David Wang, Helicap

Helicap wants to modernise finance through inclusivity, all by addressing a huge credit gap via alternative data.

HELICAP WASN’T A twinkle in David Wang’s eye when he left Morgan Stanley after eight years. While he did move into technology after realising that it was the future of finance, 33 Capital, which he co-founded, was primarily an investment firm that focused on early-stage start-ups.

But it was when 33 Capital invested in a payment company based in Singapore that the wheels were set in motion. Wang stepped in to support the CEO as a business development consultant for about 18 months and that’s when he and another co-founder, Quentin Vanoekel, realised that they enjoyed operations work. They then put a hold on their investment venture and started Helicap.

Wang sees Helicap as a means of filling a huge credit gap that hasn’t been addressed by traditional institutions. Due to a variety of factors, such as a lack of a relationship with financial institutions, a lack of a track record or a business that is financially unattractive, micro, small and medium enterprises (MSMEs), especially in low- and middle-income countries, are often left out in the cold.

According to a 2017 International Finance Corporation (IFC) study, potential demand was estimated at US$8.9 trillion but only US$3.7 million could be supplied – on paper, this points to a mind-boggling gap of US$5.2 trillion.

Traditional institutions lack the means to acquire relevant information to assess microenterprises, and this group, among others, is unlikely to have access to loans conventionally.

Helicap assesses the gap in Southeast Asia to be about US$500 billion. Its goal is to help fill this sizeable gap, be it through its own capital or from other sources around the world. Through its subsidiaries, it is targeting to invest and facilitate US$150 million to over 30 platforms by 2022, which may include alternative lending platforms like peerto-peer, microfinance institutions and non-bank financial institutions (NBFIs).

The key, of course, is data; or rather, the ability to acquire relevant data that enables financial institutions to better manage risk when lending to MSMEs and the underbanked. This is one area that modern and alternative credit solutions seem to have an edge.

“While a human component is still required with digital SME lenders, technology is allowing these platforms to integrate different forms of innovation to improve their underwriting capabilities,” Wang explains. These innovations include a central database of financial and transaction information to facilitate cross-checking and computation of probability of default using a mix of traditional and alternative data.

Part of it is down to opening up avenues to build credit scoring, such as getting data or immediate history, as well as ensuring that most loans are productive capital, meaning that it leads to revenue for the borrower. And productive capital is an indicator that Helicap observes closely.

Aside from bridging the gap for loanees, Helicap has to look at how it can entice investors as well. This involves improving the current landscape of institutions so that they are better placed to fulfil essential roles in their circles.

“There are over 40,000 NBFIs in India and Southeast Asia. That’s an incredible number of companies, of which some are cooperatives like NTUC; almost like a community lending village bank,” explains Wang. “They are the ones that are going out there to get the market because they are willing to go to the ground; go to the islands. They have the motivation to do the microlending, which is not easy.”

He elaborates further that investors are challenged by the fact that they don’t know whom to invest in – there’s no ranking based on merit, no criteria to speak of and no data on the vendors concerned. This is an area that Helicap had been working on for two years, and now it can extract the data that it needs to address any mandate given to it. At least for now, Helicap is looking to work with 30 partners that it deems suitable.

In particular, it is looking for ways to reach micro SMEs – the owner-operator businesses – as they are essentially consumers. Wang explains that consumers represent an attractive base of very diversified data. He estimates that there are about 100 million who are underbanked – those having a bank account but no credit – in Southeast Asia, and data-wise, this is a group Helicap is very interested in. It represents new ground for the company, but the end goal remains the same.

“We would like to gain visibility for as many of these 40,000 partners in the region in an effort to help them to raise capital. And by doing so, we will also engage with large institutions and funds that are keen to invest in this area,” says Wang.

Helicap is also looking into impact investing and became a signatory of the United Nations-supported Principles for Responsible Investment last year; the company is creating an impact fund for the benefit of its clients’ corporate social responsibility programmes.

“That will allow us to work hand in hand with institutional and developmental banks, like IFC, Asian Development Bank or any institution that has a nonprofit foundation angle, to help them access the market of sustainable finance. We truly believe in that,” he adds.

The transformative effects of technology on financial services can already be felt, and Wang will continue to push for positive change.

“The ideal world situation would be for fintech companies and financial institutions to work together, constantly pushing one another to improve their technology, reducing the cost of borrowing for the benefit of consumers, MSMEs and more.”

“We will also engage with large institutions and funds that are

keen to invest in this area.”