Indonesian P2P lender KoinWorks says it’s nearly profitable, has disbursed $140m in loans

When Benedicto Haryono worked for his family’s agribusiness, he would travel to far-flung areas of Indonesia, where he saw communities that were underserved by traditional financial institutions.

Financing options for many Indonesians comprise of “either local cooperatives or real peer-to-peer lenders, such as parents or friends.”

KoinWorks co-founder and CEO Benedicto Haryono / Photo credit: KoinWorks

This was true even in the more developed parts of the country, so in 2016, Haryono and co-founder Willy Arifin founded fintech startup KoinWorks.

A peer-to-peer (P2P) lending platform, KoinWorks connects lenders – a majority of whom are individual investors – with small-business owners in need of financing. Borrowers can take up loans of between 10 million and 2 billion rupiah (approximately US$700 to US$140,000).

KoinWorks has since become a player in Indonesia’s growing online lending scene. Since its founding, the company claims to have disbursed almost 2 trillion rupiah (around US$140 million) in loans.

Haryono thinks that P2P lending is a suitable business model for Indonesia because it helps build enterprises and “deliver solutions that impact people’s lives.”

Taking a pragmatic approach

About 95% of KoinWorks’ disbursements are tied to its bread-and-butter service: business loans. These can either be installment-type loans (with six to 36 months maturity) or short-term working capital loans such as receivables or purchase financing, which mature in one to six months.

Borrowers usually belong to the underbanked segment. Haryono describes them as people who have “the will or the ambition to make something better of their current situation,” but are unable to enjoy the full offering from banks, either because of their profile or inadequate collateral.

“These could be food and beverage businesses that rent their location, which means it can’t be collateralized, or online commerce businesses, which don’t have assets aside from their inventory,” he adds.

On the lender side, Haryono thinks KoinWorks is one of the “most pure P2P” businesses in Indonesia. The startup has 180,000 retail investors – i.e., mainly individuals – as opposed to institutions – on the platform.

These lenders are a mixed bunch. Anyone can start lending through KoinWorks with a mere 100,000 rupiah (roughly US$7), so it attracts everyone from blue-collar workers dipping their toes into investing to the well-heeled financiers who are looking to diversify their investments.

A majority of the startup’s lenders are also millennials. Those who are aged 35 and older make up a smaller portion, but they generally have bigger ticket sizes.

“Indonesia as a country still lacks product variation in terms of investment avenues,” Haryono observes. “Having an alternative product like ours gives investors decent returns but with low funding requirements, so most people can afford it. It is very viable for the market.”

2 million users in the next two years