Amartha is an Indonesian financial technology startup that focuses its mission towards providing affordable financial access and mentorship to the unbanked population living below the poverty line. Operating as a peer-to-peer lending platform, Amartha have disbursed more than USD 10 million funds to 39,000 borrowers, who are mostly micro-entrepreneurs, aiming at improving their income and ultimately alleviating them from poverty through financial inclusion.
Unbanked people are those who do not have traditional bank accounts or access to banking services. Generally, they have lower levels of education and therefore work in informal sectors of the economy and live in a state of financial limitedness. They face difficulties fulfilling the prerequisites to open bank accounts and are generally skeptical of the banking system. Some other factors preventing these people from accessing banking services include limitations in banking infrastructure and service coverage.
The International Finance Corporation reported in 2013 that Indonesia has 55 million micro-businesses, the majority of which do not have access to financial services despite their contribution of providing jobs to more than 90 percent of Indonesia’s total workforce. This problem occurs because micro businesses usually cannot provide loan guarantees, rely largely on seasonal incomes and have no standardized systems of accounting. The lack of access to financial services turns out to be a major factor behind the low productivity of small and medium sized businesses in Indonesia.
Such a problem, for instance, is being faced by Atinah, who makes rice bowls made of rattan to make ends meet. The 42-year- old woman, who lives in Bogor regency, West Java, belongs to one of the 196,000 families living on the edge of poverty that have no banking access in the region, which is located to the south of Jakarta.
Amartha, which provides people-to-people (P2P) lending, is able to reach out to unbanked communities by developing psychometric approaches and credit scoring technologies that allow clients like Atinah to become credit-worthy loan recipients. Clients will also have received a credit rating and credit history, which they can use to apply for future financing.
Such initiatives will create economic democracy and open up opportunities for economic participation by those who would otherwise be denied access by banks. This is the real meaning of financial inclusion.
As a technology startup, Amartha found creative ways to integrate technology with the spirit of mutual cooperation. In addition to the credit scoring technology and loan origination applications, Amartha developed a network of field officers in rural areas to help micro business players gain online access to apply for funds. Field officers have an important role in developing a platform among the unbanked community that relies on cash transactions. This mutual cooperation spirit will help avoid bad debts as members of the community are expected to look out for each other.