JAKARTA (TheInsiderStories) – Singapore’ venture loan company, Genesis Alternative Ventures partnering with publicly listed lender, PT Bank CIMB Niaga Tbk (IDX: BNGA), to channel financing to Indonesian startups with total funding of Rp300 billion (US$21.43 million). Both companies looking financial technology, health, education technology, and technology development startup.
Venture debt is a form of financing aimed at developing companies that show great growth prospects and need to maintain and extend their cash base in order to reach the growth stage, while reducing the dilution effect of the fund raised. This financing scheme that combines the principles of conventional bank credit and venture loan companies is the first in Indonesia.
In a wrote statement, the management is optimistic that the startup industry will have a significant role in supporting the Indonesian economy, especially in the current challenging conditions. Therefore, providing financing and banking operational features can support and help startups survive the challenges of a pandemic and continue to grow.
“We hope that the commitment of funds that we have prepared with Genesis can be an alternative source of funding for potential startup companies that have not fulfilled their needs,” wrote the statement.
To date, CIMB Niaga and Genesis has funded GoWork, a leading premium coworking space provider and Tanihub, an agriculture technology company. The rest, there are still exploration of financing to several other startup companies, in line with the increasing awareness of entrepreneurs towards venture debt.
Genesis o-founder and managing partner, Jeremy Loh said, “GoWork has enrolled more corporate customers with a vision of the Future of Work, where these corporate clients want to decentralize their team presence. While, Tanihub experienced sales of the B2C segment which grew by 300 percent during the pandemic.”
Not only through financing, CIMB Niaga also opens other collaborative spaces with startups, including integrating startups’ platforms with bank systems through the Application Programming Interface.
Fitch Rating has rated, tecent acquisitions of small banks in Indonesia by tech firms have highlighted the potential for financial technology (FinTech) entrants to shake up the competitive landscape for banking in Southeast Asian. However, such moves are unlikely to pose a material challenge to the biggest incumbent banks in the near term as technology firms are first likely to target underserved segments of the market.
The agency has previously argued that Indonesia and the Philippines provide the largest market potential among ASEAN’ six major economies owing to their large unbanked populations and low levels of household leverage. The acquisition of existing banks may help to smooth the path for FinTech firms wishing to offer financial services in Indonesia, which has moved more slowly than some other ASEAN governments in developing so-called “virtual banking” licence guidelines.
The growth of FinTech in ASEAN is also prompting closer regulatory scrutiny. In markets where digital bank licensing frameworks are already available, regulators have generally opted to introduce viability requirements for new digital banks, designed to minimize the risks to financial stability presented by the growth of new services and market entrants.
This will add to execution risks around technology firms’ strategies for expanding into financial services, a sector that generally has high regulatory bars and compliance requirements. Fitch believes the tech firms that are likely to provide more formidable competition for incumbent banks over the longer term include those that have established platforms and user bases or are backed by deep-pocketed corporates.
These are more likely to be able to sustain the heavy financial investment necessary to attain scale, maintain cost competitiveness and survive the initial loss-making stages of a startup.
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