The International Finance Corporation (IFC) and Amartha, an Indonesian microfinance fintech platform, have developed an innovative funding solution to boost access to finance for women-owned micro-enterprises, according to a statement.

Utilizing capital market techniques, the agreement, announced on Wednesday, creates a platform that will enable Amartha to tap financing, including from offshore impact investors, that could be scaled up to $206 million, The IFC said.

To establish the platform, IFC, the private sector arm of the World Bank, has committed funds from its own account as a cornerstone investor and aims to mobilize the balance from reputed international investors.

By boosting access to finance for microenterprises, part of Indonesia’s micro, small and medium sized (MSME) sector, IFC and Amartha will be supporting businesses that collectively employ tens of millions of people and make a key contribution to Indonesia’s economy. The agreement is also seen as having the potential to deepen Indonesia’s capital markets by providing a demonstration effect that could spur similar investments in the future.

Amartha is a pioneer in building financial infrastructure and driving financial inclusion for grassroots communities and contributes to balancing the economic development of non-Java regions and rural communities with over 70 percent of its loans underwritten outside Java, according to the statement. The initiative announced on Wednesday is expected to address the financing gaps for ultra-microenterprises in some of the most underserved segments and geographies of the country, given Amartha’s primary focus on women microenterprises in rural areas outside Java where financing gaps are the widest.

“We are grateful to have a strategic collaboration with the IFC,” said Andi Taufan Garuda Putra, Founder and CEO of Amartha. “Amartha’s technology and our digital financial infrastructure were built to close the MSME financing gap. The digital economy market share in Indonesia is approximately 40 percent of total digital economy transactions in ASEAN. This is where Amartha’s business model aligns with the government’s goal of achieving digital financial inclusion. With this partnership, we can go the extra mile to reach remote villages and women led MSMEs”.

Women-owned businesses make up a significant proportion of Indonesia’s MSME sector which accounts for 97 percent of the nation’s total workforce, but which faces a financing gap estimated at $21.2 billion. The finance gap is even wider for ultra-microenterprises, of which it’s estimated there are 44 million operating in Indonesia. These businesses do not have access to finance from commercial banks and typically rely on funding from informal sources such as money lenders, friends and family. Within this segment, the financing gaps are the widest among female microentrepreneurs and especially those operating outside Java.

“The financing gap faced by female entrepreneurs in Indonesia – who are crucial to the overall economy – widened because of the COVID-19 pandemic which saw women overwhelmingly bear the load of greater domestic and childcare pressures. This partnership is a win for women and a win for the economy,” said Riccardo Puliti, IFC Regional Vice President for Asia and the Pacific.

The partnership between IFC and Amartha is also expected to make an important contribution to digital financing in the country. The expected outcomes are aligned with IFC’s focus in Indonesia and the strategic priorities of the Government of Indonesia which include promoting the digital economy. IFC will also support Amartha in establishing its environmental and social (E&S) management framework to mitigate E&S risks as well as knowledge to help strengthen responsible finance practices as well as undertake greater social financing.

PT Amartha Mikro Fintek (Amartha) was established in 2010 as a microfinance company. In 2016 Amartha transformed into a FinTech company and is licensed under the supervision of the Financial Services Authority (Otoritas Jasa Keuangan – OJK).

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