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How Julo is transforming the credit curve in Indonesia

Published on October 3, 2023


One of Indonesia’s top consumer lending startups Julo goes beyond one-off solutions and equips customers with a revolving credit feature, helping them access financing whenever unexpected life events (such as a roof leak or a health emergency) arise.

On a recent episode of Indonesia Digital Deconstructed by AC Ventures, Julo’s Co-founder and CEO Adrianus Hitijahubessy and ACV’s Founder and Managing Partner ⁠Adrian Li⁠ discuss with host Leighton Cosseboom⁠ the unique approach Julo developed to tackle challenges in Indonesia’s consumer credit market, a space set to reach ⁠US$254 billion⁠ in value by 2025.

Transforming the credit curve

Adrianus returned to Indonesia from the US in 2016 with the idea of using his work experience at Capital One to address the needs of Indonesia’s consumers. 

As per PwC, Indonesia has a significantly lower loan disbursement per GDP ratio compared to other countries, with a majority of its citizens lacking access to formal financial services until recently. As a result, there exists a significant lack of data related to creditworthiness on the individual consumer level. This poses a major obstacle for any private company or financial institution that wants to get into the consumer credit space.

Adrianus pointed out that while, in theory, it was possible to generate profit by offering loans for various purposes, Julo’s objective was specific. The platform aims to assist people in breaking free from the cycle of credit by providing constructive loans at reasonable interest rates. 

In June 2023, Julo launched an education financing feature in its app, enabling customers to apply for school-related loans for themselves and family members. By facilitating wider access to higher education, Julo empowers its borrowers to gain new skills, become more valuable on the job market, and earn higher levels of income – thus delivering true upward economic mobility for borrowers and their families.

While cash loans and Buy Now Pay Later options are widespread, education financing is limited to just a few institutions in Indonesia. As a result, 67% of the school dropout rate is attributed to financial problems, according to the Central Agency of Statistics in Indonesia. With this new feature, Julo customers have access to a digital credit quota designed to cover education expenses.

Adrianus stressed that Julo serves a significant segment of customers located near the bottom of the socioeconomic pyramid. These individuals aspire to enhance their lives, improve their careers, and provide education for their children. However, they often face financial challenges due to a lack of liquidity.

Prepare the umbrella before it rains

Indonesia’s consumer credit market has experienced rapid growth in recent years, attracting both domestic and international companies competing for a share of the pie. Notably, Chinese companies have tested the waters. However, while acquiring customers for a short period of time can prove relatively easy in Indonesia, retention often presents a different challenge.

Adrianus revealed that there was a time when the average interest rate for payday loans was 1% per day.

“Desperate borrowers would still go for it. If I needed money today, and my kid was in the hospital, I would not worry so much about the rates,” he said. “In the long run, this will certainly backfire. It’s not sustainable. Bad customers will undoubtedly harm the platform. Over time, good customers will realize, ‘Why am I paying such a high-interest rate when there are better solutions?’”

Julo took a different approach from the start, betting on long-term collaboration by offering reasonable rates. The company has employed data solutions to build models predicting customer behavior. Based on a person’s creditworthiness, Julo sets a credit limit for each customer, which is revised monthly. With Julo’s revolving credit line called VCC, customers can access credit whenever they need it.

“As the saying goes in Indonesian, ‘Prepare the umbrella before it rains.’ Whether or not life events happen, you won’t have to worry because this credit limit is readily available,” the founder explained. He added that Julo’s customer retention rate increased significantly after the launch of its VCC product. “We have seen a massive increase in our customer retention rate, from the mid-teens to around the mid-60s in terms of percentage.”

Growing with customers

By serving returning customers, Julo mirrors their seasons of life, striving to address their evolving financial needs each step of the way. When they are in their early 20s, they may only want to buy the latest smartphone or make small transactions. A year or two later, they might be getting married and need financing for their wedding. Then, they have children.

“We have observed this trend among many of our customers, where their financing needs continue to grow and evolve during their time with us,” Adrianus pointed out. Julo is committed to accompanying them on this journey.

Speaking about the regulatory environment, Adrianus noted that things are quite favorable in Indonesia. The government has struck a balance by introducing regulations without excessive interference. He mentioned, “Indeed, the Indonesian government has taken a collaborative and supportive approach. Fortunately, we have not followed the path of China, where the government remained hands-off but then one day they suddenly became heavily involved.”

Get the full episode for free on Spotify, Apple, and Google.

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