Validus, a Singapore-based digital lending platform for SMEs, has secured a $50 million loan from HSBC under the ASEAN Growth Fund strategy.
Validus will use the proceeds to support financial inclusion for Indonesian SMEs, addressing the challenges they face in accessing financial resources.
According to the Indonesian Ministry of Economy, 64.2 million SMEs account for 61% of Indonesia's GDP, and the potential for growth is immense. These SMEs employ around 119.6 million people, which is 97% of the country's total workforce. However, only around 17.5 million SMEs are using the online ecosystem or e-commerce. According to a 2017 World Bank report, Indonesian SMEs face significant challenges in obtaining financing, mainly due to the strict operational, reporting and collateral requirements of commercial banks. Despite government efforts, only around 20% of bank loans are directed to SMEs, the World Bank report stated.
Vikas Nahata (Executive Chairman) and Nikhilesh Goel (CEO) co-founded the company in Singapore in 2015. They developed a supply chain focused lending model leveraging non-traditional data access through partnerships with traditional banks and international institutions. The company has since expanded to Indonesia (Batumbu), Thailand (Siam Validus) and Vietnam (Validus Vietnam).
“Traditional banks in the region still rely on outdated methods for credit assessment of SMEs, relying too heavily on past financial performance and real estate collateral,” said Goel. “In a region where GDP is growing at 5-6% annually, SMEs need stable working capital to expand their businesses and contribute to job creation and nation building. In this regard, Validus plays a major role as ASEAN's largest digital SME lending provider.”
Goel told TechCrunch that the company's users are primarily small and medium-sized enterprises borrowing for short-term working capital needs, and lenders include major international institutions (Citi, HSBC, FMO, Credit Saison, OikoCredit) as well as major local banks in Indonesia and Thailand (CIMB Niaga, Bank Mandiri). Goel said one of the company's differentiators is that it has more than 100 unique partnerships across the Southeast Asian region.
“Validus is the largest SME lending marketplace in the Southeast Asia region by outstanding loan balance and monthly loan disbursement, and is currently making an average of $150 million in new loan disbursements per month,” Goel said.
(Left) Vikas Nahata, Co-founder and Chairman (Right) Nikhileth Goel, Co-founder and Group CEO Image courtesy of Validus
Over the past three years, the startup has seen growth in both revenue and net profit.
“Over the past three years, we have grown our consolidated group revenue at a compound annual rate of 69%. More importantly, our Indonesian business, which is our largest market among the four countries in which we operate, has been net profit positive from 2022 onwards and is a source of positive cash flow for the group,” Goel told TechCrunch. “Our EBITDA margins are over 50% and at the consolidated group level, we aim to be cash flow positive by early next year.”
The company has more than 300 employees in five countries but declined to disclose how many customers it has.
The company has raised total equity funding of approximately $75 million. Previous investors include Vertex Ventures Southeast Asia and India, Vertex Growth, FMO, 01Fintech, NongHyup Financial Group, The Norinchukin Bank, Aizawa Asset Management and Lotte F&L.