Credit Market Trends in Emerging Asian Markets

20th Apr 2022, Industry Insights

Asian credit market looks forward with confidence post the pandemic, however, due to the Ukraine and Russian wars, there is a huge deal of volatility in the market which might impact the credit ecosystem. The conflict is a major blow to the global economy that will hurt growth and raise prices.

Impacts will flow through three main channels. One, higher prices for commodities like food and energy will push up inflation further, in turn eroding the value of incomes and weighing on demand. Two, neighbouring economies in particular will grapple with disrupted trade, supply chains, and remittances. Three, reduced business confidence and higher investor uncertainty will weigh on asset prices, tightening financial conditions and potentially spurring capital outflows from emerging markets.

Asia and the Pacific

Spill overs from Russia are likely limited, but slower growth in Europe and the global economy will take a heavy toll on major exporters.

The biggest effects on current accounts will be in the petroleum importers of ASEAN economies, India, and frontier economies including some Pacific Islands. This could be amplified by declining tourism for nations reliant on Russian visits.

For China, immediate effects should be smaller because fiscal stimulus will support this year’s 5.5 percent growth goal and Russia buys a relatively small amount of its exports. Still, commodity prices and weakening demand in big export markets add to challenges.

While some effects may not fully come into focus for many years, there are already clear signs that the war and resulting jump in costs for essential commodities will make it harder for policymakers in some countries to strike the delicate balance between containing inflation and supporting the economic recovery from the pandemic.

Emerging Market Trends

This is one of the most important reasons why everyone in the credit field is being careful and taking the necessary steps accordingly. However, on the innovation front, digital ecosystems have taken the market by hit and everything is now online post the pandemic. This has fuelled the consumer market growth. The development of fintech apps is a one stop shop for a range of financial services in the credit market expansion.

While super-apps in the financial sector first emerged in China, Indonesia, India, and Vietnam are currently home to some of the leading supper app players in the region. Banks in the regions are increasingly integrating embedded finance plays and banking-as-a-service platforms as they seek to strengthen their competitive edge in the credit market. Some of the major banks in India have already integrated their basic banking services on Whatsapp, thereby targeting more than one million users since its launch.

One of the biggest trends in the Asia credit market is the proliferation of e-wallet providers, credit card providers, and technology companies. The new entrants to the credit market are increasingly offering unique solutions that have enhanced access to loans and capital.

Philippines Market:

The Philippines’ credit rating is unlikely to be downgraded because the country’s debt, which has risen to 12 trillion pesos ($232 billion), remains manageable, central bank Governor Benjamin Diokno said. The 2020 e-Conomy report showed Indonesia posted a 44 percent on-year increase in the use of selected mobile banking apps for the January-to-September 2021 period.

However, the positive things happening are lifetime value. Kolonas said her platform targets first-time investors, with more than 80 percent of its users under the age of 30. The retention of users is really off the charts. So, once you really get a user onto your platform, the lifetime value is actually almost endless, she said.

Super app integration: Pluang has been integrated into Indonesian superapps, including ride-hailing player Gojek, payments company DANA, and e-commerce players Tokopedia and Bukalapak, which makes it more visible to a wider base of potential users. This shows that the financial inclusion part which used to be less has improved time and again.

Vietnam Market:

Vietnam’s consumer credit market size is nearly 50 billion USD last year, and it is expected to experience continuous growth in the near future.  Leading the market is FE Credit. After 10 years of operation, this credit institution gained a 52% market share in 2019, outstripping its two competitors, Home Credit (17%) and HD Saison (11%).

FE Credit informed that it has served 10 million customers and cooperated with more than 9,000 partners in more than 13,000 points of sale nationwide. Currently, this business has more than 4 million accounts using consumer credit services regularly. According to economic experts, there is still so much room for the development of Vietnam’s consumer credit market in the coming time. Therefore, in recent years, foreign capital flows from leading financial groups in the region have continuously poured in to reshape this potential market.

Indonesia Market:

The booming economy in Indonesia has carved a clear path to leverage FinTech start ups and fintech in Indonesia became one of the most promising industries. The booming economy in Indonesia has carved a clear path to leverage FinTech startups and fintech in Indonesia became one of the most promising industries. There are several reasons for this being a boon. The following include: Customer’s behavior, Lower fees (To reach the under-served segments and provide everyone lower transaction fees, government enhance the access to financial services), Cash to Cashless.

In Indonesia, there are a lot of exciting trends driven by payment gateway providers such as DOKU, Midtrans, and Xendit, with hundreds of other FinTech innovations on the rise. The credit card as a preferred payment, for example, it is convenient because there is no need for consumers to search for an ATM or to have some cash on hand. A credit card is also a great way for record-keeping with regular transaction statements for expenses and spending tracking.

With the increasing use of e-money products, the volume of bank transfer and online transactions is growing in Indonesia, even though the preferred payment method is still cash. The growth has shown no signs of slowing with FinTech startups around the world, including Indonesia pushing for a cashless society.

India Market:

Analysts said that the delinquency rates, though higher than last year, are still within limits. “Within unsecured, stressed loans are high in micro finance, followed by personal loans and credit cards. But there are no alarm bells as yet because it is still within range. In the secured category too the delinquencies are pretty benign. Moreover, most banks are sitting on excess provisions which can be used in case of any uptick,” said Manish Ostwal, analyst at Nirmal Bang securities. Cibil also said credit performance of banks has been stable through 2021.

While public sector banks led the resurgence in credit growth, Private and NBFCs have scaled significantly through the second half of calendar year 2021, according to credit market. The credit market indicator (CMI) a benchmark for gauging credit health of retail loans – by lender category reflects rapid scaling of growth in demand as well as supply by Private Banks and NBFCs, Transunion Cibil said. The BNPL sector is doing equally well and increasing its operations in the country with each new player being added.