Digital Financial Services

• Financial Insecurity in Crises: While 80% of entrepreneurs save for their business, only 16% would use business savings to recover from a crisis. Others instead rely on household savings or borrowing, which may limit the ability of the business to recover in the long-term.
• Limited Access to Credit: 27% of women entrepreneurs lack the financial resources needed to grow. High interest rates (49%), low loan amounts (23%), and short loan terms (14%) create barriers to formal financing, and debt stress remains particularly high in Pakistan, where 94% of borrowers are “very concerned” about repayment.
• Digital Divides: While 94% of respondents own a smartphone, only 51% use digital tools for their business. Access to digital upskilling remains a challenge, limiting women’s ability to tap into online financial services and expand into new markets.
• Satisfied but Stressed: While many cite satisfaction with the state of their business, households, and finances, this may come at the cost of high levels of stress. However, when spouses were involved in decision-making, women were 27 percentage points less likely to “always worry” about their business and 23 percentage points less likely to “always worry” about their household.
• Disconnected from Support Networks: One-third (34%) of women entrepreneurs lack access to networks like peer groups and mentors for business advice.

• Offering long-term, higher-interest savings accounts with features like automated deposits to help women build emergency funds.
• Financial products tailored to women’s business needs, with larger loan sizes, flexible repayment terms and alternative credit assessments.
• Offering tiered, practical digital literacy programs, from mobile banking basics to advanced tools like e-commerce and AI.
• Creating peer groups and family-inclusive workshops to build networks, mentorship, and shared responsibility at home.
• Innovations that support redistributive care responsibilities, through mechanisms such as subsidized childcare and financial tools designed with caregiving realities in mind.

1. Respondent profile/demographics and company structure (for businesses).
2. Relationship with traditional finance channels.
3. Financing experiences when using fintech-based financial services.
4. Post-financing outcomes and the impact of the COVID-19 pandemic.

• Millennials made up the greatest proportion of users of online consumer finance in the ASEAN countries analysed across the individual consumers facing alternative digital finance channels. Approximately 44% of P2P/marketplace consumer lending respondents were between 25 and 34 years of age, followed by 34% who were between 35 and 44. Of BNPL users, 54% were between the ages of 25 and 34. Across both models, most respondents were male, had an undergraduate degree, and were in full-time employment with an annual income slightly higher than their country’s minimum wage.
• Before turning to P2P/marketplace consumer lending platforms for financing, family and friends, and banks were the two most popular sources of finance for individual borrowers. Notably, the offer and acceptance rates for borrowers who approached informal finance providers were relatively higher than for those who sought funding from the most popular traditional finance channels, despite having fewer borrowers.
• For individual household users of P2P/marketplace consumer lending, the primary purpose for borrowing funds was to cover day-to-day expenses, while for BNPL customers it was to purchase fashion items and apparel. Nearly half the individual consumers who used P2P/marketplace consumer lending platforms borrowed funds to meet daily expenses or short-term needs, such as buying groceries, paying utility bills and top-ups. For BNPL users, fashion items and apparel were the main types of purchases made. This was closely followed by home appliances, mobile phones, other electronics and daily expenses, each with a proportion of around one-third.
• The speed of receiving funds was the main decision-making factor that led individual households to borrow from fintech platforms. For BNPL users, it was paying zero or low interest. Platform use factors, such as transparency, better approval rates and flexible terms, also influenced P2P/marketplace consumer lending users. Similarly, convenience was the other top factor that influenced BNPL users, including flexible terms, easy application and approval processes, and better customer service.
• Alternative finance platforms in the ASEAN region complement traditional banking systems, as they mainly serve the underbanked and enable financial inclusion. Borrowers who used P2P/marketplace consumer lending platforms reported using banking products and services more often after receiving funds from online alternative finance platforms. More than half started to use or increased the frequency with which they used their personal savings or checking accounts. This was followed by an increase in the use of personal loan contracts, personal credit cards and overdraft accounts.

• Female business borrowers made up a greater proportion of the respondents, but they borrowed less than their male counterparts. When looking at the gender distribution of business respondents, female borrowers represented 54% across all the business-facing models, 57% of whom used P2P/marketplace business lending platforms. In terms of education level, most female borrowers had completed secondary school, whereas most male borrowers had an undergraduate degree. The results indicate that the alternative finance industry plays an important role in the inclusion of under-represented business borrowers into the financial system.
• Most MSMEs were young, micro and small businesses, and were operating either as sole traders or with few full-time employees. Most MSME respondents that had borrowed or raised finance were micro and small enterprises, operating with no (sole traders) or between one and five full-time employees. Most had been operating for between one and 5 years, and a smaller proportion was less than one year old. This reinforces the hypothesis that alternative finance plays an important role in providing access to finance to smaller businesses.
• Regarding the use of traditional finance facilities, MSMEs often used personal financial products to meet their business funding needs. MSMEs that used P2P/marketplace business lending and equity crowdfunding models reported using personal checking or savings accounts the most, followed by personal current accounts. The results suggest that the owners of these businesses relied on personal financial products to meet their funding needs. Conversely, MSMEs that used invoice trading platforms mainly used business savings or checking accounts.
• MSMEs that used P2P/marketplace business lending and invoice trading platforms to borrow funds were strongly influenced by better customer service, flexible terms, ease of getting funding compared to traditional sources and speed of receiving the funds. Non-financial benefits, such as public relations and marketing, and insights and expertise from the platforms’ investors, were the main decision-making factors for businesses that chose to fundraise through equity crowdfunding platforms. The main reason MSMEs borrowed funds, across all three models, was to raise working capital, followed by expansion and growth.
• Most MSMEs reported growth in their business performance (net profit, revenue and employment) after receiving finance through a fintech platform. Most MSMEs reported that the financing had a positive impact on their business, primarily through increased productivity and an expanded customer base. Further, alternative finance borrowers defaulted less compared to the non-performing loan (NPL) average (over 3%) in ASEAN countries, according to the World Bank, reporting an almost negligible default rate (1%).
• During the COVID-19 pandemic, most MSMEs reported they had not received any financial assistance from their government or fintech platform and hence had to adjust their business operations. For those MSMEs that received government assistance, it was mostly in the form of cash assistance/loan subsidies or tax relief. A slightly higher proportion received assistance from fintech platforms, mostly in the form of fee waivers, eased payment plans and additional credit facilities. It should be noted that, in many cases, the governments themselves asked fintech platforms to reduce or eliminate fees, and even directed additional credit facilities through this channel.

• Regulators may impose limits on the amount that can be borrowed through digital lending channels. Some regulators in ASEAN countries have already implemented mandates setting limits on the total amount individuals can borrow through P2P platforms based on their annual income. For example, the Philippines limits consumers’ total borrowing to 5% of their annual income. To this end, regulators should also communicate more with platforms to get a better understanding of the amounts consumers borrow.
• Regulators may impose caps on the interest rates charged by digital lenders. Some ASEAN countries reported illegal and unauthorised digital lenders engaging in predatory lending or collection practices and charging exorbitant interest rates. To overcome this issue, regulators in some ASEAN countries have imposed caps on the interest rates that P2P lenders can charge their borrowers. For example, Thailand caps the interest rate at 15% a year. Further, it is also important for regulators to create a whitelist of regulated digital lending fintechs that are operating in the country.
• There is a need for industry standards or guidelines for BNPL providers to ensure consumer interests are protected. Most respondent BNPL users were young (Millennials and Gen Z) and new to credit, making protecting consumers’ interests even more important. Regulators need to supply BNPL providers with clear guidelines (code of conduct) and ensure they carry out sufficient checks to confirm whether consumers can afford to take out such loans. Further, regulation could also focus on product design to ensure sufficient information is provided at checkout points so users can make informed decisions.
• There is a need to promote adequate disclosure and digital financial literacy among digital finance users. In most cases, P2P lenders charged higher interest rates compared with banks and other financial institutions. This study shows that most business borrowers are micro and small enterprises and generally have a lower education level. Hence, platforms must tell businesses what interest rate they are being charged and provide mandatory user education. Furthermore, regulators need to promote digital financial literacy among borrowers using digital finance platforms.

• The results from the study reveal that most respondents (75%) were micro enterprises, supporting the hypothesis that fintechs are a critical component of smaller businesses’ funding cycles. Of the respondent MSMEs, 44% were mature firms that had been operating for more than six years and less than one-third were young firms that had been operating for fewer than three years. Most of the CEOs were men, and one-third had an undergraduate degree and were aged between 35 and 44.
• In terms of the amounts borrowed or raised, the findings suggest that they were concentrated around lower values. Overall, the median amount borrowed or raised was USD3,917 and for 75% of the sample (up to the third quartile), the amounts ranged up to USD20,000. Most MSMEs used the money, with a median value of USD4,023, for working capital. This value was largely influenced by MSMEs that had borrowed from a P2P/marketplace lending platform. By industry, MSMEs operating in traditional industries raised the highest funding amounts, with a median borrowing value of USD8,813. This was followed by MSMEs in the innovative, and commerce and services industries, where the median amount borrowed for both sectors was approximately USD4,000.
• Before receiving funding from a fintech platform, MSMEs had tried to raise funds through different sources, primarily banks or family and friends. Banks were the most popular funding source for those that used P2P/marketplace or invoice trading platforms, while for those MSMEs that used investment crowdfunding or non-investment crowdfunding platforms, it was friends and family. Although many MSMEs sought funding from banks, only approximately one-half received an offer and accepted it. MSMEs that sought funding from family and friends were more successful, especially those that used an investment crowdfunding platform: more than 80% received an offer, all of which were accepted.
• Regarding traditional finance facilities, the type of product used differed by vertical. MSMEs that used P2P/marketplace lending or non-investment crowdfunding platforms relied more on personal financial products, in the form of personal credit cards or personal accounts, to support their business. Conversely, most MSMEs that used invoice trading or investment crowdfunding platforms used business accounts. Friends and family were the traditional facilities that more than half the MSMEs that raised funds through an investment crowdfunding fintech turned to.
• The decision to raise funds through an alternative finance platform was largely influenced by being able to receive funds faster and better customer service. Also, MSMEs that used a P2P/marketplace lending platform reported they were unable to get funding through any other source except a fintech, indicating this was one of the most important decision making factors. A better interest rate was another very important decision-making factor, being reported by approximately half the MSMEs.
• Overall, MSMEs managed to improve their businesses’ financial health as a result of the funding received via an alternative finance platform. Most MSMEs across all business models and platform types increased turnover and net income. However, 20% of those that used an investment crowdfunding platform saw a decrease in net profit, but those MSMEs also reported a significant increase in the business’s value and employment rate (over 60% for both factors).
• Overall, the main impact on the businesses due to funding was an increase in productivity, which was mainly seen for those that used an investment crowdfunding platform (67%). One-third of MSMEs that used a digital lending or invoice trading platform decreased costs. Further, launching a product or service was the result for more than 6 0% of MSMEs that used an investment or non-investment crowdfunding platform.
• Another outcome of receiving funding was a positive change in the use of different financial products. There was a noted increase in the use of savings or checking accounts for entrepreneurs that borrowed from a digital lending or invoice trading platform. MSMEs either decreased their use of or stopped using products such as overdrafts, loan contracts or revolving lines of credit. Interestingly, most MSMEs that used an investment crowdfunding fintech reported no change. However, there were a few for which the use of loan contracts and mortgages increased, and decreased for business credit cards and invoice trading products.
• Regarding the COVID-19 pandemic’s effects on the business, almost half the businesses managed to cope with the crisis and remained operational, albeit with adjustments. Approximately one-third of MSMEs had to shut down operations temporarily and only 3% had to permanently close their business. When asked about government-based assistance, 22% reported receiving it, of which half received a government COVID-19 voucher and emergency funds for payrolls.
• The main assistance offered by fintech platforms was related to payment facilities. For digital lending, invoice trading and investment crowdfunding platforms, the primary types of assistance provided were payment holidays and eased payment plans. For non-investment crowdfunding platforms, it was waiving fees. Completing the top three assistance types offered, across all models, were credit facilities (not related to a government assistance scheme).

By Krishnamurthy Suresh (Principal Researcher, CCAF), Felipe Ferri de Camargo Paes (Principal Researcher, CCAF), Loh Xiang Ru (CCAF), Richard Kithuka (CCAF), Peter Morgan (ADBI), Pavle Avramovic (CCAF), and Bryan Zhang (CCAF).

• Bangladesh
• China
• India
• Kazakhstan
• Mongolia
• Pakistan
• Vietnam