Fairbanc gets funding from 500 Startups to increase the income of SMEs in Indonesia
Helping the backbone of Indonesia.
SMEs are the bedrock of Indonesia.
As the archipelago’s tech ecosystem booms and e-commerce flourish, SMEs will continue to play a crucial role in economic growth and social inclusion.
These micro-enterprises contributed to 58.92% of the country’s GDP in 2014, accounted for nearly 97% of domestic employment according to statistics. There were about 57.9 million SMEs in Indonesia the same year. That number has increased to 62.9 million in just three years.
Flourishing these SMEs with the right digital tools and adequate access to capital will be fundamental to their revenue growth and the wider economy will only stand to gain.
Fairbanc takes a novel approach to help SMEs with revenue growth by tapping into providing microloans for business owners, specifically rural micro-business owners who are unbanked or with difficulties securing loans from conventional lenders.
Here’s how Fairbanc does it.
It partners with FMCG companies like Unilever to provide credits as loans. These digital credits can only be used every week to purchase Unilever products. It’s very much like the digital credits for online shopping that can only be used at the store where the credits are tied to.
This method allows Fairbanc to effectively reduce loan default risks while scaling fast by leveraging on the companies’ reputation and vast networks of merchants. Unilever, for one, makes ubiquitous brands used by 2.5 billion people every day.
Accessibility is important to reach underserved communities. That’s why Fairbanc doesn’t require collateral, credit history, smartphone ownership, or digital literacy to qualify for a loan. It’s an easy and straightforward process.
To get credit, a business owner will receive a one-time passcode sent to them through a simple text messaging receivable by any mobile device.
Besides, the integration of technologies with FMCG companies allows Fairbanc to read micro-merchants’ order and payment history while offering Just-In-Time credit at the point of sale when required.
Any risk and potential deferments are mitigated via proprietary AI technology and thorough due diligence, ensuring that credits are only given to merchants that can grow sales by at least 10%.
Fairbanc is founded by Mir Haque, a Wharton alum who has tenured in McKinsey, Deutsche Bank and Adobe. Kevin O’Brien acts as the CTO of the company, who held the same position at US microcredit firm Kiva. The founding team also includes Thomas Schumacher, the co-founder of California-based micro lending company Tala.
In 2018, Fairbanc underwent an initial test in Bangladesh before linking up with Unilever Indonesia through the Unilever Foundry program. The company claimed participating outlets, in which 80% were unbanked and 70% were female-operated, witnessed a 35% increase in sales through the initiative.
With plans to further expand its footprint in Indonesia, Fairbanc has signed a partnership with one of Indonesia’s largest conglomerates SinarMas to extend credit to micro-merchants selling Unilever and other FMCG products.
Fairbanc is Shariah-compliant as well, having recently partnered with a large Indonesia Islamic organization to offer Shariah loans to its members.
We’re grateful to have been able to provide them with the capital to help the multitude of Indonesian SMEs, creating a ripple effect that will uplift the country’s economy.
500 Startups is a venture capital firm on a mission to discover and back the world’s most talented entrepreneurs, help them create successful companies at scale, and build thriving global ecosystems. In Southeast Asia, 500 Startups invests through the pioneering 500 Durians family of funds. The 500 Durians funds have backed over 200 companies across multiple sectors from internet to consumer to deep technology. It continues to connect founders with capital, expertise and powerful regional and global networks to help them succeed.
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