Validus, a digital lending platform specializing in small and medium enterprises (SMEs), has successfully secured $50 million in debt financing from a prominent international bank under the ASEAN Growth Fund strategy.
This pivotal move aims to bolster the financial inclusion of Indonesia’s micro, small, and medium enterprises (MSMEs), addressing key challenges these businesses face in accessing essential financial resources.
Funding to Enhance Financial Inclusion
Validus intends to leverage the recently acquired funds to significantly improve the financial landscape for Indonesian MSMEs. These enterprises are vital to the nation’s economy but often struggle with stringent requirements imposed by traditional banks.
With 64.2 million MSMEs contributing a remarkable 61% to Indonesia’s GDP, there is an immense potential for growth. Despite their critical role, these businesses face hurdles in accessing financing due to operational and collateral constraints.
Challenges Faced by Indonesian MSMEs
Indonesian MSMEs encounter substantial obstacles when trying to secure financing. Only 17.5 million out of over 64 million MSMEs engage in the online and e-commerce ecosystem, highlighting a significant gap.
Commercial banks’ stringent operational, reporting, and collateral requirements have historically made it difficult for MSMEs to obtain loans. This has resulted in only about 20 percent of bank loans being allocated to MSMEs.
Innovative Lending Model
Co-founded in 2015 by Vikas Nahata and Nihkilesh Goel, Validus developed a pioneering supply chain-focused lending model.
This model utilizes non-traditional data acquired through partnerships with conventional banks and international institutions.
The company has extended its operations beyond Singapore, establishing a presence in Indonesia (Batumbu), Thailand (Siam Validus), and Vietnam (Validus Vietnam).
Traditional Banks and MSMEs
Traditional banks in the SEA region persist in using outdated credit evaluation methods that overly rely on historical financial data and real estate-backed collateral.
According to Goel, small businesses need stable and accessible working capital to fuel growth and contribute to job creation and nation-building.
Validus’ Market Presence
Validus stands out as the largest SME financing marketplace in Southeast Asia by outstanding loan book and monthly loan disbursements. Currently, the platform averages $150 million in new loan disbursements each month.
Goel emphasized the company’s over 100 unique partnerships across the region, which bolster its ability to provide essential financial services to MSMEs.
Noteworthy lenders on the platform include major international institutions and leading local banks across Indonesia and Thailand.
Revenue and Profit Growth
Over the past three years, Validus has seen impressive growth in both revenue and net profits. The company has achieved a 69% CAGR in consolidated group revenues.
The Indonesia business, being the largest market for Validus, has been net profit positive since 2022, contributing positively to the group’s cash flow.
Operational Footprint
Validus employs over 300 staff across five countries, though the company has not disclosed its customer count.
To date, Validus has raised approximately $75 million in total equity funding, with investments from prominent firms such as Vertex Ventures Southeast Asia and India, Vertex Growth, and others.
By securing $50 million in debt financing, Validus is poised to significantly impact the financial inclusion of MSMEs in Indonesia.
The company’s innovative approach and expansive partnerships position it as a key player in addressing the financial challenges faced by small businesses in the region.
Source: Techcrunch