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.

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.”

Incofin cvso disburses a EUR 1.7 million loan to Bina Artha, the financial institution that, through micro-loans, allows hundreds of thousands of entrepreneurial women in Indonesia to build a better future for themselves.

Indonesia is not only known for its idyllic beaches, but also for impressive economic growth rates since the Asian crisis in 1997. The economy is now part of the top 20 largest economies in the world. This growth went along with important poverty reduction, with a poverty rate at 10% in 2020, while at the turn of the century that group was still twice as large. However, there are still around 26 million people living below the poverty line. The consequences of COVID-19 – which might push between 5 and 8 more million Indonesians into poverty – is therefore a setback. It shows that economic progress is still very fragile for a large part of the population.

While Covid-19 is having a significant impact on the Indonesian economy, Incofin CVSO has at heart to support microfinance institutions (MFI) even in times of crisis. In this context, CVSO has provided a loan of EUR 1.7 million to PT Bina Artha Ventura (Bina Artha) at a time of tight liquidity management and operations stabilization efforts from the MFI. The support from its international lenders partly explains Bina Artha’s resilience during the crisis.

Bina Artha – founded in 2011 – is one of the biggest institutions in Indonesia in terms of portfolio size. The MFI brings micro-credits to more than 350,000 low-income households in rural communities – increasing financial inclusion. In Indonesia, 51% of the adult population still do not even have an account in a financial institution. Therefore, with a total population of 270.6 million, there is a huge market growth potential for microfinance.

Especially low-income women have barely access to the formal financial sector because they lack independence and education. That is why microfinance institution Bina Artha focuses mainly on women who don’t have or have only partial access to the formal financial sector.

By increasing the access to capital, Bina Artha supports the income generation of entrepreneurial women, such as Bu Sabaria Bunga Lele. I used to sell my vegetables with a cart going around from place to place. At the end of 2017, I decided to take a loan from Bina Artha and open a shop on the road side near my house. Now, I provide a wide selection of fresh vegetables, spices, dried fish and other products. The people of the community around my shop buy their necessities from my stall and lots of cars stop with people from further afield as well. Thanks to the strategic location, my store is also doing fine despite the pandemic.

Incofin cvso believes that Bina Artha is well positioned to efficiently and rapidly grow further, thanks to its business model, support from its Credit Access network and investments in technology. They have for example integrated third party payment services into their core banking system.

“Bina Artha has been very transparent in dealing with clients and funding partners and therefore continues to gain support. Incofin is a proud partner of Bina Artha, via them we can deliver our impact and open up opportunities to many Indonesians for a better livelihood”says Vuthy Chea, Deputy Regional Director Asia of Incofin Investment Management.

The regions where Bina Artha operates are in dark blue.