Indonesia fintech SME

SMEs account for nearly 90 per cent of all modern businesses, making them the backbone of economies around the world— and it is no different in the largest country of Southeast Asia.

In Indonesia, SMEs contribute 61.1 per cent to the national economic growth and absorb 97 per cent (16.9 million) of the total labour force.

But with the onslaught of the COVID-19 pandemic, Indonesian SMEs have been affected in an unprecedented way. In an official performance survey of around 200,000 SMEs in Indonesia, it was revealed that despite having plans to generate new economic opportunities, over 20 per cent of the SMEs are experiencing a lack in working capital to execute their strategies.

It’s not just about digitalisation

If there is a silver lining for businesses during the pandemic, it is the increased affinity towards tapping into the limitless digital world. By observing the success of online sectors such as e-commerce and ride-hailing in recent times, there’s no denying the positive role of digitalisation in our economy.

But despite the set of opportunities that complement digitalisation, pivoting online also comes with its very own challenges.

This includes maintaining balanced cash flow and proper financing governance— aspects that can ensure the stability of SMEs during these trying times.

Closing the financial inclusion gap in Indonesia

For the underserved SMEs in Indonesia, getting their hands on financing has long been a prevailing problem even before the pandemic. Due to limited access to banks, SMEs face grave difficulties in obtaining loans and funding business expansion.

But over the years, the vibrant fintech industry in Indonesia has been able to alleviate this prevailing issue by offering SMEs loans at a lower cost with digitally-friendly features, circumventing the need for conventional banks altogether.

Leveraging on the concept of combining financial services and technology to streamline the process of applying for loans online, Dompet Kilat was founded to provide a new way for SMEs to obtain healthy and government-compliant financing for business maintenance and expansion, hence addressing the needs of contemporary entrepreneurs.

Also Read: Plentina raises US$2.2M seed round to improve trustworthiness in financial lending in Philippines

Taking a loan during the pandemic: Are you serious?

Let’s face it— relief measures by the government, such as loan relief and subsidies can only be stretched so far. For any real progress to happen for SMEs, capital investments are almost inevitable.

Nevertheless, taking out a loan and being in debt, during a pandemic no less, are legitimate concerns for businesses and entrepreneurs.

But more than providing customers with accessible solutions to apply for loans without the hassle of going through the usual banking hoops, fintech lending platforms offer the opportunity for SMEs to build a positive online track record and gain positive credit scores, both of which can lead to easier access to future financing.

By procuring financing through fintech platforms, SMEs are able to strengthen their credit reputation. Over time, this will provide SMEs with more access to other opportunities, with better terms, lower interest rates, larger loan sizes and eventually access to the Buy Now, Pay Later (BNPL) system, which is all the rage in the current fintech market.

Besides inspiring start-ups and SMEs to scale-up and stay competitive, many fintech lending platforms also provide SMEs with competitive rates and non-collateral agreements, as well as a rapid and user-friendly experience by going digital.

Towards a better finance management

During these unpredictable times, having a steady cash flow is incredibly important for SMEs. Likewise, understanding the proper financing management can only solidify a company’s economic standing.

While seasoned entrepreneurs might know the ropes to fintech lending, here are a few pointers for upcoming entrepreneurs who might be keen on the future of SME loans.

Be transparent

SMEs need to be open and transparent about their business model at all times. This includes being upfront about the risks involved and the working capital cycle.

It is important for fintech lending platforms to accurately assess the risks involved in order to propose suitable debt products that benefit the requirements of the SMEs.


Discipline is a crucial trait in doing business. As the trust between borrowers and lenders is built overtime, SMEs should comply with the terms and conditions of the loan agreement in order to build confidence.

Ensure a matching loan tenure to business’ cash cycle

In avoiding potential delinquencies, the tenure of the loan applied should be in congruence with a business’s cash cycle. This also ensures that the SME’s borrowing costs are efficient.

Borrow as needed

SMEs should only borrow the amount that is needed and nothing more.

Also Read: How Warung Pintar builds tech solutions to help warung owners embrace the future

Timely repayment

Paying your debts on time also translates to a good credit standing, which will entitle SMEs to a slew of other benefits including lower interest rates.

As the fight for stability and freedom still proves to be a long way to go, it is ever more important for the underserved SMEs and startups to band together and empower one another through these difficult times.

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Image credit: sorrapongs

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