Amartha, a Jakarta-based microlender to rural women entrepreneurs in Indonesia, had a big 2021. Its founder and CEO, Andi Taufan Garuda Putra, is now looking to partner with fintechs in other fields, such as investment and insurance, to provide more services to the financially excluded.
Taufan, an ex-advisor to Indonesia’s president, Joko Widodo, the set up the company in 2010. He was inspired by microlenders such as Grameen Bank of Bangladesh, which was set up in the 1980s to extend tiny loans to local communities of women without requiring collateral.
“We want to solve socioeconomic problems including financial inclusion,” Taufan said. “Women entrepreneurs in the village can’t get access to loans.”
Digital divide
The first five years were difficult, with the business fanning throughout Indonesia’s rural villages but only lending to 5,000 people. Then a discussion with a venture capitalist convinced Taufan to go digital, and he turned the business into a peer-to-peer marketplace.
Since then, Amartha has grown to about 1 million borrowers, with a total IDR5 trillion ($350 million) of loans disbursed – with $180 million of that lent out just in 2021. Amartha finally experienced that hockey-stick shaped business growth.
Now Taufan is looking to build on top to help women entrepreneurs build savings and wealth, make financial plans, and buy protection. “We’re looking for fintech partners with the same mission,” he said, including wealthtech and insurance aggregators.
He believes Amartha can reach 5 million borrowers in the next three years.
The platform now has about 100,000 lenders. Most of these are individuals (the minimum loan amount is IDR100,000, or about $7, for a one-year loan) but it also serves as a channel for local banks, both state-owned and private, including East Java Bank and Sumatra Bank. The loans return interest of 20 percent to 30 percent annualized, and Taufin says the default rate is a tiny 0.5 percent, even during the pandemic.
Boots on the ground
Amartha’s model is not fully digital. Indeed, half the women using it to borrow do not have a mobile phone. The company relies on field agents who work in village communities. Most borrowers are not individuals but groups of 15 to 20 women. The field agent often has to help them input their data onto the platform, as well as collect and hand out cash – and confirm they own whatever assets they pledge as collateral.
But the company has its own data-led credit scoring engine. It relies on both a counting of group borrowers’ assets and businesses, as well as other ways to determine who should receive a loan.
For example, Amartha will ask each individual in a collective about whom they recommend as good borrowers, which turns out to be an effective way to weed out risk.
Taufan declined to say what portion of groups obtain a loan, but he says about 70 percent end up coming back for additional, larger loans; and that after five iterations, customer retention is 99 percent.
Amartha does more than lend. It is focused on helping women entrepreneurs go digital and otherwise prosper. It trains them on how to access e-commerce platforms (which allows them to purchase supplies more cheaply). It also helps owners of warungs (mom-and-pop stalls) or farms to build digital supply chains, including the ability to facilitate loans to their other business partners.
Taufan isn’t worried about running into competitors as he grows Amartha. Big players like Goto and Grab focus on urban areas. “The most poor, the bottom of the pyramid, are in the villages,” he said. “To tap these borrowers, you need on-the-ground infrastructure.” It’s a cash-based world, and his loans are in cash too, even if he’s using technology to manage the process.
