- Targets low- to middle-income users
- Has disbursed more than 30,000 loans
INDONESIAN fintech startup Danabijak aims to provide better financial service to the financially underserved segment by utilising state-of-art technology and credit scoring algorithms.
Danabijak chief executive officer and co-founder Markus Prommik tells Digital News Asia in an interview that his main inspiration to start Danabijak came when he moved to Hong Kong and Southeast Asia (SEA) in late 2015.
The region shocked him in the way it has developed over the decade, especially in technology and smartphone penetration.
“Despite the high penetration of smart phones, there was a lack of transparency and convenience in financial services. This was the push for me to start Danabijak. In 2016, I moved to Jakarta to provide better financial services to the underbanked segment.”
Danabijak targets the B2C financially underserved population whose earnings are between three million rupiah to 10 million rupiah.
“We are focused on micro finance which helps our customers to overcome unexpected needs, would it be medical fees, education, and helping our customers to reach their dreams such as buying their first flight ticket.”
He says that these Indonesians are systematically being overlooked by traditional and established financial institutions. Danabijak decided to fix and find a solution to the problem by being efficient, as well as leveraging on technology to create a bigger impact.
To reach them, other than focusing on digital marketing, Danabijak also has an offline presence.
“We believe in the importance of education, we help our customers and borrowers to grow by educating them through organising financial literacy events.”
Prommik explains that Danabijak uses both alternative as well as traditional data for credit scoring which has helped it to figure out innovative risk-based pricing.
“Our interest rates are accordingly set with the risk level of default. This has become our strong competitive advantage and a way to keep our NPLs in single digits.”
Danabijak also provides several payment options for its borrowers and the most commonly used method is the virtual account payment.
Since 2016, it has disbursed over 30,000 loans to and from approximately more than 10,000 active lenders and borrowers. It also plans to scale quite rapidly towards the end of this year.
Prommik explains that his strategy to maintain the business and competitive advantages are to truly focus on customers and add value in leveraging on technology.
“Thus, we are working together with our customers to make the best products available for them. We are also working to improve our risk management and credit scoring algorithms.”
He thinks that the market has definitely seen a huge increase in players focusing on fintech lending in Indonesia. It must be noted that in reality, fintech companies registered and supervised by Indonesian Financial Services Authority (OJK) may vary from micro finance to equity crowdfunding.
“There will be definitely a correction in the market where those with the strongest risk management and information technology in place have enormous competitive advantages compared to others.
“Also, there are a few startups entering the market that have huge pockets to disburse funds and face exponential growth in users. But in fintech lending, it is more important to get back the funds and be able to pick high-quality borrowers.”
When it comes to challenges, Prommik admits that his company faces the biggest difficulty in credit scoring due to the availability of data.
“It is good to see how the regulators are working on a united credit agency but, it still takes quite a lot of time to have up-to-date quality data on the population in Indonesia. Thus, we have focused on building out algorithms that can help us with behavioural credit analysis. It is very important to have local experience in the team who understand the culture and people.”
Generally, Prommik thinks that local fintech startups are still having a hard time when it comes to the process of complying with regulations and “taking care” of people’s money.
“It is definitely not easy to build a fintech startup, but it increases the chances of the fintech sector emerging as the next unicorn as most companies are solving real problems catered to the majority of the population.
“But, seeing how OJK has a progressive mindset on fintech startups and providing a regulatory framework, it makes it easier for startups to operate, to understand their expectations and to receive guidance from them.”
Danabijak was officially registered and supervised by OJK in the second quarter of this year. The startup received an investment from Plug & Play Indonesia a year after it launched and raised capital from the founding team and advisors, who believed in its vision.
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