11:19 | 23/11/2020 Companies
Validus Vietnam finds almost two-thirds of investors surveyed see SME private credit as an attractive asset class in today’s challenging investment landscape.
On November 20, Validus Vietnam revealed the results of their inaugural Investor Survey 2020 that surveyed over 200 Vietnamese investors in October 2020 in the midst of challenging global economic conditions due to the pandemic. The survey found that 58.5 percent sees SME lending through fintech platforms as an attractive investment opportunity.
This is especially relevant in today’s challenging economic climate, where 55 percent of respondents said that COVID-19 has changed their investment strategy, which has resulted in almost four in five (79.5 percent) looking to diversify their investment portfolio with alternative investment opportunities, and 61 percent saying that alternative investments can give them a better return as compared with traditional options like stocks and property.
Swaroop Shah, CEO of Validus Vietnam, shared, “Globally, investors are facing a volatile market environment where previous so-called ‘fail-proof’ conventional asset classes are not as ‘safe’ anymore. However, Vietnam as a country has seen a strong and consistent recovery, and we see a corresponding healthy investment appetite from investors. This is reflected not only in our survey, but also on our platform where in recent months we have seen a sustained increased interest from both individual and institutional investors, who are exploring opportunities for higher returns, and are more open to alternative investments. With the nation’s digitalisation effort accelerating Vietnam’s economic recovery today, there is no doubt that investors have more confidence in taking a more digital route when it comes to investing.”
Beyond investor returns, alternative financing for business is seen as the ‘growth engine’ for economies across the globe. This is especially relevant for SMEs in Southeast Asia, where the SME financing gap is almost US$300 billion, and the lending environment has further tightened due to current economic conditions, starving SMEs of much needed credit.
In recent years, alternative lending has grown rapidly, and especially in Vietnam, this growth has been driven by regional advancements in fintech and Vietnam’s push for digitalization. The recent eConomy report showed that Vietnam’s digital economy is still growing at double digits to US$52 billion by 2025, with financial apps in Vietnam seeing exponential monthly active user growth of 73 percent, the highest in the region by far.
Ha Tran, Chief Commercial Officer at Validus Vietnam shared, “70 percent of SMEs in Vietnam are unable to obtain loans from traditional sources such as banks. Access to affordable financing is key to driving SMEs’ exponential growth, and we are capable of assisting those who are cash-strapped to seek funding. We believe that a marketplace lending model underpinned by robust technology and a strong credit model will become an important financing pillar in Vietnam, of course with the relevant regulations and protection of both lenders and borrowers, and help to accelerate financial inclusion among the unbanked and underserved SMEs in Vietnam.”
In Singapore, a 2019 study by Validus saw how Fintechs can effectively boost lending to SMEs and its positive direct impact, where SMEs supported by Validus saw an increase in their annual revenue by 17 percent on average, contributed over US$300 million to the nation’s GDP, and supported more than 10,000 jobs in the country.
“The survey also reflects a healthy appetite for social impact investing, with over 30 percent of those surveyed indicating that they are happy to accept lower returns for high community benefit potential. Our goal of SME financial inclusion is well-supported by investor trust in Validus Vietnam, where we’re seeing increased interest from investors keen to help drive SME and economic growth in the country,” Shah added.
With the surging demand for SME financing, the Vietnamese P2P market is estimated to reach US$7.8 billion this year. This immense growth underscores the need for investors to look for credible lenders as the foundation of trust even as Vietnamese legislation on this is at the pilot stage currently.
Validus Vietnam was launched in November 2019 to bring business financing to the country’s small and medium businesses. The team has forged industry-leading partnerships to provide growth financing in supply chains through its network of corporate partners, including Nafoods, Pharmacity, Bach Hoa Xanh. SMEs who are part of the ecosystem will have access to financing, obtaining capital on time to fund their business operations, expand and accelerate their business growth. In Singapore, its regional headquarters, and in Indonesia, via its subsidiary Batumbu, the platform provides a similar service to the local business community, through a marketplace lending model that provides investors with an attractive investment model and the ability to diversify their returns, with the ability to support their country’s SME growth. Additionally, investors at Validus Vietnam and Batumbu see on average returns of 12 percent p.a., and close to zero default rate, an attractive proposition for investors in today’s climate.
Validus Vietnam uses the same proven proprietary technology and credit scoring systems currently used in Singapore and Indonesia to provide Vietnam’s SMEs with access to fast, reliable and affordable sources of growth financing.