Boosting Economic Growth in Southeast Asia: The Story of Funding Societies

Small to mid-sized businesses (SMEs) are the backbone of Southeast Asia’s economy, constituting nearly half of its Gross Domestic Product (GDP). These enterprises are instrumental in job creation, fostering innovation, and stimulating economic growth. However, despite their significant role, SMEs often struggle to secure adequate working capital due to perceived high risk by traditional banks, resulting in exorbitant lending rates or even outright loan denial.

Southeast Asian entrepreneurs Kelvin Teo and Reynold Wijaya, who met during their postgraduate studies at Harvard Business School, recognized this financial gap in their home region. Motivated by the school’s mission to “make a difference in the world,” they sought to bridge this divide.

Teo, speaking to TechCrunch, said, “We had grown up as underdogs and felt privileged to be at Harvard Business School. We wanted to give back to Southeast Asia. SMEs resonate with us, and financing is their biggest pain point.”

With this in mind, they launched Funding Societies, a Singapore-based lending platform for SMEs. It currently operates in several Southeast Asian countries, including Indonesia, Malaysia, Thailand, and Vietnam. The platform has successfully loaned over $4 billion to more than 100,000 businesses, with its recent equity raise of $25 million further bolstering its growth.

The recent financing was led by Cool Japan Fund (CJF), marking its first foray into Southeast Asia’s fintech sector. The latest funding round has taken Funding Societies’ total equity raise to approximately $250 million.

Teo and Wijaya, both experienced in the business realm, spent three years studying successful American companies’ strategies before launching Funding Societies in Singapore in 2015. To date, the platform has provided over $4 billion in business financing to SMEs across Southeast Asia, a significant increase from $3 billion in April 2023.

The recent funds will be used to expedite financing services to SMEs in Southeast Asia and invest in AI technology to automate the lending application process. Furthermore, the funds will be used to expand its payment services, which were launched in 2022.

In collaboration with CJF, Funding Societies aims to offer financial backing to Japanese companies seeking to establish or expand their presence in Southeast Asia. The platform provides a range of financing options, including term loans, micro-loans, and asset-backed business loans, to cater to the diverse needs of businesses at various stages of growth.

According to the 2024 e-Conomy SEA Report, digital financial services in Southeast Asia are projected to grow, with digital lending constituting about 65% of the total revenue.

Since its significant Series C+ funding round of $144 million led by SoftBank Vision Fund 2 in February 2022, Funding Societies has further solidified its position as a market leader in SME lending.

Teo believes that the ongoing struggles faced by many fintechs in the region could prove beneficial for Funding Societies. He anticipates further consolidation in the fintech sector due to the current challenging funding climate in Southeast Asia, with companies focusing on a single market being particularly vulnerable.

Despite these challenges, Funding Societies made significant strides in December 2022 by acquiring Sequoia-backed payments fintech CardUp, nearly tripling its revenue while maintaining its headcount. The company also invested in three other companies during this period, including a fintech and a POS software startup.

An impact report by the Asian Development Bank (ADB) in 2020 revealed that Funding Societies-backed MSMEs contributed $3.6 billion to GDP and created approximately 350,000 new jobs. This demonstrates the platform’s significant role in boosting economic growth and job creation in Southeast Asia.