The backbone of the Indonesian economy is estimated to be more than 60 million small and medium-sized businesses. But many lacking access to working capital, and especially before the pandemic, were managing their finances using manual processes like spreadsheets. As the COVID-19 virus has driven many to digitization, startups focused on SMEs are raising large rounds of funding to scale quickly. KoinWorks is the latest. The Indonesia-based SME financial platform announced today that it has raised $108 million in Series C funding led by MDI Ventures. The round included $43 million in equity and $65 million in debt capital for the working capital loans KoinWorks provides to its clients.
This brings the total KoinWorks increase to $180 million. Existing investors who returned in the latest round include Quona Capital, Triodos Investment Management, Saison Capital, ACV and East Ventures. The new money will be used to hire about 400 new employees and expand KoinWorks’ latest product suite, SME Neobank.
KoinWorks is headquartered in Jakarta, with offices in Singapore and technical offices in Yogyakarta, India and Vietnam. KoinWorks was originally created to help small and medium businesses, which are often rejected by traditional financial institutions, gain access to working capital. Since then, it has also developed a comprehensive platform for financial tools to help its customers, including e-commerce sellers and social commerce sellers, increase their sales.
TechCrunch first caught a glimpse of KoinWorks in 2019 when it raised $12 million for its lending platform. Demand has surged as more businesses come online during the COVID-19 pandemic and the startup says its user base has tripled to 1.5 million customers, and a waiting list of 100,000 small and medium-sized businesses are being added to its new financial platform. Co-founder and CEO Willie Ariffin told TechCrunch in an email that since 2019, monthly loan payments have also tripled to nearly $50 million and revenue has quadrupled.
KoinWorks focuses on small and medium businesses that are disadvantaged by traditional financial institutions and may not have a bank account or credit card. On the platform, users can create an online bank account and card, borrow working capital, access accounting, points of sale, early wage access and human resource management systems designed for small businesses.
Arifin said that since KoinWorks’s monthly disbursement rate reached $50 million per month, the receiving rate has grown enough that the company became cash flow positive earlier this year, and its non-performing loan ratio (NPL) is less than 2%. He says that banks serving traditional SMEs have at least twice as much as KoinWorks’ NPL loans. “Up to 20% of companies switched their offline sales channels to online during the pandemic, and 89% of companies now use online channels to sell their products and services,” he said.
Over the past three years, KoinWorks’ competitors have grown to include new banks and other start-ups that started as an accounting software but are expanding to include working capital loans and other financial services. Notable examples include competitors BukuWarung and BukuKas, both of which have raised large rounds of funding.
“When we started, we were among hundreds of traditional financial institutions. Fast forward to today, we see these same banks now undergoing digitization,” Arifin said. Despite this, Indonesia’s annual funding gap is US$80 billion, so those who are unbanked or underbanked are still at a disadvantage. There is still much room for improvement.”
With tens of millions of entrepreneurs in Indonesia, he added, “this is not a winner-takes-all market.” The combined market capitalization of the five largest banks in the country is approximately US$160 billion. There will undoubtedly be fintech companies tackling the unbanked/underbanked space, however, KoinWorks has a best-in-class approach designed to meet the needs of SMEs and entrepreneurs who we believe will have a significant impact on the future sector.
In a statement, CEO of MDI Ventures, Donald Wyharia, said, “The investment in KoinWorks invests in financial education for underserved and underserved communities. We are pleased to be in coordination with a team that understands the importance of each step in the entrepreneurship and small business growth journey. and medium.”