Indonesia: Mandiri Capital leads series-A round in P2P startup Amartha

Mandiri Capital Indonesia, the investment arm of state-owned Bank Mandiri, has led a series-A funding round into Amartha, a peer-to-peer (P2P) lending platform for small and medium enterprises.

Existing backers Beenext and Midplaza Holding also participated in the investment, along with other new investors including Lynx Asia Partners, the company announced.

CEO of Mandiri Capital, Eddie Danusaputro, said: “Amartha’s business model plays an important role in our economy as it addresses the challenge behind delivering financial services to the unbanked population. With over seven years of experience in microlending, robust field networks in rural areas, and a solid leadership team, Amartha’s compliments Bank Mandiri’s vision to drive financial inclusion across the nation.”

Amartha will use the funding to scale its business, optimise technology as well as improve its product line. The startup said it will “provide hundreds of thousands of micro-entrepreneurs across Indonesia’s remote geographies access to affordable and sustainable financing.”

About 64 per cent of Indonesian adults do not have a bank account, according to a recent study by the World Bank. This number is far lower than the global average of 38 per cent.

“With limited banking infrastructure and service coverage especially in rural areas, micro-entrepreneurs who work in informal economies struggle with the reality of accessing affordable working capital,” says Andi Taufan Garuda Putra, CEO of Amartha.

“By leveraging Bank Mandiri’s vast network and resources in Indonesia, Amartha will be able to create a new market that modernises microlending and gives people at the bottom of the income pyramid better alternatives to fund their businesses even further,” he added.

Amartha started in 2010 as a micro-finance institution. Six years later, it changed into a P2P lending marketplace. Today, Amartha claims to have facilitated over $6 million in loans to over 30,000 women micro-entrepreneurs while maintaining a 7-year long 0% default rate.

Indonesia’s informal sector currently employs about 90 per cent of the country’s labor force. However, financial access is still a problem. Business owners are often barred from getting bank loans due to a number of reasons: lack of collateral, seasonal incomes, improper book-keeping, and so on.

Startups like Amartha are trying to address the problem by developing new credit scoring technologies. Through Amartha, for example, borrowers will receive a credit rating and develop a credit history which they can leverage when applying for future financing. This system is aimed to help users invest in micro and small businesses more conveniently while getting a security assurance.

“We will prioritise capital allocation to startups that focus on innovative financial technology (fintech), since we believe this sector especially P2P lending like Amartha will be the next wave following the development of online lending and the needs of alternative financing in Indonesia,” says Hira Laksamana, CFO of Mandiri Capital Indonesia.

Indonesia’s fintech sector is currently the second biggest in the region after Singapore, and Mandiri Capital is actively trying to capitalise on the momentum. The VC has said, it will inject up to Rp 200 billion ($15 million) into four to five startups this year, with ticket size ranging between Rp10 billion and Rp 30 billion. Mandiri Capital is 99.7 per cent owned by Bank Mandiri (with the remaining 0.03 per cent by Mandiri Sekuritas).

Last month, Mandiri Capital led a $2 million funding round for point-of-sale app operator MokaPOS, drawing participation from Convergence Ventures, East Ventures, Fenox VC, and Northstar Group.

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