Validus secures $50 million in debt financing from HSBC to support its digital lending platform for SMEs in the ASEAN region
Validus will allocate the earnings to the financial inclusion of micro, small, and medium-sized enterprises (MSMEs) in Indonesia, thereby resolving the obstacles they encounter in obtaining financial resources.
According to Indonesia’s Ministry for Economic Affairs, the potential for development is immense, as 64.2 million MSMEs contribute 61% of the country’s GDP.
Approximately 119.6 million individuals are employed by these MSMEs, which accounts for 97% of the nation’s workforce. Nevertheless, the online ecosystem and e-commerce are only utilized by approximately 17.5 million MSME participants.
According to a 2017 report by the World Bank, Indonesian MSMEs encounter substantial obstacles in obtaining financing, primarily as a result of the stringent operational, reporting, and collateral requirements of commercial banks.
Despite government initiatives, the World Bank report stated that only approximately 20% of bank loans are directed toward MSMEs.
The enterprise was established in Singapore in 2015 by Vikas Nahata (Executive Chairman) and Nihkilesh Goel (CEO).
They created a lending model that was supply chain-focused and incorporated non-traditional data access through partnerships with traditional banks and international institutions. The organization has since expanded to encompass Thailand (Siam Validus), Indonesia (Batumbu), and Vietnam (Validus Vietnam).
According to Goel, “Traditional banks in the SEA region continue to depend on legacy credit evaluation methods for small businesses and are excessively dependent on historical financials and real estate-backed collateral.”
“Small businesses need stable and accessible working capital to expand their operations and contribute to creating jobs and nation-building in a region that experiences GDP growth of 5-6% per annum.”
This is where Validus, ASEAN’s most prominent digital SME financing provider, plays a significant role.
According to Goel, the platform is predominantly used by MSMEs to finance their short-term working capital requirements.
The lenders include major international institutions (Citi, HSBC, FMO, Credit Saison, OikoCredit) and prominent local banks (CIMB Niaga, Bank Mandiri) in Indonesia and Thailand.
Goel emphasized that the organization’s distinctive offering is the presence of more than 100 distinctive partnerships throughout the Southeast Asia region.
“Validus is the largest SME financing marketplace in the South East Asia region in terms of outstanding loan book or monthly loan disbursals, with an average of $150 million in new loan disbursals per month,” Goel stated.
The venture has seen increased revenue and net profits over the past three years.
In an interview with TechCrunch, Goel stated, “Our Indonesia business, which is our largest market among the four countries we operate in, has been net profit positive since 2022 and a source of positive cash flow for the Group.
Our consolidated Group revenues have also grown at a 69% CAGR over the past three years.” “We are striving to achieve cash flow positive status at the consolidated Group level by early next year, and our EBITDA margins exceed 50%.”
The organization has over 300 employees in five countries; however, it did not specify the quantity of its clientele.
It has secured a total of approximately $75 million in equity funding. Vertex Ventures Southeast Asia and India, Vertex Growth, FMO, 01Fintech, NongHyup Financial Group, Norinchukin Bank, Aizawa Asset Management, and Lotte F&L are among the previous investors.
