Discover how he’s making an impact as part of SEA’s largest digital financing platform.
By Ashima Sethi
At every stage of development, small businesses will struggle more than large enterprises when it comes to getting ﬁnancing, which means SMEs (Small and Medium Enterprises) often have to rely on things like external ﬁnancing, major innovation, upskilling, and more to stay competitive. This existing challenge coupled with the impact that the pandemic has had on a wide-range of industries has led to a tough few years for anyone trying to grow or scale-up their businesses.
Relevant especially in Thailand where the majority of registered enterprises are SMEs, the Kingdom’s ﬁnancial landscape is ruled by major banks whose traditional practices are not tailored to help SMEs succeed, as they often require things like collateral, credibility assessments, and old ﬁnancial statements to provide ﬁnancial backing. Enter the concept of ‘crowdfunding.’
Crowdfunding in its simplest is a form of digital ﬁnancing, a means of raising money to ﬁnance projects or businesses via online platforms where money can be collected from a large group of people. This alternative means of raising capital is on the rise here, so much so that in early 2020, The Securities and Exchange Commission, Thailand (SEC) eased regulations around crowdfunding, giving more businesses the opportunity to raise funds without the fear of having to cancel their oﬀerings if they haven’t reached certain targets.
One platform that has been newly-introduced to the Thai market with the goal of supporting underserved SMEs is Funding Societies Thailand. Originally launched in 2015 and Headquartered in Singapore, their mission centres on the belief that SMEs form the backbone of our economies, making it imperative to create ﬁnancial opportunities for everyone. With operations in Indonesia, Malaysia, and now Thailand as well, Funding Societies is recognised as Southeast Asia’s largest SME digital ﬁnancing platform.
Leading the team at their Bangkok oﬃce is Varun Bhandari, Funding Societies Thailand’s charismatic Country Head. Varun’s roots can be traced to Jodhpur, India where his parents hail from, but he has family spread across the world like many of us third-culture individuals. “I come from a family of chartered accountants, so education has always been given a lot of importance in my family,” Varun explains, as he talks about his experiences attending the London School of Economics (LSE) for his undergraduate degree, followed by pursuing an MBA at the Indian Institute of Management Bangalore (IIM), and then completing a second master’s degree at Harvard University.
“I deﬁnitely consider myself a global citizen,” says Varun. “I’ve been very fortunate to have been given the opportunity to study at these institutions, and to have gathered experience working in countries like the United Kingdom, the United States, India, and now Thailand.” With over a decade of experience in the ﬁnance business, Varun shares with Masala why making a societal impact continues to form the foundation of his professional journey.
Before joining the crowdfunding space, you worked as a venture capitalist and investment banker. Can you walk us through your professional proﬁle?
My career has existed on quite a broad spectrum. I’ve worked in investment banking in the UK; impact investing in India; the World Bank and IFC in Washington D.C., USA; I focused on FinTech investments while in Mumbai; and most recently, set up Funding Societies in Thailand. Despite wide-ranging roles, I would say a lot of my work has been focused on providing ﬁnancial services that have helped and will help create a societal impact.
What motivated you to move from banking into the crowdfunding space?
My career has always been in transition as I’m continuing to explore my interests and trying to see how I can make an impact in the world. Every professional stint has helped me develop a deeper understanding of myself, and how my skills and personality can be harnessed to create something bigger.
One example of this belief is that after business school, I took the unconventional step of sitting out of campus placements in order to ﬁ nd something in the social impact sector despite receiving a job oﬀ er from a private equity ﬁrm. At the time, I was reading this book called The Power of Unreasonable People by John Elkington and Pamela Hartigan, which centres on social entrepreneurs, and I realised that my biggest strength was my ability to change the status quo and that eventually, I had to strike out and do something that was more entrepreneurial.
Can you explain what Funding Societies aims to do?
Funding Societies provides digital ﬁnancing to SMEs to help bridge the credit gap and serve growing, but underserved SMEs who are unable to access traditional ﬁnancing. As a result of the pandemic, we are seeing more SMEs requiring working capital support due to a slowdown in business, as well as due to funding crunches, as existing ﬁnancial institutions are reducing their exposures.
Crowdfunding can support these SMEs by connecting them to Thai investors via our online platform. To sum it up, the main advantages of our platform are as follows: there is a streamlined online application process with minimal documents, businesses can expect a fast response time usually within three days, and clean loans without collateral required.
Funding Societies Thailand is the company’s fourth market in only six years of operation. Why was the Kingdom the next choice for the business?
We have been eyeing the Thai market for some time now, but only decided to enter once crowdfunding regulations were put in place by the SEC towards the end of 2019. Thailand has a vibrant and relatively mature SME sector compared to other countries in SEA, so we saw an opportunity to bring our regionally successful crowdfunding platform to Thailand to provide new options for Thai SMEs and investors.
You are currently running under a specific debt-crowdfunding license given by the SEC, can you walk us through this challenging process that was required to secure this license?
Regulatory approvals are never supposed to be an easy process, and nor was this one, otherwise you would have more than four or ﬁ ve companies that have received licenses in the past two years. Adding to the existing challenges, we were the only company that did not have Thai owners or management, nor are we backed by any large conglomerates.
It took a lot of persistence and hard work but the fact that we were the leading crowdfunding platform in the region and in three regulated markets, things were certainly in our favour. There were challenges that stemmed from the fact that I came in as an outsider and did not speak the language, and before we were able to form a working relationship with the SEC, COVID-19 hit and we were moved to virtual meetings. However, to their credit, the SEC were very professional throughout our exchanges, and after some initial hurdles due to COVID, quite responsive.
Funding Societies supports SMEs by making the process of securing ﬁnance easier and more accessible. Why is this so important for a country like Thailand?
Over 90 percent of registered enterprises in Thailand are SMEs and those SMEs also represent an employment rate of more than 50 percent and account for 45 percent of the nation’s GDP. However, the estimated ﬁnancing gap remains at a high number of THB 1.3 trillion ($40 billion). Even though the Thai economy is a major driver of regional growth and relies heavily on SMEs, SMEs still face credit limitations from traditional ﬁnancing institutions. As we work to improve opportunities, we provide fast approval and non-collateral ﬁnancing to SMEs, which enable them to overcome present ﬁnancial challenges.
As one of the fastest growing FinTechs in the region, can you tell us about some of the things Funding Societies has achieved in the past few years?
We’ve received crowdfunding licenses in Singapore, Malaysia, Indonesia, and Thailand, which I believe is a huge achievement in itself. Over the last six years, Funding Societies has disbursed over THB 58 billion ($2 billion) to more than 70,000 SMEs across the Southeast Asian region. Our default rate during the pandemic has remained at less than 2 percent.
We are backed by credible investors including Sequoia India, Softbank Ventures Asia Corp, Qualgro and LINE Ventures, amongst others. We are also trusted by both local and regional partners such as Lazada, Shopee, CIMB, Foodpanda, Central Retail, NocNoc, Freshket, and Accrevo. Moreover, recently, Funding Societies has raised $18 million in debt led by a trio syndicate of ﬁnancial institutions including Helicap Investments, a newly-launched Social Impact Debt Fund, and a Japanese ﬁnancial services group.
Beyond Thailand as a whole, how do you think your work can impact businesses within the Thai-Indian community?
We work predominantly with small businesses, which is directly relevant given that a lot of the Indian community is engaged in various kinds of entrepreneurial ventures, ranging from gems, to real estate, to trading and more recently, technology startups. Traditionally, small businesses have found it hard to raise ﬁnancing from banks and rely on self-ﬁnancing or informal lending from friends and family. Funding Societies oﬀers a commercial alternative that understands the realities of small businesses, and can support their unique needs.
From my understanding, many Thai-Indians are quite aﬄuent and they prefer self-ﬁnancing, but one thing to bear in mind is the concept of capital eﬃciency. You do not want a business to be completely funded by equity, you also want to take on some debt as well because that is part of your working capital and a part of keeping your capital optimised. It is quite nuanced, but the end-all of it is that we provide options for ﬁnancing to targeted businesses that are not being served by banks.
When looking to work with SMEs, what kind of criteria do you apply to vet out those you want to help get ﬁnancing?
We are unique in the sense that we cater to SMEs across sizes and industries and types of businesses we work with include B2B services, businesses in the government and private sector, contractors, digital marketing, and other vendors. We have multiple products to cater to micro as well as large businesses and we customise these products based on speciﬁc ﬁnancing needs. In regards to the SME criteria, we look at factors like how long they have been in operation, monthly revenue, cash flows, juristic information, their credit bureau record, and so forth.
With the pandemic greatly aﬀecting many businesses in Thailand, how have you had to adapt in the face of this unprecedented situation?
Funding Societies is a two-sided platform and therefore COVID-19 has had two main implications. For SMEs, it had increased credit demand but also credit risk. For investors, it had reduced fund supply, as they had to conserve cash and take a wait-and-see approach for the economy. There is no doubt that the pandemic has been tough for the Thai economy, which saw an overall contraction of 6 percent in regards to GDP. It has adversely aﬀected many SMEs, especially in the tourism and retail industries, which were hard hit by the absence of tourists. However, it has also beneﬁtted some sectors, especially logistics, eCommerce, and food manufacturing. With the consequences of the pandemic still looming, both types of aﬀected businesses need funding, some to manage cash ﬂow issues, while others to fund their growth.
You’ve only recently moved here to set up Funding Societies Thailand, how has it been assimilating to a new country in the midst of the pandemic, and what can you tell us about life as an Indian expat?
I have to say that Thailand is one of the best countries I’ve lived in in regards to quality of life. You get all the advantages of living in Asia such as being close to home, aﬀordable domestic help that can help balance work and life with a young baby, incredible local food, while at the same time some of developed world perks such as good infrastructure, professional work opportunities, and a cosmopolitan vibe, all of which makes for a very comfortable lifestyle.
When my wife and I moved to Thailand in 2020, we enjoyed a life that was unheard of because elsewhere in the world, people were in lockdowns and it was very diﬃcult. Here, we were able to have our baby in October of last year with the privilege of good healthcare, if we were anywhere else, we would’ve been stuck at home.
Of course, every country has its challenges but on the whole it has been a very positive experience. I’m also very fortunate to have gotten to know many Indians from all the sub-communities and industries across the city. Having such a diverse, thriving Indian community here has really made a big diﬀ erence to our quality of life.