), have argued
that it is generally limited by stock market debtors.
9.4 Venture Capital: This is defined as the management of funds for investing in companies. In
this case, the Vietnam government have come with new schemes, which allow them such as
biannual investment. In this case, the SMEs may face greater chance of competence as it helps in
start ups (Sato 2016, p.199).
9.5 Loan from microfinance and NBFCs: Microfinance and NBFCs provides banking services
that cannot meet legal requirements offered by the bank.
PART 3:
A. Identification of top 3 Startups for potential investment in Vietnam
There are six alternative lending startups operating in Vietnam, such as M_Service, Timo, 1Pay,
Bitcoin Vietnam, Fundstart, LoanVi amongst them the top three startups are-
A.1 M_Service: it is an operator independent e-top up provider in Vietnam. They manage and
operate the country’s largest prepaid talk-time distribution network. It has created a mobile-
based commercial ecosystem based on the retail distribution network.
A.2 Timo: As opined by Lebovics et al. (2016, p.60),, Timo is Vietnam’s first digital bank
allowing clients to manage their finances on their mobile phones and set a free banking services
including a debit card and local bank transfers.
A.3 1Pay: It is a mobile payment platforms that enables consumers and vendors to manage all
the payments it allows only merchants and ecommerce marketplace to receive credit cards..
B. Identification of worst Start-ups for potential investment

In Vietnam, more than 60 percent of startups fail and 70 percentages fail in the year of operation.
Project Lana, a major Vietnamese internet company, backed Beyeu in Vietnam an ecommerce
site.
C. Analysis of direct competitions in alternative lending sectors in Vietnam:
The alternative lending sector in Vietnam faces a tough competition between the startups and
companies part of this sector. The main reason is more emerging business development and ideas
in the alternative credit scenario of the market. In alternative lending business there lies a vast
opportunities of the business entities and financial institutions to reduce the credit gaps. More
people in Vietnam are engaging in digitally based credit platform than the traditional
complexities in financial institutions. Alternative lending companies in Vietnam are engaging
into direct competition with their rivals in order to gain more market share in the digitally
lending business. As the sector is growing in Vietnam the competition between the companies
are also increasing (Tran, 2016, p.83).
PART 4:
A. Existence of any opportunity for alternative lending in Vietnam:
In Vietnam, the use of digital media has grown in a significant way. In recent years and the use
of smart phones lead to the huge opportunities for alternative trading sectors to flourish in the
country (Sato 2016, p.200). That the statistics shows that number of smart phones users in
Vietnam are increasing day by day and as a result more people who are later stayed outside the
financial supports are entering to the alternative credit arena. This creates a huge opportunity for
the alternative lending sector to flourish in Vietnam.
B. Singapore is another country in Southeast Asia having an opportunity:
Singapore is another leading country that has vast opportunities in alternative lending market.
Singapore is one of the largest and fastest growing economies in Southeast Asia. The major
alternative financial players are peer-to-peer lenders that only provide loans to small and medium
scale enterprises. The partnership between Singapore stock exchange and other regional P2P
lending platform made an important development in Southeast Asia (Tran (2016, p.81).
Recommendation
Vietnam is a dynamic country in terms of populations, age group, and the country has wide
internet and mobile penetration in the population. Due to the financial inclusion in the country
the country is enjoying higher growth rates. The inflation situation in the country is high which a

problem is. Due to the increasing industrial growth and development in the industrial and service
sectors it is recommended to invest more in the alternative lending sectors by the big firms.
Conclusion
It can be observed that Vietnam government has given importance to the loan offered by their
banks. However, the study has cited that they have failed to undertake the grave under issues
posed by other international bank and their loan schemes. Therefore, Vietnam government fails
to align with the other banks and loans of the other south East Asian countries. Alternative
lending is flourishing in the country.

References
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