Time For Marketplace Lending

Addressing Indonesia’s Missing Middle

Indonesia has more than 57 million micro-enterprises, but only around 1% of these businesses manage to grow to the size of a sustainable Small or Medium Enterprise (SME). Most micro-enterprises have limited capacity to scale their business, and we refer this segment – businesses with monthly revenue of 10 to 100 million Indonesia Rupiah (IDR) – as the “missing middle”.

We estimate that limited access to credit for these companies reduces Indonesia’s GDP by approximately US$130 billion, equating to 14% of total GDP (according to 2015 figures),  and marketplace lending can play a major role in facilitating this goal by providing improved access to credit for a broader range of Micro and SME businesses (MSMEs).

Other key points:

  • China is an interesting parallel to Indonesia. Its structural imbalances have created huge gaps in MSME financing (estimated size of over US$700BN) and surplus demand for return seeking investable assets (estimated size of over US$2.3TN).
  • We believe marketplace lending platforms can be a transformative force in Indonesia. However, Fintechs, Banks and Regulators need to work together and pursue a coherent agenda of self-interest alongside industry development to realize this opportunity.
  • Marketplace lending dynamics in China (Exhibit)

Time For Marketplace Lending