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Asian Economies Quietly Boost SME Financing

China largely leads the small business lending path within Asia’s economy. A report released at the end of 2014 revealed a record $523 billion worth of syndicated loans being issued throughout the Asia Pacific region in 2014, and that China spearheaded this lending boom.

As one of the world’s leading economic players, China has unsurprisingly taken the lead within Asia’s SME financing, and Chinese officials have recently encouraged domestic banks to increase their financing to small businesses.

But as business and economic groups across Asia call for increased access to capital for small businesses, smaller markets are gaining new attention for their focus on SME financing.

Earlier this month, members of the Asia-Pacific Economic Corporation (APEC) championed SME lending across the Asia-Pacific region. The topic of small business financing was the center of discussion at this year’s Asia-Pacific Forum on Financial Inclusion, reports said.

At the event, the Philippines emerged as an economy embracing the call for boosted SME capital access. The nation’s finance Undersecretary Gil Beltran told reporters that “financial inclusion is vital in achieving the goal of enhancing inclusivity of growth of economies. If we help SMEs become more productive, such as by easing accessibility of financing, we help our economies generate more jobs and boost incomes.”

Just days following the forum, reports emerged of other Asian economies heading the call to increase small business lending activity.

In Bangladesh, for example, statistics show that SME loan disbursement by both banks and non-banks hiked by more than 18 percent in 2014 compared with the year prior, a figure reports say qualifies as a new record.

According to the Governor of the Bangladesh Bank, Atiur Rahman, “the central bank has expanded SME financing to create new entrepreneurs and employment opportunities, in addition, to empower women.”

Through promotion of SME financing by the central bank, reports said, financers saw 42,000 female borrowers, the creation of 1.5 million job opportunities, and the improvement of loan recovery to 64.95 percent in the nation.

Meanwhile, in Singapore, the national budget released late last month included significant attention to financially promoting SMEs in the nation. The government reportedly allocated hundreds of millions of dollars in grants for innovative small businesses, SME tax incentives and grant schemes, and a $500 million venture debt-risk sharing program.

“It is clear that boosting SME performance is an integral part of pushing the economy to the next frontier,” said finance expert Zaid Hamzah in an opinion piece for Asia One.

Small business banking in Malaysia is also on the rise as regulations tighten banks’ non-business lending activities. The Malaysia-based universal bank CIMB Group has taken to refocusing small business financing efforts, experts say, in part after restructuring banking operations following the collapse of its planned partnership with RHB and the Malaysian Building Society. That collapse, according to reports, led CIMB to close its investment banking operations in Australia, but has also led the bank to launch a new SME banking unit by 2018.

Alternative financing across the region is beginning to take shape, too. Malaysia’s Securities Commission has increased efforts to regulate crowdfunding platforms, according to reports. A new focus on P2P lending and equity crowdfunding (ECF) is taking shape as Malaysian alternative lender pitchIN launches operations and as Southeast Asia’s largest crowdfunding platform Crowdonomics, based in Singapore, promotes the rise of SME lending to spur economic growth throughout the economies of the Association of Southeast Asian Nations (ASEAN).

Crowdonomic co-founder and managing director Leo Shimada told reporters that despite the progress in Asian SME lending, there is a gap in multiple industries that, while having potential, cannot offer small businesses the necessary financing. “Every major market in Asia is now in the process of introducing ECF-targeted regulations and ASEAN is no exception,” he said. “ECF creates visibility for these high potential companies by opening up to a broad community of investors with various expertise and investment appetite.”

While Malaysia, Shimada said, is “clearly a pioneer market” in the equity crowdfunding space, he said Singapore and Thailand both have the potential to become the next alternative lending leaders across Asia – a position that suggests Asian economic groups will not likely quiet their calls for increased SME financing anytime soon.​

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