ADB Ventures, the venture investing arm of the Asian Development Bank (ADB), has approved an equity investment of up to $2 million in Silicon Valley-based fintech startup Fairbanc to fuel its Indonesia expansion.
Founded in San Francisco, Fairbanc offers a business-to-business (B2B) mobile loans and payments platform for micro, small and medium enterprises (MSMEs) in emerging markets. It primarily provides working capital credit to unbanked and women-operated FMCG micro-merchants for inventory purchases.
According to a disclosure, ADB will make an initial investment of up to $500,000 in Singapore-based holding company Fairbanc Pte that will be funnelled into its subsidiary PT Fairbanc Technologies Indonesia. The rest of the committed capital will be invested in subsequent funding rounds to be closed by Fairbanc by June 2024.
The fintech company collaborates with FMCG companies such as Unilever to offer digital credits. MSMEs can use these credits to buy products from partnering consumer brands.
Fairbanc says its service doesn’t require collateral, credit history, smartphone ownership or digital literacy. It uses the supply chain data of FMCG distributors to automate credit scoring and risk monitoring to extend working capital. Merchants can access the credits through a one-time passcode sent via a text message.
“Fairbanc’s mission to bridge the MSME credit gaps in emerging markets aligns with ADB’s operational priorities of achieving greater financial inclusion and building climate and disaster resilience in Asia and the Pacific,” ADB said in its disclosure.
Fairbanc was founded by Wharton alum Mir Haque, who has previously worked at McKinsey, Deutsche Bank and Adobe. After completing a pilot of its service in Bangladesh in 2019, the fintech firm rolled out its platform in Indonesia in partnership with Unilever’s local unit through startup programme Unilever Foundry.
It has also partnered with Indonesian conglomerate Sinar Mas to extend credit to micro-merchants and with a local Islamic organisation to offer Shariah-compliant loans.
Fairbanc had last raised an undisclosed amount of funding from Columbia Business School’s student-run impact fund Microlumbia in Dec 2020. Before that, it had raised capital from Indonesian billionaire Michael Sampoerna, who owns one of the world’s largest cigarette firms, and venture capital firm 500 Startups in June 2020.
In targeting Indonesia’s MSMEs, which account for over 60% of the country’s GDP, Fairbanc competes with a host of peer-to-peer lending startups in Indonesia as well as MSME solution providers such as BukuKas and BukuWarung.
Fairbanc investor ADB Ventures closed its first fund at $60 million last year, exceeding an initial target of $50 million. The firm, which invests in Asian startups requiring pre-Series A to Series A capital in the range of $500,000-4 million, says it plans to deploy half of its first fund over the next three years.
ADB Ventures is also planning a second vehicle with a corpus of $100 million to provide debt funding of up to $8 million to technology companies requiring Series B capital.