Most MSMEs in Asia seek bank loans first, but success rate remains low at 57%

Amongst all funding options, microfinance institutions had the highest success rate.

Banks were the primary source of funding for MSMEs in Asia, with 73% of respondents seeking funds from them before turning to fintech providers. However, only 57% of these MSMEs successfully secured bank financing, according to the Cambridge Centre for Alternative Finance’s report on MSME Access to Digital Finance Study.

The next most common sources were family and friends, followed by microfinance institutions.

Amongst all funding options, microfinance institutions had the highest success rate, with 66% of MSMEs indicating that they successfully received funding from them.

Family and friends were also common, with 53% of MSMEs successfully receiving funding.

In contrast, the highest unsuccessful rates were seen in banks (32%), family and friends (31%), and government and public sources (29%).

Larger firms had higher bank loan approval rates, with 86% of successful applicants being medium-sized firms, 73% small and micro, and 42% sole traders.

Moreover, business owners in countries with a higher financial development index (above 0.36, per the World Bank Group) relied more on the banking system as the main successful source of funding, with the People's Republic of China, India, and Vietnam recording funding success rates of 90%, 64%, and 88%, respectively.

Conversely, business owners in countries with a lower financial development index (below 0.36) relied more on microfinance institutions and non-bank financial institutions. Bangladesh, Kazakhstan, Pakistan, and Mongolia indicate funding success rates of 47%, 87%, 81% (80%), and 71% (83%), respectively.