Mekar, the Indonesian fintech start-up controlled by tycoon Putera Sampoerna, will seek financing from foreign venture capital investors as it looks to deepen its use of technology to expand its microcredit lending service both within and outside the country. Thierry Sanders, chief executive officer of Mekar, told the South China Morning Post on the sidelines of last week’s Family Office Solutions Showcases in Hong Kong that since the start-up’s inception in January 2016, it has successfully intermediated micro loans totalling US$7 million, typically at US$250 per loan. Through its P2P website, these micro loans are extended to small farmers and shop-owners across the 17,000 islands making up the archipelago, which is also the world’s fourth most populous nation at over 260 million. Mekar, which means “blossom” in Indonesian, has its origins tied to the tycoon’s wish for more accessible credit in the country. As the heir to the biggest tobacco business HM Sampoerna Tbk, known for its clove cigarettes until it was sold to Philip Morris in 2005, Sampoerna had in 2010 discussed with Sanders about his desire to help the many small businesses in Indonesia access credit with the help of technology. In Indonesia, banks find it challenging to reach small businesses in such a vast country, while credit co-operatives lack funding to be able to lend to them. Our goal is to lend to small businesses with up to 50 employees that find it hard to get credit and would otherwise have to seek out to loan sharks Thierry Sanders, CEO of Mekar Technology should tackle these challenges, and this subsequently gave birth to Mekar, which operates under the Putera Sampoerna Foundation, a social enterprise affiliated to Indonesian conglomerate Sampoerna Strategic and led by the 70-year-old tycoon’s son Michael. “Our goal is to lend to small businesses with up to 50 employees that find it hard to get credit and would otherwise have to seek out to loan sharks,” Sanders said. With over 90 per cent of the 1.1 million small borrowers on Mekar being women – which is a typical microfinance lending model popular also in India and Bangladesh because of women’s supposedly better repayment behaviour than men – Mekar promises investors annual percentage rate of up to 16 per cent for a one-year lock-up term, while charging borrowers 24 per cent. The investors of these loans are Indonesian banks, such as Bank Woori Saudara and Bank Sampoerna. These banks deposit their funding through Mekar, after choosing from all the business descriptions published by the credit co-operatives on Mekar’s website. Sanders said over the next two months, the platform will also be opened to foreign investors to invest in microloans on its platform. The next step will be to invite foreign investors – which could be a venture capital sponsor – to own 25-30 per cent of the business by the end of this year, at which point he expects Mekar to reach break-even. “We are looking for investors that have a good reputation, which are known for bringing governance structure to their portfolio companies,” Sanders said. Mekar uses machine learning technology to help approve loans for business-owners, checking if the loan applicant’s facial features matches with the photo on their identity cards. Sanders said going forward, Mekar’s operating model also has potential to be exported to countries such as the Philippines, also an archipelago with over 7,000 islands.