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The Importance of Ensuring Greater Access to Digital Financial Services for the Underserved

by Tunku Danny Nasaifuddin Mudzaffar

It is no secret that we have experienced hyper-growth in the digital financial services sector in Malaysia, not just due to our rapidly advancing technological capabilities, but out of sheer necessity as consumers are forced to stay home due to continued lockdowns and movement control orders. Physical and social distancing have rendered us unable to execute everyday tasks in person, and we have no choice but to take the digital route with many aspects of everyday life. The case for digital financial services is strong, recently seen with over 40 consortiums made up of state governments, traditional banks, e-wallet players, and listed conglomerates amongst others, all vying for the 5 digital banking licenses on offer from Bank Negara Malaysia (BNM). This is further underpinned by the fact that Malaysia is ripe for digital financial services; with smartphone penetration at 78% and internet penetration at 87.4% (MCMC, 2018). However, to truly experience digital financial services now, have a look at the great strides the Securities Commission Malaysia (SC) has implemented since it started regulating ECF (Equity Crowd Funding) in 2015 and regulating P2P (Peer-to-Peer) Financing in 2016. There are now 21 operators offering ECF or P2P Financing, with microLEAP being one of them, that provide a truly online experience in digital investments and digital financing.

Now how do we provide this access to the underserved? In Malaysia, the majority of the underserved are micro-enterprises or people from the Bottom 40% Income Group (B40) who often struggle to access financial services such as loans or investments. As the needs of the underserved are often smaller, it is expensive for traditional lenders to provide loans in such small amounts and the costs or minimum investment amounts are too prohibitive for the underserved for it to make economic sense. Therefore, it is up to the digital financial services operators that may provide smaller financings and smaller investment products to take up the mantle and provide these services to the underserved. Without them, MSMEs (Micro, Small and Medium Enterprises) that account for 98.5% of registered businesses in Malaysia (Dept of Statistics, 2016) will surely struggle.

Here at microLEAP, where we provide Shariah-compliant and Conventional P2P financing, it is our mission to provide Issuers (borrowers) access to P2P financing from as little as RM1,000 to RM50,000 as well as provide investments (loans) from as little as RM50 to these Issuers. When all is said and done, how do we actually get, for example, a ‘mak cik’ in Kuala Pilah that needs RM10,000 for her ‘kedai runcit’ to understand and use our platform? Here is where education and financial literacy comes in.

Improving financial literacy starts with education, and at microLEAP, we believe that it is the most crucial yet forgotten aspect of catering one’s services to the underserved. When introducing a brand-new concept to a relatively unexposed demographic, we must consider the user’s lack of understanding and knowledge of a service to better serve them. In the case of micro-enterprises, microLEAP is committed to providing the necessary tools for business owners to get started with our fully digital P2P financing services.

An example of said tools comes in the form of explainer videos available in both English and Bahasa Malaysia (BM). This is crucial as we have found that mere verbal explanations can be difficult to grasp, and that videos add a dimension of visuals to better aid understanding. Furthermore, the timelessness of video explainers and the ability to play them back and forth on-demand has proven to be a great hit among the many micro-business owners that we try to spread awareness to.

As microLEAP’s services are 100 percent digital, it is important that the Issuers on our platform are familiar with and know how to navigate it to enable them to raise financing. To this end, we provide in-depth assistance through step-by-step video guides as well as a specially-trained, dedicated team that is ever ready to walk Issuers through the process of getting started with microLEAP.

Aside from that, we understand the need for our Issuers to familiarize themselves with the various financial tools at their disposal and how they can better navigate their debt and manage repayments well. Some of the resources we provide have had careful thought put into them, as we worked directly with some of our Issuers to test out the various versions of our on-demand training videos. Upon better understanding their needs, we were able to tweak our informational videos to better suit the micro-business owners.

The educational content we provide our Issuers early on in the process includes debt management training and basic book-keeping for them to reap the full benefits of our fully digital P2P financing services. They are available on-demand to ensure our Issuers are able to grasp the content and as an incentive, they do not get their financing unless they pass all these modules.

We hope that with our efforts to improve the accessibility of P2P financing, thereby expanding our reach to include the underserved, we are able to not just help them raise the financing they require to grow their businesses but also improve their digital financial literacy skills. In a world where technology is rapidly evolving, we must do all we can to ensure that no one gets left behind, especially as we see this hypergrowth in the digital space.

Currently, we are also exploring more avenues to better assimilate our Issuers with the rapidly evolving digital financial services industry. As we introduce more products, it is crucial that we continuously innovate to ensure that our platform remains user-friendly. To help communities that need to raise financing the most, we must ensure greater and easier accessibility to our platform, and greater understanding of the concept of a fully digital P2P financing service.

About microLEAP

microLEAP is an Islamic and Conventional P2P (Peer-to-Peer) financing platform regulated by the Securities Commission Malaysia (SC). P2P Financing in Malaysia is an alternative financing tool on one side and an alternative investment tool on the other. A proudly Malaysian fintech platform, microLEAP focuses on the micro-enterprise and SME sector and we are the first P2P operator in Malaysia that offers both Islamic and Conventional financing on the same platform. For more information, do visit www.microleapasia.com available in both Bahasa Malaysia and English.

Link to article here.

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