Validus Group and Fintech Nation have announced a US$10 million fund to support small and medium enterprises (SMEs) in Thailand and Indonesia.

The fund has completed its first closing and is now deploying capital into projects that provide growth financing to underserved SMEs.

In Thailand, SMEs represent over 99% of businesses and employ more than 70% of the workforce.

Indonesia’s 64 million SMEs account for 97% of all businesses.

Despite their economic importance, a credit gap of more than US$320 billion exists across ASEAN.

This gap leaves many SMEs with insufficient financing options.

🔗 Source: Validus Group

🧠 Food for thought

1️⃣ Southeast Asia’s SME financing gap represents a multi-billion dollar opportunity

The $10 million Validus-Fintech Nation fund addresses just a fraction of the massive SME financing gap in Southeast Asia, which exceeds $320 billion according to the press release.

This gap persists despite SMEs comprising over 99% of businesses in Thailand, employing 70% of the workforce, and representing 97% of Indonesia’s 64 million businesses 1.

The financing challenges have worsened in recent years, with a Bangkok Post survey showing formal credit access for Thai SMEs dropped from 53% to 40% between Q1 and Q2 2024, forcing many to turn to informal, higher-cost loans 2.

This access problem is particularly acute for innovation funding, with the World Bank noting that Thai SMEs’ R&D spending remains low at just 1.33% of GDP by 2020, significantly limiting their ability to innovate and compete globally 3.

Indonesian SMEs face similar barriers, accounting for only one-third of total value added despite employing 97.2% of the workforce, highlighting the productivity gap that limited financing creates 4.

2️⃣ Embedded finance represents a rapidly growing solution for underserved SMEs

The Validus-Fintech Nation partnership exemplifies a broader industry shift toward embedded finance, which integrates financial services directly into non-financial platforms where SMEs already operate.