Modalku Receives Series C+ Funding of More than 2 Trillion Rupiah, Ready to Enter Neobank

Modalku Group announced a series C+ funding round of $144 million (approximately 2,06 trillion Rupiah) led by Softbank Vision Fund 2, with participation from VNG Corporation, Rapyd Ventures, EDBI, Indies Capital, Ascend Vietnam Ventures, and previous investors, such as Sequoia. Capital India and BRI Ventures.

On the occasion, the company also announced a new loan facility of $150 million (approximately 2,15 trillion) from financial institutions in Europe, the United States, and Asia. This announcement follows a series C round worth $45 million earned between 2020 and 2021. In total, the company pocketed $189 million (approximately IDR 2,7 trillion).

The funding raised will strengthen the company's position as a leader in regional digital funding. The funds will be used to manage expenses and improve B2B Payments services for MSMEs in Southeast Asia in order to become neobanks. Same strategy too taken by KoinWorks for the next focus.

Management also said that $16 million (approximately 229 billion Rupiah) of this new funding will be used to contribute to the company's stock options plan in the form of share repurchases, for former and current employees.

In an official statement, Funding Societies Co-founder Reynold Wijaya said, "[..] After successfully proving our credit capability during the unprecedented financial crisis, Modalku will expand its business towards neobanking. We are committed to being able to better support MSMEs, strengthen our presence in Southeast Asia, and bring a greater positive impact to society.”

SoftBank Investment Advisers Managing Partner Greg Moon added, "MSMEs in Southeast Asia have historically struggled to get access to loans from financial institutions, but they have been forced to rely on private funding to support their business growth. Modalku is here and bridges these entrepreneurs to access more funding that suits their needs.

“Also, it is more affordable to build a data system that judges a business based on its performance and uses technology-based Artificial Intelligence (AI) to make the process more effective. We are pleased to be able to support their mission to contribute to Southeast Asia by funding viable but underserved MSMEs,” said Moon.

Focus on SMEs

The Modalku Group, which was founded in 2015, seeks to solve the main challenges of MSMEs that hinder their growth, starting from the existence of financial gaps of $300 billion (approximately IDR 4,6 quadrillion) in the Southeast Asia region. Although almost 99% of all businesses in Southeast Asia are small businesses, in fact, MSME actors face many obstacles in obtaining business loans from conventional financial institutions due to the lack of a credit track record or collateral to guarantee.

Modalku service is here to offer loans of up to IDR 2 billion that can be disbursed within 24 hours, so that it becomes a solution for MSMEs to face challenges related to access to capital for businesses. Currently the company is positioning itself as one-stop shop in financing MSMEs so that they no longer use the traditional supply chain approach to achieve financial inclusion, but instead use a credit-based model Artificial Intelligence (AI) and use value added products to reach underserved businesses.

A recent study using the methodology from the Asian Development Bank, revealed that MSMEs supported by the Modalku Group contributed USD 3,6 billion (approximately IDR 51,6 trillion) to GDP in Southeast Asia.

After seven years, the Modalku Group now has licenses in four ASEAN countries, namely Singapore, Indonesia, Malaysia, Thailand, and is already operating in Vietnam. To date, the company has channeled more than Rp29,4 trillion in business funding to more than 4,9 million MSME loan transactions in Southeast Asia.

Since 2019, the Modalku Group has expanded its financial services beyond lending and plans to expand to more locations in Southeast Asia in the next 12 months.

Virtual Credits

In order to move towards neobank, the company previously launched "Virtual Credits", facility paylater to support business needs for MSMEs in the form of credit limits that can be used to transact digitally on the platform or online/offline suppliers. With a fast approval process, limits can be used to increase stock of goods, develop businesses, as well as urgent needs of entrepreneurs.

This Modalku Virtual Credit facility can be used by individual MSMEs and business entities (PT/CV) to manage and control business cash flows with easy access. The limit given will be adjusted to the scale of the business. The individual MSME category can get a credit limit of up to Rp. 100 million, while for MSMEs with business entities it is up to Rp. 500 million. MSMEs can apply for this facility without the need to have collateral.

Currently, Modalku has collaborated with more than 100 online and offline suppliers to assist MSMEs in meeting business needs. Several online platforms that have collaborated include JD.ID, Bizzy, Blibli, Jubelio, and will continue to grow as services develop.

“With the facilities paylater For this business, we aim to provide flexibility to MSMEs to get a longer maturity and help MSMEs to control cash flow better because income or receivables often fluctuate from time to time, especially in times of a prolonged pandemic and uncertain,” said Modalku's Head of Growth and Partnership Arthur Adisusanto.

Cash flow itself is the lifeblood of every line of business. The ability to be able to manage income and expenses is an essential science in developing any business. When cash inflows are slower than outflows (negative cash flow), running and growing a business becomes difficult.