Small and medium-sized businesses (SMEs) It accounts for approximately 50% of Southeast Asia's GDP, Contributing to job creation, innovation and overall economic expansion. However, as in other parts of the world, SMEs in Southeast Asia face challenges with sufficient working capital. In summary, SMEs are often very risky In order for traditional banks to lend to them, these banks charge high rates if they approve them.

Kelvin Teo and Reynold Wijaya, two Southeast Asian entrepreneurs who met while both earning master's degrees at Harvard Business School (HBS), were keenly aware of this gap in their hometown. Inspired by HBS stated mission They set out to solve this problem to "make a difference in the world."

“We grew up as persecuted people, felt privileged to be at HBS, and wanted to pay it forward to Southeast Asia,” Teo said in an interview with TechCrunch. “SMEs resonate with us and financing is their biggest pain point.”

their beginning, Funding CommunitiesIt is a Singapore-based SME lending platform with licensed and registered offices in Indonesia, Malaysia, Thailand and Vietnam. Following strong growth across the region — more than $4 billion in loans has been given to more than 100,000 businesses to date — the fintech startup is also struggling with funding and most recently raised $25 million in equity capital.

The investment comes from a single investor: Cool Japan Fund (CJF), Japan's sovereign wealth fund. Notably, this marks the fund's first investment in a fintech company in Southeast Asia.

The latest round of funding brings the total raised by Funding Communities to approximately $250 million in equity capital. Strategic supporters also included among the investors: Khazanah National Berhad And maybankSoftBank Vision Fund 2, along with CGC Digital, SBVA (formerly SoftBank Ventures Asia), Peak XV Partners (formerly Sequoia Capital India) and Alpha JWC Ventures, which generated $40 million less in revenue than a year ago.

Funding Societies was founded in Singapore in 2015, building on the collective backgrounds of the two founders. Teo previously worked at Accenture, McKinsey and KKR Capstone, while Wijaya had experience at a family business in Indonesia. After deciding to start a business that would work with SMBs, the duo spent nearly three years researching the most disruptive companies in the US and analyzing their journey to the top.

The company said it has provided more than $4 billion in business finance loans to nearly 100,000 SMEs in five Southeast Asian countries to date. This is from: $3 billion in April 2023. Additionally, it has generated over $1.4 billion in annual payments gross transaction value (GTV) since entering the payments business in 2022.

The startup plans to use the money to expand its primary focus and provide faster financing services to SMEs in Singapore, Indonesia, Malaysia, Thailand and Vietnam. It is also investing in artificial intelligence to digitize and automate the loan application process and grow its payments business, which launched in 2022.

Beyond that, through a partnership with CJF, it will offer financial services to support Japanese companies already operating, looking to expand their presence in Southeast Asia or enter new markets in Southeast Asia, Teo told TechCrunch.

The startup offers a wide range of financing options ranging from $500 to $2 million, including term loans, microloans, receivable/payable financing, revolving loans, and asset-based business loans to meet the diverse needs of businesses at different stages. . Many companies use the funds as working capital or as bridge loans to scale up.

One thing that differentiates the startup from rivals like Validus and Bluecell Intelligence is that it offers a one-stop service from short-term financing to supply chain financing through online and offline channels and partnerships and payment offers. to the CEO of the company.

Revenue from digital financial services is expected to grow in Southeast Asia; digital loans lead the way, accounting for approximately 65% ​​of total revenue. e-Conomy SEA Report 2024.

$144 million since a mammoth Series C+ financing round Teo claimed in February 2022 that the Southeast Asian SME lending market, led by SoftBank Vision Fund 2, has undergone significant consolidation, making the startup even stronger as a market leader.

Ironically, a company's crisis can turn into a gain for the Financing Societies. Teo said the company expects further consolidation among fintechs focusing on credit in Southeast Asia. This is because many companies have reached the end of their runways and are unable to raise more money in SEA's still sluggish financing environment. Those focusing on single countries are particularly vulnerable, he added.

“Since the SoftBank Vision Fund's investment in February 2022, the macro market has changed significantly, with US banks collapsing and the supply of credit to non-bank lenders affected,” Teo told TechCrunch. “US interest rate increases also increased the cost of funds.” He added that by September the macro market was facing a 23-year period of interest hikes and that geopolitics was hurting SMEs and increasing non-performing loans.

During this challenging period, in December 2022, the company made its first acquisition: Sequoia-backed payments fintech CardUp. This nearly tripled its revenue while keeping its headcount nearly constant. Teo also noted that the startup invested in three companies during this period, including a fintech company and a startup specializing in POS software.

A social and economic impact report the startup collaborated with the Asian Development Bank (ADB) in 2020 found that MSMEs supported by Financing Communities contributed $3.6 billion to GDP and created nearly 350,000 new jobs. It has also helped SMBs increase their revenue by 13%, thanks to its fast payment and simple application process, according to the company.