Banking platform Mambu's survey shows Thai MSMEs unable to secure business funding
Ninety five percent of survey respondents would switch lenders for better or improved services, with digital options growing in importance, according to a new report from cloud banking platform Mambu. More than eighty five percent want more flexible loan conditions and tailored services. Barriers to funding prevent them from seizing key business developments during post-pandemic recovery period.
More than half (63%) of micro, small and medium-sized enterprises (MSMEs) in Thailand have been unable to secure sufficient, or any, funding on at least one or more occasion over the last five years.
The ‘Small business, big growth’ report surveyed over 1,000 MSME owners globally, including Thailand MSME owners, who set up their company and applied for a business loan in the last five years.
More than a third (35%) of Thai MSMEs had to rely on friends and family for loans, followed by 34% securing funding from traditional banks or building societies, and 25% from specialist SME and commercial lenders. Of the MSMEs unable to secure sufficient funding, 34% were unable to hire effectively, 32% were unable to upgrade or improve technology and 31% experienced cash flow issues or were unable to launch new products or services.
Mambu’s findings come amid a rise in alternative lending, as Thai MSMEs turn to challenger banks and fintechs to overcome common barriers, such as rigid lending criteria (44%), too much paperwork and admin (30%) and slow lending speeds (29%). The opportunity for new entrants is clear as the vast majority (95%) of these organisations say they are open to changing lenders for a better lending experience.
Nearly half of Thai MSMEs cited better financial options (46%) and better digital services (46%) as the top reasons to change lenders. Meanwhile, 43% would switch for better borrowing benefits and incentives and 41% for better customer service support.
Myles Bertrand, Managing Director APAC at Mambu, said: “Small and medium-sized enterprises are significant contributors to Thailand’s economic activity and employment; there are 3.1 million of them, generating 12.7 million jobs (71% of Thailand’s workforce). However, the inability to access business financing will adversely hamstring Thai MSMEs eyeing commercial or operational opportunities crucial for their continued growth. With the business lending sector not keeping pace with the technological innovations transforming other financial service areas, Thai lenders are not positioned to offer solutions that best serve their MSME customers when they’re really needed.”
Financial institutions must do more to tackle challenging application processes for loans. The research found that the length it takes to apply for a loan is a major influence on small businesses when choosing a lender. While long-term repayment plans were a leading consideration for 89% of MSMEs in this decision-making process, 88% also want low interest rates, and 87% prefer cash-out options.
Pham Quang Minh,
When it comes to improving the application process, 88% of Thai MSMEs want to see more flexible loan conditions, 86% are interested in tailored offers and services, and 83% want payroll management.
Richard Lim, CEO of Retail Economics, said: “The pandemic has ushered in enormous changes in how we work, play and shop, accelerating the democratisation of digital and with its repercussions still reverberating across society. But access to capital is an area where digitisation has matured at a much slower place. All too often, businesses looking to scale quickly and seize opportunities are choked by exhausting application processes. Stifled by slow and inefficient practices, current lending practices are no longer fit-for-purpose in today’s fast-paced, digital world.”
Globally, the most common barriers to securing funding among SMEs are not enough starting capital (30%), too much paperwork and admin in the lending process (28%) and cash flow not being considered strong enough (27%).
