Robocash predicts installment consumer lending will surge in Southeast Asia

    Lifestyle Money Robocash predicts installment consumer lending will surge in Southeast Asia

    Installment consumer lending is one of the most promising segments of alternative finance in Southeast Asia in the coming years. These are the findings of analysts of the financial holding Robocash Group after studying different prerequisites across the region. 

    With digital lending projected to reach US$100 billion by 2025, Southeast Asia has seen massive growth in alternative consumer lending in the past years. Still, apart from the main directions such as microfinance and P2P lending, there are some more segments worthy of attention. Despite their current low adoption across countries with different economic and technological landscapes, they promise to develop gradually in the near years.

    Supported by short forms of alternative financing common in the region, installment consumer lending goes first. An increase in welfare that will intensify the interest in larger and longer loans among the population is the main factor. It indicates a promising nature of this loan type in developing countries as soon as they start to recover their economies after the COVID-19 outbreak. Thus, the baseline scenario of the World Bank report suggests that the GDP growth in 2020 in the developing countries in East Asia Pacific will slow to 1.3% but then stabilize around its trend level by late 2021.

    Lines of credit take second place according to the analysts. Initially designed for the most reliable regular customers, a personal line of credit implies a long-standing low-risk service. At the moment, it is more common in neighbouring India but is already expanding across Southeast Asia. For instance, it has become rather popular in Vietnam and the Philippines.

    Special loans facilities targeting specific social groups, e.g. Sharia-compliant financing or loans for expats, are very promising and often have almost no alternative among available offers. At the same time, they are highly facilitative in respect to financial inclusion. Moreover, despite overall specificity limiting their expansion, they can have significant market volumes. For instance, according to the Islamic Finance Development Report, in 2023, the global Islamic finance industry is projected to grow to US$ 3.8 trillion in assets.  Meanwhile, in 2018, it amounted to US$ 2.5 trillion.

    To sum up, short-term microfinancing and P2P lending are expected to stay at the forefront of alternative consumer finance in Southeast Asia. The main driver is the robust development of mobile and digital technologies intensified lately by the global health crisis and social distancing. However, in those countries that will recover faster, customers will return their appetite to cumulate properties, respectively. Long-term loans of a greater size will fit in well. As a result, installment loans and lines of credit similar to bank products will develop their significance. The defining role in non-bank lending will primarily belong to the improvement of electronic know-your-customer procedures, scoring, and infrastructure in general.

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