Kredivo Secures $200M Debt Facility from Victory Park Capital

Kredivo Secures $100 Million Debt Facility

Kredivo has recently announced a new $100 million debt facility secured through Victory Park Capital (VPC). This significantly expands the Indonesian digital lending platform’s total warehouse financing with VPC, bringing it to $200 million.

The initial funding round was finalized in July 2020. This latest facility represents the largest loan Kredivo has obtained to date.

FinAccel and VPC’s Investment

Kredivo is operated by FinAccel, a Singapore-based fintech company. VPC’s commitment marks its largest debt investment in a fintech firm outside of the US and Europe.

Notably, this is VPC’s sole investment within the Southeast Asian region.

The acquired funds will be strategically utilized to further Kredivo’s objective of reaching 10 million customers throughout Indonesia.

VPC’s Portfolio

Victory Park Capital has previously provided debt financing to other prominent startups. These include Razor Group, factory 14, Konfio, and Elevate.

Kredivo’s Lending Products

Kredivo currently serves over three million customers. It offers a diverse range of lending solutions.

• Zero-interest, 30-day “buy now, pay later” options for both online and in-store purchases.
• Installment loans spanning three, six, and twelve months, carrying an interest rate of 2.6% monthly, equating to a maximum annual rate of 53.36%.

According to Kredivo CEO Akshay Garg, the “buy now, pay later” service is generally used for smaller online transactions.

Conversely, installment loans are typically employed for financing larger purchases, such as laptops, home improvements, or medical expenses.

Building Credit in Emerging Markets

While services like Klarna, Afterpay, and Affirm provide convenience in established markets, “buy now, pay later” options also function as a credit-building tool in emerging economies.

This is particularly relevant in countries with limited credit card access, as highlighted by Akshay Garg.

Addressing Indonesia’s Credit Gap

Akshay Garg emphasized that Indonesia faces a significant gap in credit availability. He stated that credit represents a substantial and intricate aspect of financial services.

Most Indonesian banks primarily offer secured loans, like those for homes or vehicles, with unsecured lending being uncommon.

Currently, only eight million Indonesians possess credit cards, a figure that has remained stagnant for the past 13 years despite the nation’s population of 270.6 million.

Access to Credit for Millennials

Banks often hesitate to extend unsecured loans, especially to younger demographics, contributing to low credit card penetration.

Akshay Garg explained that Kredivo is addressing an access problem rather than a convenience issue.

The platform is providing unsecured credit to urban millennials for the first time, filling a void left by traditional banking institutions.

Risk Management and Performance

Kredivo’s sophisticated risk-scoring model enables it to offer competitive interest rates.

The company maintains a low single-digit non-performing loan ratio, even considering the economic challenges posed by the COVID-19 pandemic, which Akshay Garg described as a significant test.

Building a Digital Credit Bureau

Similar to traditional credit cards, Kredivo reports customer loan histories to Indonesian credit bureaus, facilitating credit score development.

Akshay Garg stated that the company is establishing Indonesia’s first comprehensive digital credit bureau.

He believes their risk metrics demonstrate the effectiveness of this approach, proving it’s not merely innovation but a system delivering tangible results.

VPC’s Perspective

Gordon Watson, a partner at VPC, expressed his satisfaction with Kredivo’s resilience and growth in a statement.

He affirmed VPC’s commitment to strengthening its partnership with Kredivo.

VPC recognizes Kredivo’s unique combination of growth, scalability, risk management, and financial inclusion within a rapidly expanding emerging market.