Funding Societies Co-Founder and CEO Kelvin Teo
Licensed and registered in Singapore, Indonesia, Thailand, and Malaysia and operating in Vietnam, Funding Societies (known as Modalku in Indonesia) provides business financing to SMEs. In addition, it offers payments and collections intending to solve SMEs’ cashflow management challenges.
The finance platform claims it has achieved over US$3.2 billion in business financing, processing over 5 million transactions and serving about 100,000 SMEs across Southeast Asia. In late September, the fintech firm announced a US$27 million in debt fundraising led by AlteriQ Global, with participation from Aument Capital Partners and Orange Bloom.
Shortly after the funding announcement, e27 spoke with Funding Societies’s Co-Founder and CEO Kelvin Teo.
Below are the edited excerpts from the interview:
What unique financing solutions do Funding Societies offer to underserved SME segments in its five markets, and how do they address the specific needs of these businesses?
We see many underserved MSMEs/SMEs across our five operating countries, from sole proprietors to small listed companies, including traditional SMEs to startups. Typically, these businesses come to us for their first-time business loan, top-up to bank loans, fast credit approval and flexible financing options.
Also Read: SME lender Funding Societies nets US$27M debt funding
Our financing solutions come in the form of term loans, invoicing financing, and micro-loans ranging from US$500 to US$2 million, catering to businesses of various stages and needs. Many of these businesses use the funds for working capital or as bridge loans to scale their businesses.
Could you provide insights into Funding Societies’s growth and impact in Southeast Asia? For instance, how has the company contributed to the growth of SMEs in the region?
In 2020, we collaborated with the Asian Development Bank (ADB) to survey the social and economic impact of our lending in Singapore, Indonesia and Malaysia. Our regional impact survey found that Funding Societies-backed MSMEs and SMEs contributed US$3.6 billion to gross domestic product (GDP) via the multiplying impact of direct, indirect and induced economic effects, resulting in around 350,000 new jobs.
Funding Societies emphasises its environmental and social management System. Could you explain how this system works and how it benefits both the company and its clients?
We started implementing our environment and social management system (ESMS) in early 2023 across all our markets. The ESMS is a set of processes and procedures that allow us to assess borrowers from an environmental and social risk perspective instead of only from a financial risk perspective. It is a concrete way to integrate ESG considerations into our core business by embedding them in our credit assessment process.
Also Read: Funding Societies enters neobanking space with investment in Indonesia’s Bank Index
Through our added ESG lens, we will be able to increase the ESG exposure to our borrowers, thereby allowing them to stay updated with market developments on ESG. The design of the ESMS was done through technical assistance from one of our debt investors and with the support of PwC Netherlands.
Can you share some success stories or examples of how SMEs have benefited from Funding Societies’s financing and cashflow management solutions?
Shop Patrol is a Singapore-based e-commerce firm for the latest premium quality furniture. It works on a pre-order model and needs occasional working capital to purchase new stocks and meet growing customers when its current customers are late in making payments.
Using Funding Societies’s business expense solution Elevate and credit line, Shop Patrol maintained a steady cash flow for stock purchases and a scalable payments and sales cycle to boost its business by 70 per cent.
How has Funding Societies adapted to the evolving fintech landscape in SEA, and what strategies have you employed to stay competitive and innovative?
Since our inception, we’ve progressively evolved our business annually to build a resilient SME financing platform, as SME credit is a hard business and a big pain point for SMEs. We stay competitive by many lead bullets rather than a silver bullet.
Also Read: Funding Societies acquires payments solution startup CardUp
In 2021-22, we’ve grown from financing to cards, payments, collections and accounts, with the acquisition of payments FinTech CardUp and partnerships. The strategic expansion positions us to be a closer financial partner for SMEs.
Could you elaborate on the role of technology and data analytics in your credit assessment process for SMEs seeking loans?
We’ve used technology and data to improve customer acquisition, operating leverage and credit assessment. Specifically for credit assessment, we combine traditional and alternative data to increase credit approvals using AI, digitalising and simplifying the application process, and offering and deepening our product suites, e.g., Syariah, car dealer financing. This is reflected in our NPS survey, whereby SMEs choose us for our speed, ease of application and flexibility.
Given the significant role of SMEs in SEA’s economy, what long-term vision does Funding Societies have for supporting and empowering these businesses in the region?
Funding Societies’s vision is to empower SMEs and uplift Southeast Asian societies by giving every SME a fair opportunity for growth. The love of money is the root of all evil, but money is key to social mobility, business growth and innovation.
We believe that one day, we’ll move from alternative to mainstream financing. And we can further simplify financing and empower SMEs with financial management, which is being accomplished by our cash flow management platform Elevate.
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Image Credit: Funding Societies.
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