Hackernoon logoIs DeFi the Answer to Southeast Asia’s Financial Woes? by@kristina-frunze

Is DeFi the Answer to Southeast Asia’s Financial Woes?

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@kristina-frunzeKristina Frunze

Market-savvy content writer with 5+ years of experience. My second passion is SEO.

More than a year ago, the world has been hit with one of the worst pandemics that ever existed, dubbed COVID-19. At that time, the global population seemed to be hopeful for the quick resolution of the problem – yet, the virus not only doesn’t seem to go away, it, in fact, is mutating into stronger and more contagious variants.

While the COVID-19 pandemic has undoubtedly caused global economic turmoil, sending a number of countries into crisis-like states, it has also created a lot of new opportunities. Besides, the coronavirus pandemic has propelled huge changes in finance, technology, and consumption sectors all around the world. 

Southeast Asia’s Financial Hurdles

However, while the new opportunities have appeared, the lingering problems of the global economies have become exposed. One of such issues that have been persisting for a long time lies in the financial industry – and has emerged due to the lack of access to financial services for billions of people worldwide. The unbanked population is now facing issues like never before and the Southeast Asia region seems to get the hardest hit.

Southeast Asia is a densely populated region with more than 655 million people. This area is known as one of the most economically diverse in the world, thanks to a myriad of spoken languages and ten different currencies circulating in the region.

Despite being so vibrant, Southeast Asia is also known to be the land of paradoxes. 

For instance, Cambodia, the country with the highest mobile connectivity in the region, has 95% of its population going without any financial services from the bank, according to KPMG

In the same fashion, 80% of the population in the Philippines, Indonesia, and Vietnam are unbanked. The same is true for 77% of Myanmar, and 30% of Malaysia and Thailand’s population. The highest percentage of the population with access to banking services in Southeast Asia is Singapore, with only 2% of its residents facing this issue. (World Bank)

As a matter of fact, such staggering numbers pose a great risk of underutilization of their potential for the majority of these countries, as access to financial services is seen as one of the key elements for economic development. As the population of these countries continues to see limitations, the countries will not receive the necessary support to kick-start their growth.

Luckily, there seems to be a solution to this important problem.

DeFi To Solve Southeast Asia Financial Woes?

DeFi stands for decentralized finance and refers to a revolutionary financial system that is transparent and trustless. It is built on blockchain and consists of smart contracts, dApps, and protocols. Thanks to this ground-breaking technology, the financial services world can finally get rid of its ever-lasting problems.

Now, with tightened global regulatory measures, conventional financing sources are less willing to provide their services to small and micro-businesses. This leaves a huge gap, considering the fact that Southeast Asia’s economy is primarily supported by SMEs. That is where the DeFi technology comes into the picture – thanks to its ability to offer comprehensive access to banking services. 

For example, imagine a DeFi loan that is built on top of a smart contract on the Ethereum blockchain. With this digital financial instrument, borrowers and lenders are able to put up their collateral, where a tamper-proof smart contract is responsible for distributing interest payments. The technology is securing the collateral in case of default.

At the moment, the technology behind these loans is still in the development stage and needs certain improvements. Some claim that smart contract loans are over-collateralized. However, these issues can be solved with the help of investors that might be willing to face the borrowing risks in return for a higher RoR. An alternative solution lies in the crypto wallet technology, which could allow for a “repayment history” of a user, potentially lowering down the need to over-collateralize. 

DeFi Projects Support Southeast Asia’s Economy

The DeFi movement has been taking over headlines only since summer 2020 and still has a long way to go. Nevertheless, its potential for microlending and borrowing services is astounding. The same applies to remittances – this is another area that can potentially disrupt the financial transaction market in Southeast Asia.

As per the estimates from the United Nations Department of Economic and Social Affairs, there are more than 20 million migrant workers coming from Southeast Asia. Yet, the real number is said to be even higher. Another piece of data from the Asian Development Bank suggests that in 2019, sending a 200$ cash remittance to the Southeast Asia area could have the sender pay a fee of 6.3%. With remittances totaling 10% of GDP in some of the Southeast Asian countries, like the Philippines, DeFi technology can be a life-saver. 

Taking into consideration the importance of fund flows to Southeast Asia, a lot of states have decided to take initiative. Just like that, a number of countries, including Cambodia, are eyeing the launch of a nationwide system based on the Blockchain. 

In addition, Southeast Asia is home to countless innovative projects, such as ShuttleOne, that are working tirelessly to improve the economic situation of the population with the power of Blockchain. ShuttleOne, soon to be listed on Dodo, is a digital asset blockchain infrastructure company that creates systems supporting governments, B2B platforms, and institutions. The project is servicing the Southeast Asian region in trade financing, remittances, and microlending. The Shuttleone.Network acts as a foundation for an ecosystem that allows for the digital asset on/off ramps for digital assets with a protocol for asset financing decentralization.

Thanks to ShuttleOne and similar initiatives put forward by a number of ground-breaking crypto-fueled projects, the Southeast Asian problem might be resolved in the near future. 

Final Words

Decentralized Finance is slowly but steadily spreading to every single major area of the global financial system. Payments, commerce, banking and lending, investment management, insurance or asset tokenization – you name it! 

The good news is that Southeast Asia is a region that has already acknowledged the potential of DeFi. As it strives for greater economic integration and development, the DeFi technology is bound to provide help on the way and lead the revolution.


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