After a tough 2018, Indonesian online lender UangTeman looks to be bouncing back

Indonesian online lending startup UangTeman seems to have turned things around after a 2018 beset by internal issues.

The company announced that it has closed the first round of its series B financing from new and existing investors. It’s raising a total of US$10 million in equity financing, spread evenly in two rounds, as well as a separate debt financing of an undisclosed amount.

UangTeman founder and CEO Aidil Zulkifli / Photo credit: UangTeman

This first round was led by Draper Associates, the Silicon Valley firm founded by venture capitalist Tim Draper, which had invested in UangTeman’s series A fundraise in 2017. New investors KDDI Open Innovation Fund and Global Brain Corporation also participated.

Meanwhile, the second round of funding is anchored by Japan’s Spiral Ventures (formerly called 500 Japan), with commitments from other investors. UangTeman says it plans to close the second round by October 2019.

The fundraise also comes months after UangTeman obtained a permanent online lending license from Otoritas Jasa Keuangan (OJK), Indonesia’s financial services authority, in May. The startup was among the seven applicants to have received the license – the majority of online lenders are under a “registered” status. And among the seven, only UangTeman and another company offer consumer loans.

“This effectively removes any regulatory risk involved in investing in this sector,” says UangTeman CEO and co-founder Aidil Zulkifli. “Investors can now focus instead on the market dynamics, knowing that they are investing in a fully compliant and regulated company.”

Benefits of a permanent license

UangTeman’s percentage of non-performing loans (NPL) beyond 90 days is 4.14%, as disclosed on its website. This is slightly higher than the average of 3.18% among OJK-registered online lenders. The company explains the difference by pointing out that unlike many other online lenders that specialize in productive loans, it focuses on the riskier business of cash loans.

When asked about the company’s performance this year so far, Zulkifli declined to disclose exact numbers. But he claims that UangTeman is growing according to the roadmap it set at the start of 2019.

“We consistently grew 200% to 300% every year, and I think we’ll be on track for that,” he explains.

The most important milestone for the company this year is the permanent online lending license from OJK, shares Zulkifli. “That was a tough thing to get,” he continues. “We had to change a lot of our business processes, make system overhauls and modifications in order to reach the standards imposed by OJK.”

One of the changes is a digital signature requirement for users. The technology for this must be provided by one of three vendors recognized by Indonesia’s Ministry of Communication and Information Technology and involved a long implementation process, according to Zulkifli.

But ultimately, it was worth the effort. The effect of having a full license may be marginal among the company’s consumers, but Zulkifli observes that it’s had a positive impact on how the company is regarded by partners, including investors.

“It opens doors for us because having the license means [we’re] compliant and up to standards,” he adds. “Investors right now have a choice between investing in one of the seven license holders with little regulatory risk, or investing in other players in the market. Removing risk for investors is also important, from my perspective.”

Plans for regional expansion