Validus , a Singapore-based digital lending platform, has secured USD 50 million in debt financing from HSBC as part of the ASEAN Growth Fund strategy. The funds will be used to reinforce financial inclusion for micro, small, and medium enterprises (MSMEs) in Indonesia, addressing the challenges these businesses face in obtaining financial resources.

Validus employs a supply chain-focused lending model and leverages non-traditional data through partnerships with banks and international institutions. The company has expanded its operations to Indonesia, Thailand, and Vietnam. The company's primary users are MSMEs seeking short-term working capital, while its lenders include major international institutions such as Citi, HSBC, FMO, Credit Saison, and OikoCredit, as well as local banks like CIMB Niaga and Bank Mandiri.

Validus is noted for its extensive network of over 100 partnerships across Southeast Asia. Challenges faced by Indonesian MSMEs In Indonesia, MSMEs account for 61% of the country's GDP and employ approximately 119.6 million people, representing 97% of the workforce. Despite this significant economic contribution, only 17.5 million of these enterprises engage with the online ecosystem and ecommerce.

A 2017 World Bank report highlights that Indonesian MSMEs face considerable difficulties accessing financing due to stringent requirements from commercial banks, including operational, reporting, and collateral demands. Additionally, government initiatives have resulted in only about 20% of bank loans being directed toward MSMEs. Access to affordable and timely credit is one of the primary challenges for Indonesian MSMEs.

Many small businesses in Indonesia face high interest rates and complex loan approval processes, making it difficult to secure the funding they need. This financial barrier prevents MSMEs from investing in new technologies, expanding their operations, or entering new markets. The lack of alternative financing options further compounds this issue, leaving many MSMEs reliant on personal savings or informal lending channels, which can be costly and unreliable.

Another significant challenge faced by Indonesian MSMEs is the lack of financial literacy and business management skills. Many MSMEs do not have the necessary knowledge to create solid business plans, maintain accurate financial records, or understand credit terms, which hampers their ability to secure financing. Moreover, the absence of adequate training and support systems means that these businesses often struggle with cash flow management and financial planning.

This lack of financial acumen can lead to unsustainable business practices and increased vulnerability to economic downturns, limiting the long-term growth prospects of MSMEs in Indonesia. .