Incofin Investment Management is investing a total of USD 6 million in the Indonesian fintech Amartha, a peer-to-peer platform that connects urban investors with thousands of entrepreneurial women on the countryside.
Indonesia is undergoing a digital revolution: by 2020, 67% of Indonesians had access to an internet-enabled cell phone. This percentage is expected to increase by another 20% by 2025. No wonder that Amartha is just one of the hundreds of fintechs in Indonesia, but it is the only peer-to-peer platform focused on microentrepreneurs in rural areas. Amartha connects lenders with women entrepreneurs from rural areas who have difficulty accessing capital sources due to limited collateral, fluctuations in income or lack of a credit history.
Amartha, was founded in 2010 as a classic microfinance institution focused on women entrepreneurs. Inspired by the booming of the new financial technologies in the region and by the growing appetite from investors in the cities to fund women entrepreneurs on the countryside, Amartha decided to change its business model in 2016.
Amartha provides group-based working capital loans, accompanied by training in financial literacy and entrepreneurship. The borrowers are well known and screened by Amartha. The fintech has 480 branches throughout the country (in Java, Sumatra and Sulawesi), allowing local staff to maintain a close relationship with the borrower-client.
Jairo Espejo, Investment Manager for Incofin, explains why Amartha caught Incofin’s eye: “Amartha’s business model encompasses the best of two worlds: that of Fintech and the Microfinance model. It leverages new technologies like Artificial Intelligence and Machine Learning to improve its financial products as well as create new services to the end-borrowers. This is combined with the strong expertise of the business managers in the field. ”
Business partners and regional managers oversee loan origination and assess credit risk in the field, supplemented by insights coming from technologies such as machine learning. With a scoring system developed to assess the creditworthiness of unbanked segments of society, Amartha ensures access to capital, even without a credit history. The way Amartha uses technology will not dilute its social mission, but should just increase its impact. Since it turned itself into a peer-to-peer platform, Amartha has managed to exponentially increase its portfolio.
Today, Amartha reaches more than 470,000 entrepreneurs and aims to grow its client portfolio in the coming years. With more than 25 million women underserved financially in a country with high mobile and internet penetration, there still is a lot of growth margin.
One of Amartha’s clients is Pariyah who lives in Klaten on the island Java. When her son sent her one day some of the popular breadfruit (‘sukun’), she processed the exotic fruit into chips and sold it to her neighbours. Unexpectedly, her neighbours liked it so much that they wanted to buy more to share with their family and friends. One of those friends brought the chips to Japan, where she worked and gave it as a souvenir from Indonesia to her boss and co-workers. It became an instant hit and Pariyah started a business in breadfruit exporting every month 20 kilos of chips to Japan. Today, Pariyah runs a breadfruit snack business employing 12 employees, all living in Pariyah’s neighbourhood. The expansion of her business wouldn’t have been possible without the loans Pariyah received from Amartha. She used the money to buy land for her storage facility.
Pariyah with a bag of her famous breadfruit chips.
Ramdhan Anggakaradibrata, Chief Finance Officer of Amartha: “By empowering women like Pariyah with capital and digital literacy, we are promoting higher household incomes and a spread of prosperity. Since 2010, Amartha has supported more than 1 million female entrepreneurs across 20,000 villages in Sumatra, Java and Sulawesi.”
Incofin supports Amartha with debt financing through two funds that Incofin manages or advises: USD 2 million comes from the Incofin Inclusive Finance Fund and USD 4 million comes from the MEF (Microfinance Enhancement Facility).
Noémie Renier, Managing Partner Incofin Investment Management: “We are happy to start this new cooperation with Amartha and together reach out to women entrepreneurs in the countryside. This partnership will reinforce our expertise in digitalization and understanding of how new technologies can accelerate meaningful financial inclusion in the region.”