In June 2021, The University of Cambridge released the 2nd Global Alternative Finance Market Report. The purpose of the report is to offer knowledge and information on the evolving alternative finance landscape to the public. Data in this report was collected and analysed between July 2020 and May 2021 and included the participation of nearly 2000 fintech firms globally.
Growth of Global Alternative Finance
Given the negative impact on the global economy due to the COVID-19 pandemic in 2020, alternative finance volumes globally (excluding China) still continued to show promising growth. Volumes reached a record high of $113 billion dollars in 2020. Of that, alternative finance volumes attributed to businesses increased by 51% year-on-year to a record $53 billion in 2020.
In 2020, we also saw a global expansion of fintech businesses and a further increase in financial access to vulnerable population. It is a testimony to the resilience of the alternative finance industry.
Global Volume by Alternative Finance Model
Over $113 billion was transacted via online alternative finance platforms in 2020. This represents a 7% reduction in market activity compared to 2019. The fall was mainly driven by reduced lending in South and Central Asia which reported a 40% reduction in activity, amounting to $1.9 billion in 2020. Oceania also saw a decline of 9% in market volume.
APAC Alternative Finance
In most markets, access to bank finance is still a top challenge to SMEs. The emergence of online alternative finance providers whose solutions are much more SME focused, helps close the financing gap in many markets. Business funding volume reached its peak at $5.3 billion in 2019, offering much needed finance to nearly 1.4 million businesses across APAC. The top 3 alternative finance products that businesses are utilising are Business Lending (19%), Balance Sheet Business Lending (18%) and Invoice Trading (7%).
Over 2019 and 2020, APAC saw a positive increase in alternative finance adoption, 55% in 2019 and 44% in 2018. The small decline in 2020 was most likely due to the effects of COVID-19 on business activity. About $31.8 billion was disbursed to both consumers and businesses via online alternative finance providers between 2013 to 2020. Market volumes peaked in 2019 at $9.5 billion.
The top 3 APAC countries for Invoice Trading (alternative finance for business) in 2020 were Australia, Hong Kong SAR and Indonesia.
The report suggests that financing volumes being channelled to entrepreneurs, start-ups, and small and medium-sized businesses (SMEs) globally is on the rise and proving to be a viable and long-lasting funding source. This is even more critical during the current pandemic and its impact on small business operations and cashflow.