Indonesian P2P lending platform Investree has raised a Series C round of funding, starting with a $23.5m first tranche co-led by Mitsubishi UFJ Financial Group Innovation Partners (MUIP), the VC arm of MUFG, and BRI Ventures, the newly minted corporate VC arm of state-owned bank BRI.
Investree CEO and co-founder Adrian Gunadi said on April 8 that the funds would be used to expand the business in Indonesia and maintain Investree’s position as a market leader in the P2P lending industry. This includes introducing new services such as electronic invoicing and also its collaboration with Mbiz to provide e-procurement services.
Investree will also use the funds to support its regional expansion. The company is already working to obtain licenses to operate in Thailand and the Philippines, where they have set up joint ventures with local companies 2C2P and Filinvest Development Corporation respectively. Investree expects it will obtain the licenses by the second or third quarter of this year.
Due to the Covid-19 outbreak in Indonesia, Investree opted to announce the new funding through a Zoom conference call. Gunadi, BRI Ventures CEO Nicko Widjaja and MUIP CEO Nobutake Suzuki were on the call.
“The presence of these two banks [MUFG and BRI] builds confidence in Indonesia’s industries, especially the fintech lending sector,” Gunadi said in the video conference. The funding represented “a very important moment amid market volatility,” he added, referring to the current Covid-19 pandemic that has slowed daily life and business activities in Indonesia.
Low, mitigable risk exposure
“The pandemic has definitely caused uncertainty in certain SME sectors such as the creative industries, but we see that Investree has very low, mitigable exposure to the most high-risk sectors,” BRI Ventures CEO Nicko Widjaja said.
Prior to the funding announcement, MUFG, through its Indonesian acquisition Bank Danamon, signed an agreement with Investree to channel to the startups SME loans of between IDR 200m and IDR 2bn from mid-March this year. Separately, BRI said in March that they planned to continue their partnership with Investree with the goal of channeling IDR 1tn in loans through the fintech platform this year.
Both Bank Danamon and BRI have partnered with Investree for some time now, with Danamon signing their first loan channeling agreement in 2016 and BRI in 2018.
“Many people think that banks and fintech companies are competing against each other, but we have proven that we can create a strategic collaboration,” said Gunadi.
This funding, he added, is also a form of collaboration between MUFG and BRI, which are among the biggest financial institutions in Japan and Indonesia, respectively.
Suzuki expressed his confidence in Investree's management team: “We have seen Investree's proven strategic and managerial expertise, which has made it one of the leading players in the Indonesian and Southeast Asian fintech lending industry. We believe that together with Investree and Danamon, which has been working together since 2016, we can contribute in helping Indonesia's SMEs get through these challenging times.”
Existing investors SBI and 9F Fintech Holdings also participated in the deal.
According to Indonesian financial news site Kontan, Investree channeled a total of IDR 2.6tn in financing throughout 2019, doubling from IDR 1tn in 2018. About 35% of the funds channeled come from six institutional lenders, including Danamon, BRI and Bank Mandiri. Bank Mandiri is also an investor in Investree through its CVC arm, Mandiri Capital Indonesia.
Investree competes in a tight market of P2P lending platforms channeling business loans. Other major players include KoinWorks – part of Mandiri Capital’s portfolio – Akseleran, Taralite, and Modalku, the Indonesian arm of Funding Societies. There are also lenders operating in specific niches, such as TaniFund, which works with farming communities, and Amartha, which focuses on financing women-founded micro-businesses in rural areas.
Investree's new markets, Thailand and the Philippines, are similar to Indonesia, where SMEs form a majority of the economy. According to Gunadi, many SMEs in these countries are still underserved by banks and financial institutions. In the Philippines, Investree is working with Filinvest Development Corporation and has plans to tap into their ecosystem of supply chain financing.
Investree has already launched its Thailand branch by working with a local partner company in which they hold a majority stake. According to news website Kontan, the Thai branch of Investree retains the brand name and has disbursed THB 10m in loans. They are also finalizing a partnership with payment gateway firm 2C2P to facilitate loan disbursement and payments.
The economic slowdown caused by the Covid-19 pandemic has hit many industries hard and this can potentially affect the risk profiles of borrowers in P2P lending platforms. With a greater risk of non-payment and default, individual investors might hold back on higher-risk investments such as P2P lending.
In an email to CompassList in March, Investree co-founder and CEO Adrian Gunadi said that the company is expecting a drop in lending activity by individual/retail lenders: “Past trends show that people tend to hold on to their cash and reduce their investing activities during periods of uncertainty.”
He adds that Investree is “strategically” using the funds channeled by their institutional lenders to make up for a potential shortfall in funds from retail lenders. The company will also be more selective in approving loan applications to control risk.
In Wednesday’s conference call, Gunadi responded to media queries about the lending risks, saying that Investree is discussing the possibility of restructuring or other debt strategies with borrowers from the hospitality and retail sectors. Referring to the policy by the P2P lending association in Indonesia, Investree said that the final decision rests with the lenders themselves, with Investree and other P2P lending platforms allowed only to facilitate the process.