Empowering Micro-Entrepreneurs
Category: Technology By : R Joe Regan Read : 249 Date : Friday, November 10, 2017 - 09:16:33




Indonesia has been a pioneer in microfinance, with Bank BRI employing it on a mass scale. Now Andy Taufan Garuda Petra, 30, is using fintech to extend microfinance’s reach even further using peer-to-peer (P2P) lending. He wants to serve the estimated 65% of the population that doesn’t have bank accounts. “We are very passionate in building a business to empower the informal economy, bridging those who live in the cities with rural businesses,” says Andy. “We see fintech as a solution to accelerate economic growth in Indonesia.” In 2010, he founded PT Amartha Mikro Fintek (Amartha), a fintech startup that provides microloans in rural Java, under the brand Amartha.

Amartha operates as an online platform that provides microloans of about Rp 3 million, with the minimum amount being Rp 1.5 million. In 2015, Andy added P2P lending to the site, so Amartha can tap into a wider pool of funds and ordinary individuals can easily participate in microfinancing. This sector provides good returns: Amartha charges borrowers 25% annual interest, and lenders get about 17% of that, with the rest going to Amartha in fees.

In structure and goals, Amartha is similar to Kiva, a nonprofit site based in San Francisco that was founded in 2005 and that also does P2P microloans. Kiva has disbursed $1 billion, to 2.5 million borrowers, from 1.6 million lenders, with a 97% repayment rate. It operates in 80 countries, including Indonesia.

Amartha has similar statistics. To date, Amartha has served about 38,000 borrowers, 5,200 lenders and disbursed over Rp 100 billion. The site Amartha claims a remarkable 0% nonperforming loan rate, with 99.4% of loans paid on time. About 85% of borrowers return to get a second loan. The secret to Amartha’s stellar figures may be its borrowers: 100% women. “We choose to empower women,” says Andy (81% of Kiva borrowers are also women).

In addition to lending exclusively to women, first-time Amartha borrowers must have at least 15 others to be responsible for the loan and take a course in financial literacy, a model pioneered by Pakistan’s Grameen bank. The course includes basic lessons on topics such as managing loans and building savings.

“Through this model, members share the risk and responsibility for each other’s timely payment because if one individual defaults on her loan, the others will be required to assume the repayment,” says Amartha in its 2016 Social Accountability Report. As Andy puts it: “The business is driven by community. The community is responsible to each other. If someone 

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