Draper Associates placed first bet in Indonesia, participating in $12m round for UangTeman

Aidil Zulkifli and Darmawan Zaini of UangTeman.

Consumer lending startup UangTeman has raised US$12 million in equity and debt in its series A round, the startup told Tech in Asia.

The round was led by K2 Venture Capital, with participation from Silicon Valley VC Tim Draper. UangTeman says this is the Draper Associates early stage fund’s first direct investment into an Indonesian startup. The fund was announced last year. Draper is a partner in VC firm Wavemaker’s Southeast-Asia focused fund, which means he already has investments in the region, albeit indirectly.

The debt financing comes from STI Financial Group, a Hong Kong-based asset management company, and will allow UangTeman to grow its base of borrowers in Indonesia. The startup didn’t disclose how much of the total funds raised is in equity versus debt.

UangTeman co-founder and CEO Aidil Zulkifli says the new funds will also be used to invest in building its technology.

“We have collected quite a bit of data and are hiring more data scientists,” Zulkifli says. He plans to open R&D centers in Singapore and India. “It’s a question of talent pool. We don’t have masters or PhDs in machine learning or algorithm design here in Indonesia.”

First risk

UangTeman was launched in April 2015. It provides short term micro-loans of between US$75 and US$350 for a maximum of 30 days.

Borrowers apply by filling out a simple questionnaire, which asks them for personal data like a phone number and family status.

As of July, UangTeman has been giving out loans equivalent to about US$750,000 a month, Zulkifli says. Roughly two percent of borrowers default, which means they fail to repay their loans.

He considers UangTeman’s this rate of defaults, as well as that of late payments, which is at 5 percent, to be low and attributes that to its deep understanding of credit risk and effective collection methods.

The firm hires and trains debt collectors in-house, handling the majority of late payment cases this way. As a last resort, third-party debt collectors will be brought in. These are firms that also work with banks, says Zulkifli.

After two years of approving all loans manually, the startup now claims to have enough data to automate the system. It is present in 14 Indonesian cities.

In UangTeman’s lending model, the platform bears the first risk. This means lenders get their money back even if borrowers pay late or not at all.

This sets it apart from competitors who employ what Zulkifli calls a pass-through platform. “The lender lends to a borrower. If the borrower defaults, the lender suffers the loss.” He says startups like Modalku, Investree, and Crowdo, who are active in Indonesia, work this way.

Waiting for a tipping point