Thousands of carts line up in the pasars, or local markets, of Indonesia every day to sell varieties of fruits and vegetables — sweet-smelling custard apples, unripe bananas, and earthy mushrooms. The warungs, or small roadside shops, fire up their woks to prepare delicious noodles, fragrant rice, fish, and vegetables cooked in savory sauces. The toko-owners flip their door signs to welcome customers and sell everything from seeds to sickles and sewing needles to sarongs.

These small businesses — running on minimal infrastructure, limited capital resources, and sweat equity — are the heartbeat of Indonesia’s economy. More than 64 million micro, small, and medium enterprises (MSMEs) fuel the engine of Indonesia’s economy. They contribute nearly 61 percent to the country’s GDP and provide livelihood to 97 percent of the archipelago’s 272 million population.

Women selling fruits and vegetables in a market.

These microenterprises have recurring financing needs to pay salaries and bills, buy inventory, and transport stock, yet only 19 percent of all MSMEs have access to financial services. The IFC estimates the MSME finance gap in Indonesia to be a staggering $234 billion.

Digital technologies can help expand the reach, affordability, and quality of financial services for this segment. Digital banking, online lending platforms, and mobile payments can help microentrepreneurs — particularly women — overcome operational challenges, establish their creditworthiness, access timely credit, and successfully run their businesses. Amartha, one of Indonesia’s fastest-growing financial companies, provides digitally enabled financial solutions to microentrepreneurs, with a focus on serving women-led businesses.

Accion Digital Transformation Fund (ADTx) invests in financial institutions by providing growth capital to better meet the needs of small businesses that are currently excluded from the financial system. Alongside capital investment, companies will receive hands-on strategic support and insights from Accion’s deep-rooted expertise and global experience in developing responsible digital financial solutions. The fund was launched by Accion to help build the digital capabilities of banks and financial companies across South and Southeast Asia, Latin America, and Africa, enabling them to better serve their clients.

With advisory support from its ongoing partnership with Accion and Mastercard Center for Inclusive Growth, Amartha is improving its operational productivity and enhancing its underwriting process for MSMEs. Accion Digital Transformation Fund’s recent investment in Amartha aims to help the company reach millions of micro and small businesses and individuals, connecting them to the digital economy. We are excited to support Amartha as they work to:

Overcome conventional banking challenges: Digital marketplace for P2P lending

Peer-to-peer (P2P) lending plays a significant role in the microfinance sector, serving around 26 million borrowers in Indonesia. The P2P model helps borrowers skip lengthy paperwork processes and secure competitive interest rates despite limited credit history. Amartha operates a digital marketplace that links borrowers with institutional and individual lenders. It takes a customer-centric approach to product development for borrowers and actively engages with investors and lenders by sharing the benefits of impact investments. The platform-based approach to financing helps to manage revenue growth, funding, and operational risks, and build scale to reach more borrowers across Indonesia.

A woman scanning a QR code from a poster with the mobile phone.

Put women at the forefront: Digital products for low-income rural women entrepreneurs

Of the 64.2 million MSMEs in Indonesia, more than 60 percent are led by women. Supporting these women entrepreneurs will not only drive gender equality but also promote innovation and bolster the economic growth of the country. Amartha provides access to finance for women microentrepreneurs across Indonesia — 85 percent of them being in peri-urban and rural areas of Sumatra, Java, and Sulawesi — and aspires to provide a full suite of products and services to drive financial inclusion of this key target segment. To date, Amartha has disbursed working capital of more than 25 trillion Indonesian rupiah (USD 1.6 billion) to more than 2.5 million women-led MSMEs in rural and peri-urban areas across the archipelago. We believe that evolving Amartha’s digital products and services to better meet the financing needs of women-led small businesses will help the company reach millions of other women entrepreneurs in the upcoming years.

Evolve from high-touch to high-tech: Innovative products and services for digital adoption

The gap in access to financial services for MSMEs is largely driven by low financial literacy, difficulties establishing credit history, and high credit costs for borrowers. Moreover, the traditional high-touch lending model makes it difficult to reach rural, underserved populations due to their geographical remoteness.

Amartha is in the process of implementing digital initiatives such as digital bill payments, cashless disbursements, and digital loan repayments for borrowers to address the challenges of high-touch banking models.

Amartha is steering the digital journey of underserved microentrepreneurs and strengthening the grassroots economy in rural Indonesia. We are proud to join forces with Amartha as we work toward our shared goals of helping reduce inequality and advancing inclusion.

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