Serving the unmet needs of SMEs

Established in 2016 by Benedicty Haryono and Willy Arifin, Koinworks has had a very clear target group right from the start: meeting the needs of the underserved SME sector in Indonesia.

KoinWorks has developed a P2P online platform, connecting borrowers (SMEs) to retail lenders, so that small businesses can get access to credit. Currently, around 550,000 retail lenders and more than 4,000 borrowers are active on its platform. Through this platform, KoinWorks provides retail individuals with an opportunity to channelise and diversify their money towards the underserved SMEs which form the backbone of the Indonesian economy.

Senior Investment Officer Sagar Thakar: “Indonesia is lagging behind in terms of financial inclusion. Over two-thirds of the 56 million micro, small, and medium-sized enterprises in Indonesia have no access to any type of formal financial service. This leaves a sizeable market for a company like KoinWorks to address. The company shows that technology is key in improving quality, access and affordability of financial services for the millions who are not well served.”

Tech and touch

KoinWorks’ loan application process is simple and straightforward, with a balanced ‘tech and touch’ approach by using a mix of borrowers’ data and third-party data, and physical visits to the borrowers’ premises. Currently, the company’s operations are focused on Java and Sumatra, the major economic hubs of Indonesia, but expansion into other regions is part of its strategy for the coming years.

Fuelling growth

In October 2020, Triodos Microfinance Fund, Triodos Fair Share Fund and Hivos-Triodos Fund provided a EUR 3 million debt facility to KoinWorks.

To fuel KoinWorks’ growth, Triodos Microfinance Fund and Triodos Fair Share Fund invested in a USD 3 million convertible loan note in 2021 that was converted into preference shares as part of the Series C round closed in January 2022. The funds topped up the conversion by an additional investment of USD 3 million in preference shares as part of this Series C round. This will support KoinWorks’ ambition to  develop into a full-fledged financial service for SMEs. The company recently launched a neobank feature that allows SMEs to open a business banking account directly from its app. 

COVID-19 as an accelerator

The COVID-19 crisis hit the Indonesian economy quite hard. However, the underlying demand for finance continues to remain high, especially for working capital loan for SMEs. Sagar Thakar: “Additionally, COVID-19 has forced the technology adoption and digital acceleration of businesses, especially in a largely unorganised Indonesian market. For example, in the SME sector, around 2.7 million SMEs were digitally connected during the pandemic. This has proved to be beneficial for specialised fintech players such as KoinWorks.”  

Investing in fintech for greater financial inclusion

This paper explores financial technology as a tool for greater financial inclusion, specifically in emerging and developing markets, and how Triodos IM is building an impactful fintech portfolio. Download it here