\n

The project code name “CROWN” is a unique opportunity to invest in an established online platform offering digital solutions to facilitate MSMEs\' (Micro, Small & Medium Enterprises) financing in Indonesia.

\n\n\n\n

.

\n\n\n\n

The company managed to reach profitability thanks to an innovative SaaS Business Model with multiple revenue streams:

\n\n\n\n

\n
1. Main revenue stream: Digital lending services for MSMEs with > USD 100m loans provided to date
\n\n\n\n
2. Additional recurring revenue stream through the cross-selling of:\n
   \n
   • Credit insurance solutions in a rapid digitalization context (37m additional internet users in the last 3 years in Indonesia)
   \n\n\n\n
   • Digital solutions for MSMEs (digital document management, customer management, digital payments for MSMEs)
   \n\n\n\n
   • New product launch pipelines include earned wage access, non-credit insurance products
   \n
   \n
\n

\n\n\n\n

.

\n\n\n\n

It is a unique opportunity for a strategic player to:

\n\n\n\n

\n
• enter the Indonesian market, the largest and most underserved in ASEAN:\n
  \n
  • +60m MSMEs in Indonesia vs 2.6m in Thailand
  \n\n\n\n
  • financing gap left by traditional financial institutions >USD 165bn (World Bank)
  \n
  \n
\n

\n\n\n\n

\n
• exploit / scale / accelerate the company’s existing platform to boost all revenue streams in Indonesia (the company has lost almost 2 years and now benefits of all the necessary licenses for both business and consumer lending)
\n

\n\n\n\n

\n
• duplicate the business model other booming Asian & overseas markets (Thailand, Vietnam, ...) since 80% of the existing model will be identical
\n

\n\n\n\n

\n
• incorporate a profitable and commercially proven digital lending business and additional digital solutions / potential revenue streams into a comprehensive digital banking business
\n

\n\n\n\n

\n
• capture attractive risk-adjusted returns via balance sheet lending to MSMEs
\n

\n\n\n\n

.

\n\n\n\n

Key Figures:

\n\n\n\n

\n\n\n\n

Revenue 2023e = USD 1.4m

\n\n\n\n

\n
• The company slowed down its activity in 2022 & 2023 and invested > $1m in order to comply with the new regulatory framework (POJK10) imposed by the OJK (Otoritas Jasa Keuangan = Financial Services Authority) in July 2022.
\n

\n\n\n\n

The business is set to be back to growth from the beginning of 2024.

\n\n\n\n

\n
• USD 45m loan disbursements are forecasted in 2024
\n

\n\n\n\n

\n\n\n\n

.

\n\n\n\n

Key Investment Considerations:

\n\n\n\n

1.    The company’s existing strengths

\n\n\n\n

\n
• A comprehensive local team composed of fintech & digital professionals that can run the company even with founders\' departures.
\n\n\n\n
• Fully licensed by Indonesia’s OJK (Otoritas Jasa Keuangan = Financial Services Authority), i.e. no barriers to entry for a player willing to enter the market
\n

\n\n\n\n

\n
• B2B positioning: Proprietary database of 300k registered MSMEs (x25 vs. 2021)
\n

\n\n\n\n

\n
• Unique SaaS business model: Additional recurring revenue stream secured through the cross-selling of complementary digital solutions for MSMEs (credit insurance, digital invoicing, customer management tool, document e-signature, others) accessible via SaaS digitalization platform
\n\n\n\n
• The company has demonstrated its ability to generate profits for two consecutive years, while other major players have had no path to profitability
\n\n\n\n
• Established presence in Indonesia, the largest market (+60m MSMEs vs 2.6m in Thailand) and the most underserved market in ASEAN (financing gap estimated at USD 165bn by the World Bank)
\n\n\n\n
• In-house technology: developed digital tools including a proprietary AI-driven credit score engine for digital lending
\n\n\n\n
• The business model has been approved by world-class financial and institutional investors:  \n
  \n
  • Successfully closed Series A + pre-Series B (total amount = USD 4m) from reputed financial VCs in Southeast Asia
  \n\n\n\n
  • With USD 2.2m revenue in 2022, the company’s revenue/capital raised ratio = 60% while the industry average in Southeast Asia = 33% according to a study from Rabocash
  \n
  \n
\n\n\n\n
• ESG-Driven Business Model:\n
  \n
  • the company aims to facilitate financing solutions for underserved MSMEs in emerging market
  \n\n\n\n
  • USD 50m loans have been allocated to women-led businesses.
  \n
  \n
\n

\n\n\n\n

.

\n\n\n\n

2.    An Attractive Market: Indonesia = +60m of MSMEs mostly underserved in lending

\n\n\n\n

According to a BCG report, the digital financial services market is expected to grow by almost +30% per year in APAC by 2030, driven by Indonesia for the ASEAN region.

\n\n\n\n

Indonesia\'s key market growth drivers:

\n\n\n\n

\n
• Market size: +60m of MSMEs are registered in Indonesia, vs 2,6m in Thailand which is ranked as Number 2 (source)
\n\n\n\n
• MSMEs weight in Indonesia’s economy = over 60% of the country’s GDP (source).
\n\n\n\n
• MSMEs are underserved in terms of financing:
  • According to the World Bank, the financing gap left by traditional banks and financial institutions in Indonesia is estimated at USD 165bn in 2019. In 2022, digital lending platforms covered USD 17bn
  \n
  \n
  • Total MSMEs loans = 20% of MSMEs revenues, vs 60% in Thailand, Malaysia and Singapore
  \n
  \n
\n\n\n\n
• Mature regulatory framework: the OJK (Financial Services Authority) strengthened the regulatory framework of the rapidly growing digital lending sector with the issue of POJK 10 regulation in July 2022 to: \n
  \n
  • Monitor the industry: + 1,800 non-compliant platforms blocked in 2021, and nearly 4,900 since 2018 (source)
  \n\n\n\n
  • High barrier to entry and stricter regulatory standards to operate as reflected in the fact that no new licenses have been issued since January 2022. This is against the backdrop of a -38% reduction in the total number of digital lending licensed and registered companies down to 102 as of June 2023 (source). Of the remaining licensees, less than 5 are considered direct competitors to the company behind CROWN project (MSME segment)
  \n
  \n
\n

\n\n\n\n

\n
• Increasing Internet penetration and rapid digitalization:\n
  \n
  • 37m additional internet users in the last 3 years in Indonesia, representing a growth of +20% (source)
  \n\n\n\n
  • The Indonesian digital economy is the Number 1 market in ASEAN = x2 vs Thailand which is ranked Number 2 (source)
  \n
  \n
\n

\n\n\n\n

\n\n\n\n

3.     Growth drivers

\n\n\n\n

\n
• BtoC business development: Penetration into the personal financing space via an earned wage access financing product targeting the 115m white and blue collars workers in Indonesia
\n\n\n\n
• Multi-services platform: expanding cross-selling products such as non-credit insurance products targeting an insurance industry expected to grow to USD 32bn by 2028 (source)
\n\n\n\n
• Expansion in new geographical markets such as the Philippines which faces a significant financing gap of USD 220bn according to the World Bank, with multiple market traits similar to Indonesia
\n\n\n\n
• Increase the number of balance sheet lending SPVs to have greater control and speed of credit disbursements while improving interest income margins
\n

\n\n\n\n

.

\n\n\n\n

4.    M&A Trends

\n\n\n\n

According to Whitesight report, the M&A activity in the fintech and digital financial services sector will mainly be driven by:

\n\n\n\n

(i) The continuous consolidation trend in the sector:

\n\n\n\n

\n
• July 2022: Qonto (FR), a digital financial management provider for SMEs, acquired its competitor Penta (DE) for its European expansion (source)
\n

\n\n\n\n

\n
• Feb 2022: Luminor (SG), announced acquiring of Funded Here (SG), a crowdfunding platform, to expand its P2P lending solutions regionally. The company started as a property development company. The group has since 2019 diversified its activities in financial solutions with different licenses in Malaysia (source)
\n

\n\n\n\n

(ii) Geographic expansion with leading players in fintech looking to establishing a global footprint:

\n\n\n\n

\n
• May 2022: ZoodPay (CH), a leading digital lending platform for e-commerce in MENA acquired Tez Financial Services to enter Central Asia, Pakistan market (source)
\n\n\n\n
• Feb 2022: Razorpay (IN), a payments company in India acquired Curlec (MY), a leading fintech company in Malaysia (source)
\n\n\n\n
• Dec 2021: The Google/Temasek-backed Neobank Open acquired Finin (India) (source)
\n

\n\n\n\n

(iii) Diversification strategies to expand their range of services as well as their revenue sources (source):

\n\n\n\n

\n
• Digital payment companies acquiring digital lending companies looking to improve their margins:\n
  \n
  • Mar 2019: OVO (ID), a leading Indonesian payments platform acquired p2p lending platform Taralite (ID) to step up lending solutions (source)
  \n
  \n
\n\n\n\n
• Other fintech companies\' interest:
  • Aug 2023: FOMO Group (SG), a provider of digital payment and banking solutions, acquired CapBridge (SG), a digital wealth management platform (source)
  \n
  \n
  • Dec 2022: TymeBank (ZA), the result of a partnership between African Rainbow Capital and TymeGroup (SG), a multi-country digital bank focused on emerging markets in Asia and Africa, acquired Retail Capital (ZA), an award-winning fintech in SME funding solutions. (source).
  \n
  \n
\n

\n\n\n\n

(iv) Growing interest from traditional banks to enhance their services offer in a context of strong digitalization:

\n\n\n\n

\n
• JP Morgan’s acquisition of digital wealth management platform Nutmeg (UK – June 2021 – source) and payments unicorn Viva Wallet (Greece - December 2022 – source) 
\n

\n\n\n\n

\n
• Société Générale acquired the Neobank Shine (FR – June 2020 – source) 
\n

\n\n\n\n

Additionally, M&A is also driven by:

\n\n\n\n

(v) Consumer lending platforms acquiring SME lending fintech for portfolio expansion:  

\n\n\n\n

\n
• May 2022: 4finance (LV), a digital consumer lending company in Europe, acquired Online Loans (PH) to expand its activity in South East Asia (source)
\n\n\n\n
• Dec 2021: MoneyMe (AU), a provider of personal loan platform announced the acquisition of p2p lending platform SocietyOne (AU) (source)
\n

\n\n\n\n

 (vi) Non-financial institutions acquiring fintech to build their financial arm for their community:

\n\n\n\n

\n
• April 2020: Gojek (ID), aSoutheast Asia’s leading on-demand platform, acquired Moka (ID), a POS payment start-up to boost the digitalization of MSMEs’ business (source)
\n\n\n\n
• Oct 2021: Grab (SG), a competitor of Gojek, acquired the majority stake in OVO (ID), leading Indonesian payments, rewards and financial services platform (source)
\n\n\n\n
• Mars 2022: Apple (US) acquired Credit Kudos (UK) an open-banking fintech company (source)
\n

\n