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Empowering SMEs: KoinWorks’ journey from online merchants to FMCG

Published on October 6, 2023


When entrepreneurs in Indonesia have figured out how to grow their companies but lack the financing to do it, many turn to local financial super app KoinWorks. The startup is a leading fintech platform serving small and medium enterprises (SMEs), many of which struggle to access capital through banks due to strict requirements.

On a recent episode of Indonesia Digital Deconstructed by AC Ventures, Ben Haryono, Co-founder and CEO of KoinWorks, sat down with Adrian Li⁠  and Leighton Cosseboom to discuss how the company addresses the needs of underserved SMEs, a vast collective that makes up the backbone of Indonesia’s economy.

In 2016, Ben boldly invested most of his life savings to build a platform that would enable Indonesians to fulfill their business dreams. The company started as a four-person team, with each member having versatile functions. “We did everything ourselves, even the copywriting of our website back then,” he said.

KoinWorks started as a peer-to-peer (P2P) lending platform, connecting borrowers to willing lenders so that small businesses could get access to the credit they needed to finance growth. P2P lending allows people to lend or borrow money from one another without going through a bank and is particularly in demand in Indonesia, where the majority of the population remains underserved by traditional banks.

Transforming P2P lending

With AC Ventures being an early investor in KoinWorks, Adrian recalled that out of the many companies in the P2P lending market back then, KoinWorks was the only one that had truly innovated — adopting an effective beachhead strategy by focusing solely on online merchants. 

Today, it serves over 550,000 lenders, with more than 4,000 SME borrowers actively using its platform. To access potential clients and ensure adequate returns, lenders rely on the KoinWorks’ underwriting algorithm.

Adrian went on to point out the strong execution of that particular model. He said, “For us, being able to see founders who place such strong conviction on themselves, coupled with the traction that the company had gained, was a strong proof point that this was the team to back at that time.”

Ben highlighted that KoinWorks focuses on a structured approach to solving customers’ problems and strives to address their needs rather than pursuing any opportunity to profit. A major difference between KoinWorks and a traditional bank is that the former does not require collateral. Instead, it evaluates a customer’s creditworthiness through the “4Cs” – character, capacity, capital, and conditions – rather than the “5Cs” used by banks.

Currently, the startup primarily operates in Java and Sumatra, which are the major economic hubs of Indonesia. However, as demand for financial services continues to expand across the country, KoinWorks plans to push into other regions in the coming years. Small businesses have always played a significant role in Indonesia’s economic story, with more than 64 million MSMEs contributing over 60% of the nation’s GDP. 

Lending to customer-centric businesses

In its first year, KoinWorks worked exclusively with e-sellers because they could provide a lot of data to validate financial conditions. Ben explained, “None of the banks were providing loans to online merchants until we did. And then everyone else followed.”

Since then, KoinWorks has started exploring opportunities in new industries. “When we venture into a new industry, we initiate a pilot project, monitor it for the next one to three years, and then, if it proves successful, we expand,” he said.

For example, in 2019, KoinWorks entered the FMCG sector, which has since become its largest customer segment. The first customer the company served saw its monthly sales increase by more than 10x, making it one of the largest FMCG distribution companies in the country today.

“This type of validation gives us the confidence to attract more clients in specific sectors,” Ben explained. In addition to the traditional creditworthiness criteria, KoinWorks assesses how businesses treat their customers, including customer feedback related to orders and service quality.

Collaborating with banks

Although many see P2P platforms as a threat to traditional banks, Ben says KoinWorks has never aimed to disrupt banks’ operations. In fact, the company’s objective is to establish partnerships with financial institutions to serve businesses and regular people.

He said, “We see banks as a necessary support function to help us create financial inclusion. The funding gap cannot be addressed by us alone. We need the support of other players to address it.” 

Adrian highlighted that KoinWorks has effectively branched out over the years, building a network that connects lenders and borrowers across various industries. Additionally, the platform facilitates connections with specialized lenders that focus on providing capital to SMEs.

When COVID-19 forced businesses to adopt new tech and accelerate their transformation journeys, KoinWorks knew it had to quickly innovate. One such innovation took the form of a neobank feature that now enables an SME to open a business banking account directly through KoinWorks. 

Ben revealed that, as KoinWorks aims to go public within the next three years, the company strives to balance growth with healthy and sustainable financial metrics. 

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