Norfund invests in fintech targeting SMEs

November 3, 2023

Norfund is investing USD 7.5 million in Funding Societies, Southeast Asia’s largest digital financing platform for small and medium-sized businesses. The goal is to help create new jobs in Indonesia and Vietnam.

In emerging economies, small and medium-sized enterprises (SMEs) account for 7 out of 10 jobs, according to the World Bank. However, many of them struggle to access basic financial services such as savings, insurance and loans.

Funding Societies is a fintech platform specializing in short-term financing for SMEs in Southeast Asia. The company’s ambition is to play a decisive role in bridging the gap between those who have access to finance and those who do not.

“We are very happy to be able to support Funding Societies in expanding their reach and thereby further increasing financial inclusion, so that more SMEs can grow and create badly needed jobs in Southeast Asia”.

Erik sandersen, evp, Norfund

Difficult for SMEs to access capital

In developing countries, a lack of financial infrastructure constitutes a significant obstacle to social and economic development. A study carried out by Funding Societies shows that 70% of the small and medium-sized companies in their markets depended on start-up capital from their own savings and support from family and friends. Only 23% were able to obtain funding from traditional banks, and 7% used alternative funding sources.

Fintech opens up new opportunities for offering customized loan products, and the ambition is that Norfund’s investment will contribute to creating more jobs in small and medium-sized enterprises in Indonesia and Vietnam.

“We are honored to collaborate with Norfund to meet the growth capital needs of several underserved SMEs in Southeast Asia.”

Kelvin teo, ceo, Funding societies

Fintech creates new opportunities – not least for female entrepreneurs

76% of the world’s adult population now has a bank account (World Bank). This is a significant improvement from 68% in 2017 and 51% in 2011. Nevertheless, there is a long way to go before everyone has access to basic financial services, which in turn is an important driver for people to escape poverty.

There is also a significant gender gap: in developing countries in 2021, 74% of men had a bank account, while only 68% of women had the same. A study of female small-scale entrepreneurs in Indonesia shows that limited financing from banks, due to high interest rates and complicated loan documents, is a major obstacle for female business owners.

“Norfund sees great opportunities within fintech that reduces costs and the ability to include both individuals and companies that currently lack financial services,” says Sandersen.

Norfund has previously invested in other fintech including Wave Mobile Money, operating in Senegal and the Ivory Coast; Amartha, a lending platform in Indonesia with a focus on financing rural women; and in Lula Lend, a technology-driven financial institution with a new technology for to assess the risk of loans to small and medium-sized enterprises in South Africa. Last year, Norfund also invested in the fund Integra Partners Fund II, which targets companies in Southeast Asia that focus on financial inclusion through the use of new technology.