SMALL businesses in the Asia-Pacific, facing a capital crunch, are turning to new funding sources, according to Economist Intelligence Unit (EIU) research commissioned by Mastercard.

The growth of alternative finance points to “untapped market opportunities and more growth and change in financial markets ahead”, it added.

In fact, financial technology (fintech) investments in South-east Asia have shifted from digital payments and mobile wallets to wealth management, insurance and peer-to-peer financing since 2017, Moody’s Investors Service also said, in a separate report.

Peer-to-peer lending (P2P) platforms in Indonesia reportedly transacted some US$1.4 billion in 2018, up from US$20 million in 2016.

And the growth of these alternative platforms is putting pressure on traditional lenders, the EIU said – “particularly as business to business e-commerce or P2P software-as-a-service companies that provide invoicing, procurement and other data processing systems develop the ability to also analyse their clients’ business and extend them credit”.

Ivan Tambunan, chief executive of lending platform Akseleran, was quoted as saying that non-performing loans make up about 0.5 per cent of his firm’s disbursements, against a national industry average of between 2 per cent and 3 per cent.

“The fintech industry is expanding in Asean in tandem with other Internet businesses, reflecting generally growing consumer preferences for digital services that are convenient, customised and speedy,” Moody’s analysts separately noted.

Indonesia, the region’s biggest market, attracted about two-fifths of all fintechs investment in the region as at October 2018, according to United Overseas Bank.

Meanwhile, Google and Singapore’s Temasek have forecast that the country’s digital economy will be worth US$100 billion in 2025 – more than 10 times its value in 2015.

Encouraged by factors such as rising online and mobile penetration, Asean “will remain a hotbed for new fintech investments”, the Moody’s team added.