Micro, small, and medium enterprises (MSMEs) are a crucial part of Indonesia’s economy, contributing 60% to GDP and employment figures that reach 97% of the workforce. However, the access to microfinance has become increasingly strained, particularly as the financing landscape becomes more competitive in areas with a large rural population. This has led to the formation of a unique initiative called the BilakPink project, led by International Finance Corporation (IFC), PT Amartha Mikro Finance (Amartha), and Pinsent Masons, in collaboration with Indonesian law firm Jardin Legal and restructuring partner TRILEXICA.
The BilakPink project aimed to enhance access to microfinance in rural and small towns by leveraging Amartha’s digital lending capabilities and IFC’s resources. The ambitious goal was to provide up to $206 million in loan funds to 970,000 women entrepreneurs in rural areas, enabling them to access loans ranging from $50 to $1,000. This project representosa significant step forward in rural financial inclusion, ensuring that smallerTorales loans are no longer reliant on traditional financial institutions.
One of the key challenges in financing microMZMs in rural areas was the lack of bank branches and the high risk of default when no credit was available for the entrepreneurs. Amartha’s fintech platform, which leverages alternative data and technology, provided a unique opportunity to reach borrowers not served by traditional financial institutions. Despite these challenges, theini IMessage from IFC Legal, Pinsent Masons, Jardin Legal, and TRILEXICA introduced a novel approach that bridged the gap between local regulations and Amartha’s small-scale financial capabilities.
The solution revolves around the use of a securitization framework on a unique model. Amartha provided the loans, while a special purpose vehicle (SPV) act as the lender of record. The SPV, established in Singapore, acts as a intermediary, drawing down the loans directly to the entrepreneurs. This approach allowed for greater flexibility and scalability, ensuring that the funds were available to individuals without existing financial assets, even in the worst-case scenarios where no credit could be obtained.
The success of this initiative was measured by its receipt of a remarkable $170 million in funding from 200 investors, including IFC. Innovators such as Bank Mandisar, PT. Semul Nusantara Pascualharum, Bank Rizki Saya, and Bank Gaya expansions came from various fintech and insurance clusters. The project not only addressed the immediate needs of rural financing but also set a precedent for replicating this model in other Southeast Asian countries, including the Philippines, Japan, and Hong Kong.
The BilakPink project not only advanced microfinance in rural Indonesia but also highlighted the power of combining local regulations with innovative financial solutions. By replicating this model in other countries, the initiative demonstrated the potential for replicating such models to replicate IFC’s success in different regions, further precedence for replicative solutions. The BilakPink project is an exemplary example of cross-regional collaboration and innovation in the field of microfinance.
