CARI Captures Issue 628: Southeast Asian fintech firms extend credit to unbanked population

ASEAN
Southeast Asian fintech firms extend credit to unbanked population
(24 October 2023) Fintech firms in Southeast Asia are extending credit to young borrowers who generally lack access to traditional financial services. These include buy now, pay later services and digital banks. By partnering with e-commerce sites and telecom carriers, these fintech firms have developed credit scoring models that can assess potential borrowers’ creditworthiness based on their spending habits. According to a study on financial inclusion in Southeast Asian countries by the Centre for Impact Investing and Practices (CIIP), 63% of current fintech users are first-time customers while 57% state they do not have access to alternative financial services, compared with 46% and 40%, respectively, for traditional financial service providers. CCIP also found that the default rates for both fintechs and traditional nonbanks were only slightly higher than banks.

MALAYSIA
Malaysia to ban the export of raw rare earth materials, processed rare earths to be allowed
(24 October 2023) According to Malaysia’s science, technology and innovation minister, Malaysia intends to ban the export of raw rare earth materials, but will allow the export of processed rare earths. This followed the government’s announcement in September 2023 of a plan to curb exports of rare earths in order to avoid “exploitation and loss of resources, [and] guaranteeing maximum returns” for the country. It is estimated that Malaysia contains about 16.1 million tonnes of non-radioactive rare earth elements in Malaysia, estimated to be worth about US$169 billion. Said non-radioactive rare earth elements are expected to contribute as much as MYR 9.5 billion (US$2 billion) to the country’s GDP and create nearly 7,000 jobs by 2025.

INDONESIA
Angel investor network Bali Investment Club to launch US$25 million sustainability-focused investment fund
(24 October 2023) The Bali Investment Club (BIC), an angel investor network that invests in impact-driven Indonesian businesses, is seeking to launch a US$25 million venture capital fund focused on sustainability in early 2024. The BIC will co-invest in the fund alongside European and Southeast Asian limited partners. With ticket sizes ranging from US$250,000 to US$2 million, the fund will target companies in their pre-seed to Series A stages. The fund intends to generate most of the impact through agriculture-focused sectors and the circular economy. The fund will have three verticals – waste reduction and reduction of waste going to landfills, carbon dioxide reduction, and providing higher incomes to bottom-of-the-pyramid players.

SINGAPORE, MALAYSIA
Malaysian ringgit hits fresh low against Singaporean dollar
(24 October 2023) On 24 October, 2023, the Malaysian ringgit hit a fresh low against the US dollar, breaching the MYR3.50 mark to trade at MYR3.5026 against the Singapore dollar at 9:00 AM. It had closed the previous day at MYR3.4887. Between 03 January, 2023 to 23 October, 2023, the Malaysian ringgit had dropped 6.55% against the Singapore dollar. The ringgit has been weighed down by weaker exports and widening interest rate differentials with the US. Bank Negara Malaysia (BNM) had paused interest rate hikes in July 2023. In response to the recent weakening of the ringgit, BNM stated that the central bank possesses “an array of market measures” ready to boost the ringgit, should the need arise. However, these measures were not disclosed.

THAILAND
Thailand aims to foster 10,000 startups by end-2027 to boost innovation
(24 October 2023) Thailand aims to cultivate 10,000 startups in fields like agriculture and medicine by end-2027 in order to spur innovation and raise the productivity of the Thai economy. The Thai government is currently developing a four-year national innovation plan to begin in 2024 that carries the goal of expanding the number of small and midsize enterprises including startups. The government also intends to provide US$138 million to the National Innovation Agency’s grants and investment funds over the next four years, around double the money it allocated for the previous four years. Funds will be focused on five areas: agriculture, medicine, tourism, soft power, and energy.

THAILAND
Automobile production expected to reach 1.85 million units in 2023
(25 October 2023) According to the Federation of Thai Industries (FTI), automobile production in Thailand is expected to reach 1.85 million units in 2023, down from its previous forecast of 1.9 million. The downward revision by the FTI – the second this year after one in July 2023 – was attributed to authorities’ stricter scrutiny of car loan applications, which is weighing down on domestic car sales and clouding sales for the near future. The FTI has also downgraded its projections for domestic car sales from 850,000 units to 800,000 units. The FTI’s export projections for 2023, however, remain unchanged at 1.05 million units. Auto production decreased 8% year-on-year in September 2023 to 164,093 units, marking the second consecutive month of decline.

CAMBODIA
Cambodia to bank on solar energy and electricity imports to address hydropower volatility
(23 October 2023) Cambodia is banking on scaling up solar projects and electricity imports from neighboring countries to address volatility in Cambodia’s hydropower output as well as rising energy demand. Hydropower currently accounts for nearly half of Cambodia’s annual electricity usage, but output has become volatile due to increasingly frequent weather-related disruptions. Over the last two decades, Cambodia has sought to use hydropower to substitute fossil fuels. However, hydropower output in Asia in 2023 dropped at the fastest rate in decades, forcing power regulators to rely more on fossil fuels to meet demand. In the coming years, Cambodia will still see hydropower as central to its power mix.

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SOUTH KOREA, SAUDI ARABIA
Hyundai sign US$2.4 billion contract with Saudi Aramco to build gas processing plant
(24 October 2023) South Korea’s Hyundai Engineering & Construction and Hyundai Engineering have signed a US$2.4 billion contract with Saudi state-owned energy company Saudi Aramco to build a gas processing plant in Saudi Arabia. Both Korean engineering companies are affiliates of Hyundai Motor Group, and had been working on the first phase of Saudi Aramco’s Jafurah gas processing facilities project after having won the order in 2021. The US$2.4 billion contract is the second phase of the Jafurah project. Jafurah is believed to contain 200 trillion cubic feet (5.7 trillion cubic metres) of raw gas reserves. The agreement was signed during South Korean President Yoon Suk Yeol’s state visit to Saudi Arabia.

CHINA
Net capital outflows from China hits seven-year high in September 2023
(25 October 2023) Net capital outflows from China hit a seven-year high in September 2023, driven by foreign companies scaling back their operations within the country as well as wealthy Chinese shifting funds abroad. According to China’s State Administration of Foreign Exchange, which tracks monthly international financial transactions by domestic banks on behalf of businesses and households, China’s net capital outflow reached US$53.9 billion in September. This is the largest amount since January 2016, when China recorded a net outflow of US$55.8 billion. Capital outflows related to direct investments, such as the construction of manufacturing plants, reached US$26.2 billion in September, roughly half the total and the largest amount since 2010, when comparable data first became available.

AUSTRALIA
Inflation accelerates to 1.2% in the third quarter of 2023, up from 8.0% in second quarter
(25 October 2023) According to the Australian Bureau of Statistics, Australia’s headline consumer price index (CPI) rose by 1.2% in the third quarter of 2023, up from 0.8% in the second quarter. At an annual rate, headline CPI was 5.4% compared with 6.0% in the second quarter. In September alone, headline consumer prices were 5.6% higher year-on-year, accelerating from the 4.9% recorded in July and 5.2% in August. The most significant price rises in the third quarter were a 7.2% rise in automotive fuel, while rents rose 2.2%, electricity by 4.2% and the cost of new homes by 1.3%. The rise in rent was slower than the 2.5% rise recorded in the June quarter. The Reserve Bank of Australia has left its key rate unchanged at 4.1% for the past four months.