BCA Joins Forces With Modalku to Tap MSME Market

Jakarta. Bank Central Asia, Indonesia's most valuable listed lender, has partnered with Mitrausaha Indonesia Grup, the company behind digital peer-to-peer lending Modalku, to penetrate the micro, small and medium enterprises, or MSME, market in the country.

Under the partnership, which started in December, BCA disburses business loans to borrowers in the Modalku platform.

The Financial Services Authority regulation has capped loans made on such a platform at Rp 2 billion ($147,000) per loan. 

Liston Nainggolan, the executive vice president of commercial business and MSME at BCA, said the partnership with Modalku was a natural strategic step for the lender. 

"BCA and Modalku have the same interface technology," Liston said in a statement on Tuesday.  

"That's why we've decided to support MSME borrowers on Modalku's platform so that capable MSMEs can continue to expand and independently grow," he said. 

The collaboration with Modalku should allow BCA to provide more lending for micro-businesses in Indonesia – defined as those with assets of less than Rp 50 million or annual sales of less than Rp 300 million – and increase the lender's exposure to MSMEs in Indonesia.

The lender disbursed Rp 192 trillion in loans to commercial businesses and SMEs in the first nine months last year, up 11 percent from the same period a year ago. The loans comprised 32 percent of BCA's total loan disbursement in the period.

Peer-to-peer lending platforms like Modalku, or rivals Koinworks, Investree and Amartha, take pride in their ability to use tech to evaluate borrowers who otherwise are deemed not credit-worthy by conventional banks since they do not have enough collaterals.

Reynold Wijaya, Modalku's co-founder and chief executive, said the collaboration should make it easier for micro, small and medium enterprises to get access to BCA loans.

"It's an honor for Modalku to partner with BCA, one of the most reputable banking institutions in Indonesia," Reynold said. 

"Our shared vision to support financial inclusion in Indonesia has presented an ideal opportunity for Modalku to reach out to more MSMEs. We believe the economy grows stronger with better financial inclusion and more access to financial services for MSMEs," he said.

There are 57 million micro-businesses in Indonesia but only one percent of these companies can expand their scale to reach SME tier due to limited funding, according to a 2017 report by consultancy firm OliverWyman and Modalku.