Singapore SMEs financed by Validus Capital contributed over S$400m to GDP in 2018
Singapore’s top SME financing platform Validus Capital (Validus) today announced that small and medium-sized enterprises (SMEs) that received financing through their platform has enabled them to grow their business. It was found that these SMEs contributed S$403m to Singapore’s gross domestic product (GDP) and supported over 10,000 jobs in the country, based on data from 2017 and 2018. With this trend, Validus expects that their financed SMEs are expected to contribute an additional S$500m in 2019 – given that disbursals this year have exceeded the combined amount in the past two years — bringing the total to close to S$1bn in GDP contributions across 2017, 2018 and 2019.
The study was conducted by Steward Redqueen, a leading consultancy firm focused on impact management and sustainable entrepreneurship.
SMEs are the backbone of Singapore’s economy and workforce. In 2018, SMEs contributed 48 per cent to Singapore’s GDP and employ 72% of the country’s workforce. However, many of them continue to face challenges in gaining access to financing required to grow their business. Many do not have a solid track record of having credit and collateral, and this prevents them from securing a bank loan to grow their business. SMEs being light in fixed assets means that banks will often take a longer period to approve their request.
Steward Redqueen’s study demonstrates how Validus’ financing positively impact both the SMEs and wider economy. SMEs that obtained financing from the platform experienced a 17% increase in their annual revenue in 2018. GDP contribution from Validus-assisted SMEs grew by 18%. This is in contrast to the overall GDP contribution by Singapore’s businesses of 5% in the same year. In addition, SMEs who obtained financing from Validus experienced a robust employment growth of 12% as compared to 1% the overall employment growth of Singapore’s businesses.
“Validus is proud to be able to contribute to the growth of Singapore SMEs. We want to provide growing SMEs faster access to zero-collateral financing. The findings from Steward Redqueen’s study is a testament that our online financing solutions are on track to make a significant impact in plugging Singapore’s SME financing gap. As Validus prepares to apply for the Digital Wholesale Banking licence in Singapore, we are confident that the socio-economic impact will be positively higher given the digital transformation that could be made possible through a digital banking licence,” said Vikas Nahata, co-founder and executive chairman, Validus Capital.
SMEs are seeking financing solutions to drive sales, expand their local operations and internationalise their business. Validus is filling a critical financing gap for SMEs across different industries by leveraging the use of Validus’ proprietary technology to provide efficient and flexible financing solutions that are customised to the needs of the respective SME borrower.
Nahata added, “Many businesses continue to hold the belief that having debt on their balance sheet is detrimental. Our study reinforces that debt can be a growth-enabler when prudent capital management is exercised. In order for us to continue serving the SME community, we are partnering with banks and corporates who have SME vendor ecosystems to further facilitate affordable growth financing. This allows more SMEs to tide through Singapore’s challenging economic environment, while bringing innovative ideas to fruition and grow their business.”
“To estimate the impact results, we trace how financial flows associated with Validus’ financing circulate in the Singaporean economy. These flows are traced using the input-output (IO) methodology; which is to a great extent developed by the Nobel prize winning economist Wassily Leontief and is commonly used by economists to quantify indirect impacts. Notwithstanding its limitations, this approach provides robust estimations and is the ‘go-to’ approach for many development finance institutions around the globe,” said Tias van Moorsel, managing director of Steward Redqueen Singapore.
Singapore’s economy grew by 0.1% year-on-year (y-o-y) in the third quarter of 2019, narrowly avoiding a technical recession. On an annual basis, the Ministry of Trade and Industry (MTI) revised its growth estimates to be between 0 and 1% in 2019. Furthermore, SMEs are expecting their turnovers to be lower in the next two quarters owing to global macroeconomic conditions.
Earlier in February 2019, Validus raised S$20.5m in an oversubscribed Series B funding round led by Dutch public-private development bank FMO and invests in private sector growth in emerging markets. In July, Validus announced its plans to be among the first Singapore fintechs to apply for a digital bank licence in Singapore, with a vision to create an inclusive, 360-degree solution for SMEs in Southeast Asia.
Validus also officially launched its Vietnam entity, Validus Vietnam, yesterday in Ho Chi Minh City as part of the company’s goal to drive business financing for SMEs in Southeast Asia.