In Indonesia’s increasingly competitive and cautious economic climate, small and medium-sized enterprises (SMEs) are facing a complex set of challenges.
According to Arthur Adisusanto, Country Head for Indonesia at Funding Societies, the slowdown in consumer spending has had a direct impact on SME revenues and their ability to grow. While inflation and global headwinds contribute to the uncertainty, the bigger issue is that Indonesia’s economic expansion has not met expectations. As Adisusanto notes, first-quarter GDP growth fell short of the government’s 5.2 per cent target, dampening the growth prospects of the very businesses that power much of the country’s economy.
Against this backdrop, the demand for financing among SMEs remains strong. Yet, not every business is positioned to secure credit. Funding Societies—long recognised as a leading SME digital financing platform in Southeast Asia—has adapted its strategy in response to this evolving landscape. The company has shifted its focus away from ultra-micro and micro enterprises, such as sole proprietors and home-based operations, and is concentrating on SMEs with more established structures, financial records and cash-flow visibility.
This shift is part of a broader effort to ensure sustainable growth and responsible lending. “We obviously want to be there and bridge the financing gap,” Adisusanto says in an interview with e27. “But at the same time, we also need to protect the lenders. If the clients that come to us don’t meet our criteria, then we have to reject them.”
Operating across Indonesia, Singapore, Malaysia, Thailand and Vietnam, Funding Societies adapts its offerings to the unique needs of each country. In Malaysia, the company has established a strong presence in dealer financing, supporting vehicle dealerships with inventory funding. Singapore has developed a niche in fixed-asset financing backed by property.
Indonesia, however, takes a distinctly horizontal approach. Rather than focusing on specific industries, Funding Societies assesses SMEs based on their financial fundamentals. “We don’t necessarily look at verticals. We assess the business, the financials, the cash flow and the credit history,” Adisusanto explains.
This enables the platform to support a diverse range of Indonesian SMEs, particularly those that traditional banks often overlook.
How institutional investors power growth
Indonesia has nearly 3,000 financial institutions, from commercial banks to rural banks and multifinance companies. While banks generally serve larger SMEs, many lack the infrastructure to lend to smaller businesses. This is where Funding Societies sees tremendous potential. Through partnerships, banks can channel funds to smaller SMEs via the platform, using Funding Societies’ technology, underwriting and monitoring capabilities.
Apart from that, Funding Societies often steps in when banks decline credit applications. While this places the company in a higher-risk segment, it also fills a critical financing gap for businesses that still have strong fundamentals but lack the collateral, credit history, or scale required by banks.
When SMEs compare financing alternatives, three factors typically matter most: pricing, speed and certainty of capital. Adisusanto is candid that Funding Societies is not the cheapest provider and does not promise the fastest disbursements. Its due diligence process takes more time compared with lenders that offer approvals in minutes because SME financing is inherently more complex and demands careful assessment. However, the company excels where it counts: reliability.
“Where I think we would win is the guarantee that the capital is there when they need it,” he says.
A key driver behind Funding Societies’ ability to guarantee capital lies in its growing partnerships with institutional investors. While the platform once maintained a balanced mix between retail and institutional funders, retail investor participation has dwindled amid negative perceptions of the wider peer-to-peer lending industry.
Institutional investors, ranging from funds to financial institutions, have become Funding Societies’ primary source of financing. These institutions are more receptive to data-driven risk assessments and can appreciate the platform’s differentiated approach and robust credit evaluation.
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“With institutions, you can reason with them,” Adisusanto notes. “[With retail investors,] there’s a lot more pre-work to make them understand how we’re different and how we manage our risk.”
In the next two to three years, Adisusanto envisions deeper collaboration across the financial sector, enabling more SMEs to “graduate” to better, cheaper facilities, whether through Funding Societies or traditional banks. “If they grow and get better facilities, that means we’ve done our job,” he says.
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