The mainstay of Indonesia’s economy is its estimated 60 million SMEs. Many aren’t able to access working capital and, particularly prior to the pandemic, they managed their finances through manual processes such as spreadsheets. As COVID-19 is causing many to digitalize, startups focused exclusively on SMEs are raising massive rounds of capital to grow quickly. KoinWorks The latest news is KoinWorks, a company that operates a financial platform that caters to SMEs, announced that it has received $108 million in Series C funding, led by MDI Ventures. The round comprised the equity of $43 million along with $65m in loan capital to fund those working capital loan KoinWorks provides its customers.
The round increases KoinWorks’ total amount raised to $180 million. The investors who returned to KoinWorks for the company’s most recent round are Quona Capital, Triodos Investment Management, Saison Capital, ACV, and East Ventures. The money will go towards hiring around 400 new workers and to expand KoinWorks’ latest range of offerings, SME Neobank.
KoinWorks is located in Jakarta and also has a presence in Singapore and offices for technology located in Yogyakarta, India, and Vietnam. KoinWorks was founded to help SMEs that are often denied access to traditional institutions for financial assistance gain access to capital. Since then, it’s created a complete platform with financial products designed to help its clients, such as sellers of e-commerce and social commerce, boost their sales.
TechCrunch first covered KoinWorks in the year 2019, the year it raised $12 million to fund its loan platform. The demand for loans increased as more companies came online during the COVID-19 epidemic, and the company claims its customer base has tripled to 1.5 million users, as well as an influx of 100,000 small businesses that are currently enrolled in its software for financial management. Executive chairman and co-founder Willy Arifin told TechCrunch in an email that, since the beginning of 2019, monthly loan payouts have tripled to almost $50 million and the revenue has quadrupled.
KoinWorks is focused on SMEs, which aren’t served through traditional banks and may not have accounts with banks or credit cards. On the platform, users can set up an online account with a bank and card as well as borrow working capital. They can also access the point-of-sale system, early-wage services, and HR management tools designed specifically for small companies.
Arifin stated that since KoinWorks’ monthly disbursement rate was $50 million per month, the company’s take rate has increased to the point that the company was cash flow positive in the first quarter of this year. Its Non-Performing Loan (NPL) proportion is less than 2 percent. The banks that serve traditional SMEs have at a minimum doubled their KoinWorks NPLs.”As as high 20 percent of companies have switched their sales channels from offline in order to go online during the outbreak as well as 89% companies currently use online channels to market their products and services.” he said.
In the last 3 years, Indonesian financial technology companies that are focused on SMEs have expanded and now include other banks as well as startups that began as accounting software but are now broadening their offerings to include work capital loans as well as various financial products. Two notable examples are BukuWarung and BukuKas, both of which have had significant amounts of capital (and are KoinWorks partners), and Neobank Aspire.
“When we first began in our beginnings, we was only one among hundreds of financial institutions with a traditional structure.”In the current day, we’re seeing the same banks undergo digitalization,” Arifin said. “Despite this, Indonesia’s annual funding gap of $80 billion dollars, meaning that those who aren’t banking or underbanked are in a position of disadvantage. There’s plenty of room to improve.”
He said that with the presence of tens of millions of people working in Indonesia, “it’s not a winner-takes-all market.” The five top banks in Indonesia have a market value of around $160 billion. There are certain to be fintech firms that are tackling the underbanked or unbanked sector, but KoinWorks provides a top-of-the-line approach that is tailored to the requirements of SMEs and entrepreneurs, which I think will create a huge impact on the industry in the coming years.
In an announcement, MDI Ventures CEO Donald Wiharia stated it was “Investing with KoinWorks helps to increase financial literacy among the poor and marginalized populations. “We are thrilled to join an experienced team who understands the importance of each step along the road to entrepreneurship and SME growth.”