It has been recently announced that Bank Central Asia (BCA), one of Indonesia’s most valued listed lenders, has partnered with Mitrausaha Indonesia Grup, the company behind digital peer-to-peer lending Modalku, to penetrate deep into the underserved SME market in the country.

Under this new partnership, the BCA will disburse business loans to borrowers in the Modalku platform. Currently, the Financial Services Authority regulation has capped loans made on such borrowing platforms at Rp 2 billion (US$ 147,000) per loan.

Liston Nainggolan, the executive vice president of commercial business and SME at BCA, said the partnership with Modalku was a natural strategic step for the lender.

“BCA and Modalku have the same interface technology,” Liston said in a statement in January. “That’s why we’ve decided to support SME borrowers on Modalku’s platform so that capable SMEs can continue to expand and independently grow”.

The partnership was created in the hopes of increasing the BCA’s exposure to SMEs in Indonesia as well as allowing the BCA to provide more lending for SMEs, particularly the micro-businesses. These are generally defined as businesses with assets of less than Rp 50 million (US$ 3,660) or annual sales of less than Rp 300 million (US$ 22,000).

Within the first nine months of 2019, the lender had distributed up to Rp 192 trillion in loans to commercial businesses and SMEs. The loans comprised 32 percent of BCA’s total loan disbursement in the period.

Peer-to-peer lending platforms such as Modalku and its rivals (Koinworks, Investree, Amartha, etc.) have made a name for themselves through the ability to utilise technology to evaluate borrowers who otherwise are deemed non-credit-worthy by conventional financial institutions due to not having enough collaterals.

Reynold Wijaya, Modalku’s co-founder and chief executive, said that the collaboration with the BCA should make it easier for SMEs to gain access to loans.

“Our shared vision to support financial inclusion in Indonesia has presented an ideal opportunity for Modalku to reach out to more SMEs. We believe the economy grows stronger with better financial inclusion and more access to financial services for SMEs,” he said.

There are approximately 57 million micro-businesses in Indonesia, but only about 1 percent of that number has the ability to expand their scale to reach SME-level operations due to their limited ability to obtain funding; according to a 2017 report by consultancy firm OliverWyman and Modalku.


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