Validus, headquartered in Singapore and operating as a digital lending platform tailored for small to medium enterprises (SMEs), has successfully obtained a $50 million debt finance commitment from HSBC, facilitated by the ASEAN Growth Fund strategy.
The infusion of capital will be directed towards bolstering financial inclusivity among micro, small, and medium businesses within Indonesia, by tackling the prevalent issue of insufficient access to financial services.
Given the substantial contribution of 64.2 million MSMEs, which account for 61% of Indonesia’s GDP as per information from Indonesia’s Ministry for Economic Affairs, the sector’s potential for scaling is significant. These enterprises also provide employment for roughly 119.6 million citizens, representing 97% of Indonesia’s workforce. Despite these figures, a mere 17.5 million of these businesses have ventured into the digital and e-commerce spheres. Hindered by rigid operational, reporting, and collaterization prerequisites from traditional banking institutions, Indonesian MSMEs often struggle to secure financial backing, a challenge underscored in a World Bank report from 2017. Despite governmental efforts, MSMEs beneficially receive only around 20% of bank lending, as per this report.
Vikas Nahata and Nikhilesh Goel, who established Validus in Singapore back in 2015, have crafted a unique lending framework centered around supply chains. This model, innovative in its incorporation of non-conventional data through partnerships with established banking institutions and global organizations, has enabled Validus to broaden its operations, marking its presence in Indonesia (as Batumbu), Thailand (through Siam Validus), and Vietnam (via Validus Vietnam).
Goel noted that despite the SEA region’s traditional banking sector’s heavy reliance on outdated credit assessment processes – primarily focusing on historical financial performances and property as collateral – there is a critical need for SMEs to secure accessible and steady working capital. This financial empowerment is essential for their growth and in turn, facilitates job creation and economic development. Validus emerges as a pivotal intermediary in this context, establishing itself as the premier digital financing platform for SMEs across the ASEAN.
Serving a clientele chiefly composed of MSMEs in need of short-term working capital, Validus operates with a blend of supporting lenders that ranges from significant global names like Citi, HSBC, FMO, Credit Saison, and OikoCredit to leading regional institutions such as CIMB Niaga and Bank Mandiri, prevalent across Indonesia and Thailand. As Goel points out, the platform’s strength lies in its network of over 100 unique partnerships spanning Southeast Asia.
“Our platform operates as the leading marketplace for SME financing across Southeast Asia, based on our outstanding loan book size and monthly loan disbursements which currently averages at $150 million,” Goel elaborated.
Over the recent three-year period, the startup has witnessed a notable climb in revenue and net profits.
“In these past three years, we’ve seen our Group’s consolidated revenues grow by a Compound Annual Growth Rate (CAGR) of 69%. Notably, our ventures within Indonesia – our largest operational market across the four countries – have achieved net profit positivity since 2022 and have become a vital cash flow source for our Group,” Goel shared with TechCrunch. “Our EBITDA margins have surpassed 50%, and we are on track to reach Group-level cash flow positivity by early next year.”
Although Validus has a workforce exceeding 300 individuals spread across five nations, specific details regarding its customer base remain undisclosed.
To date, the company’s overall equity funding has approached the $75 million mark, with prior contributions coming from Vertex Ventures Southeast Asia and India, Vertex Growth, FMO, 01Fintech, NongHyup Financial Group, Norinchukin Bank, Aizawa Asset Management, and Lotte F&L among its investors.
Compiled by Techarena.au.
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