The Equity Crowdfunding Bandwagon: South East Asia Jumps on Board
Wednesday, January 13, 2016
Southeast Asia (SEA) represents a burgeoning regional economy comprising of 11 countries with a consolidated GDP of US$2.57 trillion (that’s approximately 15% the size of the US economy), and a combined population of 620 million people. It’s no wonder that there’s a buzz around the potential that the region presents; growing populations, rising wealth of the middle class and a track record of 5.23% GDP y-o-y growth since 2011 form the core pillars of the SEA growth story.
It’s also little surprise that these economies are comprised of an overwhelming number of small-medium enterprises (SMEs), and this mix continues to drive the growth engines of SEA. These SMEs contribute between 88.8% to 99.9% of the total number of businesses in SEA, and 51.7% to 97.2% of total employment.
Yet, studies by the Asian Development Bank reveal a funding gap in almost all SEA economies: only 18.7% of total bank lending were to SMEs in Asia, and this has been a decreasing trend since the global financial crisis of 2009. To understand the scale of this unserved segment, a whopping 9 million SMEs do not have sufficient access to financing.
The swell of new business births, as well as the barriers to traditional financing, represent the cradle of crowdfunding — borne of a combination of foreign innovation and domestic requirements, a good number of companies in SEA have embraced the equity crowdfunding (ECF) phenomenon. One needs to look no further than regulatory progress and government support across the region as evidence of crowdfunding’s status as a real business solution.
Varying degrees of support exist for crowdfunding in the region, specifically for equity-type structures. The 4 countries that have made the most progress are Malaysia, Thailand, Singapore and Indonesia.