Modalku Group Receives Additional Debt from Norfund, Strengthens Loan Quality for MSMEs

Modalku Group announced the acquisition of a loan facility (debt) amounting to $7,5 million or around Rp. 117 billion from Norfund, a Development Financial Institution (DFI) which operates the Norwegian government's investment fund for developing countries.

Previously, Norfund also provided the same facilities with exactly the same nominal amount to Amartha in June 2021.

For the Modalku group itself, this is a facility debt second earned so far this year. In September 2023, the facility obtained was $27 million or around IDR 414 billion led by AlteriQ Global, Aument Capital Partners, and Orange Bloom.

All of these facilities will be redistributed through various funding solutions specifically designed for MSMEs that have not had access to funding in Indonesia, Singapore, Malaysia, Thailand and Vietnam.

Co-founder & Group CEO of Funding Societies (parent of Modalku) Kelvin Teo said this achievement is not only proof of the group's creditworthiness in facing the pandemic and macroeconomic uncertainty, but also an opportunity to meet the need for access to funding for MSMEs that are still underserved in Southeast Asia .

"We appreciate Norfund's support in our mission and commitment to providing equal opportunities for MSMEs," said Teo in an official statement.

Norfund's Regional Director (Asia) Fay Chetnakarnkul said that his party was impressed with the Modalku group's ability to support underserved MSMEs in Southeast Asia with a variety of funding solutions to overcome cash flow management challenges.

"We are pleased to be able to support Modalku in expanding its reach, increasing financial inclusion and enabling more businesses to grow, as well as creating much-needed jobs in the region," he added.

Norfund is here with their main focus in investing, namely to increase financial inclusion. To date, Norfund has distributed funding of around $4,54 billion (around IDR 70 trillion) to 7,5 million clients. The funding provided through the Modalku Group will be a bridge between Norfund and the public & private sector in expanding its investment reach in Southeast Asia.

Impact investing (impact investing) carried out by a number of DFIs in Southeast Asia has reached $2 billion (around IDR 31 trillion) per year between 2017-2022 (with an accumulation of more than $12 billion or around IDR 187 trillion). More than half of the investment portfolio is channeled to the financial services sector.

DFI has the ability and capacity to support MSMEs that cannot be supported by commercial and government funders, this is due to their strong financial position.

Maintain the quality of financing

Separately, when contacted DailySocial.id, Modalku Indonesia Country Head Arthur Adisusanto said that apart from focusing on opening wider access to MSME funding, maintaining the quality of financing is also no less important. He admitted that in maintaining credit growth, the company really pays attention to the quality of its portfolio.

The way to do this is to always apply principles responsible lending, prudence and risk management, namely assessing the MSME recipients of funds, as well as their financial ability to repay the business capital provided.

"Because we also have a responsibility to funders who lend funds through Modalku," said Arthur.

Plus, the company is improving its risk mitigation system in maintaining NPL figures, such as doing assessment, monitoringand collection as an early detection effort if there is a decline in portfolio quality and collection efforts, as well as simultaneous credit rescue.

"We will also continue our commitment to strengthening the business by increasing company profitability, as well as accelerating access to funding for MSMEs that are still underserved. "Apart from that, Modalku also continues to focus on the company's financial health and remains wise in company spending."

Previous on August 2023, Modalku Group streamlined operations which resulted in the termination of employment (PHK) for 38 people out of a total of 214 employees in Indonesia.

Modalku's financing products are quite diverse. Among them, Project Capital for procurement in the government sector. The concept is similar to invoice financing, with adjustments according to the shopping workflow in the government sector.

Then, at the end of last year, Modalku also started to enter the multi-finance business through its acquisition of PT Buana Sejahtera Multidana, then rebranded it as "Modalku Finance". Modalku Finance offers various financing functions, including Working Capital Financing, Investment Financing and Multipurpose Financing.

Previously, Modalku also did this co-investments together with Carro to Bank Index, giving the company a signal to enter the digital banking segment. The other products that are also in focus are b2b paylater, collaborating with a number of parties such as Bukalapak, Paper.id, and BukuWarung.

On a regional scale, the Modalku Group has distributed funding of more than IDR 53 trillion to more than 100 thousand MSMEs in Singapore, Indonesia, Malaysia, Thailand and Vietnam.