Validus, a digital lending platform for small and medium enterprises (SMEs) based in Singapore, has secured $50 million in debt financing from HSBC under the ASEAN Growth Fund strategy. The funding aims to support financial inclusion for micro, small, and medium enterprises (MSMEs) in Indonesia, addressing the significant challenges these businesses face in accessing financial resources.
Indonesia’s MSME sector plays a crucial role in the country’s economy, contributing 61% to its GDP and employing around 97% of the total workforce, according to the Ministry for Economic Affairs. Despite this, only 17.5 million of the 64.2 million MSMEs are engaged in the online ecosystem and e-commerce, highlighting a substantial gap in financial and digital access. A 2017 report by the World Bank pointed out that strict requirements from commercial banks hinder MSMEs’ ability to secure loans, with only about 20% of bank loans going to these enterprises, despite government initiatives.
Validus was co-founded by Vikas Nahata and Nihkilesh Goel in 2015, focusing on a supply chain-oriented lending model that leverages non-traditional data through collaborations with traditional banks and international institutions. Over the years, the company has expanded beyond Singapore to include operations in Indonesia (as Batumbu), Thailand (Siam Validus), and Vietnam (Validus Vietnam).
Nihkilesh Goel, CEO of Validus, emphasized the need for accessible working capital to foster growth among small businesses in Southeast Asia, which has been experiencing GDP growth of 5-6% per year. Validus positions itself as the largest digital SME financing provider across ASEAN, offering a crucial alternative to traditional banks that often rely on outdated credit evaluation methods focused on historical financials and real estate-backed collateral.
Validus primarily serves MSMEs that require short-term working capital, with lenders ranging from international institutions like Citi, HSBC, and FMO to local banks such as CIMB Niaga and Bank Mandiri. One of Validus’s distinguishing factors is its network of over 100 partnerships across Southeast Asia, enabling it to support small businesses effectively.
The company disburses around $150 million in new loans monthly, making it the largest SME financing marketplace in Southeast Asia by loan book and monthly disbursals. Over the last three years, Validus has seen significant growth, with consolidated Group revenues increasing at a 69% compound annual growth rate (CAGR). The Indonesian market has been particularly profitable, contributing to positive cash flow and achieving net profit since 2022. Validus aims to be cash flow positive at the group level by early next year, with EBITDA margins exceeding 50%.
Validus employs more than 300 staff across five countries and has raised approximately $75 million in equity funding. Its investors include Vertex Ventures Southeast Asia and India, Vertex Growth, FMO, 01Fintech, NongHyup Financial Group, Norinchukin Bank, Aizawa Asset Management, and Lotte F&L.
Featured Image courtesy of Digital News Asia
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