Indonesian Shariah bank launches VC firm with $21m fund

Publicly listed Indonesian bank BTPN Syariah has launched an investment arm called BTPN Syariah Ventura. According to a disclosure to the Indonesian stock exchange, the company, along with its affiliate BTPN, has injected 300 billion rupiah (around US$20.6 million) into the new firm.

The company said that it is the first and only corporate VC that implements Shariah compliance in Indonesia.

BTPN Syariah Ventura CEO Ade Fauzan / Photo credit: BTPN Syariah

BTPN Syariah Ventura will be led by Ade Fauzan, who worked as an executive in various local Shariah-compliant banks and co-founded lending startup Investree in 2017. It will focus on Indonesian startups in series A to pre-series B stages, and it has made its first investment by leading the US$6.6 million pre-series B round of social commerce firm Dagangan.

According to Fauzan, the VC firm plans to invest in startups that have similar target markets to BTPN Syariah, which are micro entrepreneurs in Tier 3 and Tier 4 cities. “They must also be focused on financial inclusion, but not necessarily fintech,” he added.

As a unit of a Shariah-compliant bank, BTPN Syariah Ventura also needs to implement Shariah principles in its operations and portfolio companies. Fauzan said that the term sheet may be similar to other VCs, but there is an additional requirement to comply with Islamic laws, such as to not sell alcohol and cigarettes as well as to not provide loans with interest (riba).

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Founded as a Shariah-compliant business unit of Bank BTPN in 2010, BTPN Syariah was spun off as an independent bank in 2014. It focuses on disbursing loans to women entrepreneurs in rural areas across Indonesia. Its network of more than 10,000 agents has reached more than 4.1 million active borrowers.

Fauzan said that there is no specific target on how much return the firm has to get, or when the fund needs to be returned to the parent company. “As long as the company is still growing, then BTPN Syariah Ventura is still on the right track,” he added.