Fintech startups throw financial lifeline to Philippines’ unbanked

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.

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.

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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