4/20/2020 Fintech startups throw financial lifeline to Philippines' unbanked - Nikkei Asian Review

STARTUPS

Fintech startups throw nancial lifeline to

Philippines' unbanked
Technology opens new doors in country where 80% can't access banks

JUN ENDO, Nikkei staff writer

APRIL 18, 2020 18:02 JST

A rice grower tends a field in the shadow of Mount Mayon in the Philippines. Peer-to-peer lending platform Cropital is
trying to connect farmers in need of financing to potential lenders. © Reuters

MANILA -- As the Southeast Asian digital economy expands beyond online

shopping, a host of startups are using financial technology to give the unbanked
Filipino majority access to loans from individual and institutional lenders.

The province of Nueva Ecija, to the north of Manila, is known as the granary of
the Philippines. Peer-to-peer lending platform Cropital is working hard to
connect farmers there in need of financing to potential lenders.

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Cropital interviews each farmer to determine ability to repay. Those who pass
screening are listed on the platform and can receive seeds, fertilizer and cash
from willing lenders. After harvest, the loan is repaid with monthly interest -- 2%
on average.

The lenders are more interested in supporting farmers than profiting, according
to Cropital CEO Ruel Amparo. The company has distributed a total of 70 million
pesos ($1.38 million) to 1,200 farmers since going live in 2016, largely from
overseas Filipino workers with extra cash on hand.

Cropital CEO Ruel Amparo, right, speaks with farmers seeking to borrow money through the digital platform. The
coronavirus has complicated the startup's operations.

But the new coronavirus pandemic and government lockdowns to slow its spread
havethrown a wrench into operations. The government is restricting travel on
the island of Luzon, where both Manila and Nueva Ecija are located, from March
17 to April 30, meaning that Cropital representatives cannot interview new
potential borrowers in person. "We are also testing new ways of [remotely]
implementing loan applications and disbursements," Amparo said.

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Fintech is a rapidly growing field in Southeast Asia, where 300 million out of
roughly 400 million adults cannot access bank loans for such reasons as an
inability to open accounts. Outstanding digital lending in the region is on track to
hit $110 billion in 2025, up from $23 billion in 2019, according to a report by
Google, Temasek and Bain & Co. that was published in October, before the
coronavirus hit.

Indonesia's Modalku is now believed to lead the region in peer-to-peer lending,

connecting small-business owners to retail lenders across Indonesia, Singapore
and Malaysia. Loans through its platform have more than doubled in a year to
1.75 million, together worth 13.7 trillion rupiah ($834 million).

In the Philippines, 52 million people, or nearly 80% of adults, are ineligible for
bank loans. Many end up borrowing money from acquaintances or loan sharks to
cover unforeseen expenses. Combined with highly developed money transfer
services, used by throngs of overseas workers to send money back home, the
country is seen as fertile ground for fintech startups.

The boom extends beyond peer-to-peer lending. Japan-based Global Mobility

Service has made it easier for banks to lend to drivers of tricycles -- motor-
powered rickshaws common on Philippine streets -- so that they can buy their
own vehicles instead of renting.

The system lets banks remotely shut down the tricycles' engines if drivers fall
behind on payments. About 10,000 drivers have bought their own tricycles using
the framework so far.

"Now I can keep everything I earn, so I can send my children to school," a 32-
year-old driver said.

But the coronavirus has complicated such efforts for now.Bans on tricycles put in
place due to the pandemic could make it difficult for drivers to make loan
payments. GMS is working on responses, such as asking banks for deferrals.

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