DIGITAL LENDING is expected to grow further in the next three to five years, with demand to be driven by the increasing number of tech-savvy individuals in the Philippines and small borrowers in need of funding, financial technology company AND Global Pte. Ltd. said.
“The use of digital loans is expected to continue rising, driven by supportive regulations, technological advancements, and the growing demand for accessible financial services… The country’s young, tech-savvy population, combined with increasing smartphone use and government support for financial inclusion, has accelerated adoption,” AND Global Chief Business Development Officer Baasandorj Davaasuren said in an e-mail interview with BusinessWorld.
“As infrastructure improves and mobile networks expand, digital lending will likely reach more remote areas, further reducing the financial inclusion gap. Government reforms, such as open banking, will increase competition, improve product offerings, and keep interest rates competitive,” Mr. Davaasuren said.
He noted that Filipinos have adopted digital loans faster than expected, similar to Mongolia.
“Once people experience the accessibility, convenience, and speed of digital lending, they often prefer it over traditional methods,” he said.
He added that digital loans can support the government’s push for financial inclusion as it eliminates the need to visit bank branches, as these are easily accessible and can be processed faster via end-to-end online platforms, involve less paperwork, and can even be personalized based on a borrower’s needs.
“Mobile access means users can apply for loans anytime and anywhere, a distinct advantage over traditional banks’ limited hours and in-branch requirements. Automated processes significantly reduce loan approval times, allowing borrowers to access funds within hours,” Mr. Davaasuren said.
The processing of these loans also typically involves the use of alternative data for credit risk assessment, helping provide funding access to individuals without credit histories, such as first-time borrowers, small business owners, and gig economy workers, he said.
“For MSMEs (micro, small, and medium enterprises), digital lending offers an essential financial lifeline. Flexible loan options empower entrepreneurs to manage short-term cash flow needs and invest in growth. This is especially important in the Philippines, where MSMEs are vital for GDP (gross domestic product), job creation, and innovation, but often struggle with slow financing processes.”
For banks, digital lending could help increase efficiency, reduce risks, enhance customer experience, offer data-driven insights, and reduce operational costs, he added, and the scalability of digital loan products would also allow them to target specific market segments.
However, cybersecurity, data privacy risks, as well as predatory lending practices are key concerns, Mr. Davaasuren said.
Limited digital infrastructure in rural areas could also limit the growth of digital loans, he added.
“In the Philippines, developing centralized credit databases could help lenders track debt across platforms, preventing over-borrowing. Enhanced customer support and digital literacy programs would empower borrowers to make informed financial decisions and avoid predatory lending practices,” Mr. Davaasuren said.
“AI (artificial intelligence) can also play a role in reducing these risks, particularly in fraud detection, which is crucial for regulatory compliance and consumer protection. Developing these safeguards could make digital lending safer and more sustainable for all.” — Aaron Michael C. Sy
