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Indonesia’s Bukalapak sees itself as ‘financial inclusion champion’

Written by Nikkei Asia Published on   3 mins read

The e-commerce giant is further targeting the underbanked population through its Mitra business.

Indonesian e-commerce company Bukalapak sees further opportunity in helping power the ubiquitous small and midsize family-owned warung retail shops operating throughout the archipelagic nation by increasing its financial product offerings, an executive told Nikkei Asia.

Bukalapak’s Mitra business is helping warung owners to digitalize operations. The service enables the shops, which stock a variety of daily necessities, to carry out one-stop procurement of goods with an app and also sell digital items including phone credits and data plans.

In a recent interview, Howard Gani, Mitra Bukalapak’s CEO, said that the company hopes to expand its financial lineup for warung operators, along with physical and virtual services including paying electricity bills. “I think what is exciting is definitely the financial products as well, [in] which we think that there are still opportunities to go deeper.”

Gani says that warung owners can propel their communities forward without relying on traditional bank branches. “We believe that the Mitra can effectively be that financial inclusion champion,” he said.

The company formed a partnership with Standard Chartered in 2021, before investing in Indonesian lender Allo Bank in 2022. Mentioning these partnerships with banks, Gani said, “We’re definitely looking at a number of them” to expand business in the financial sector.

Gani did not offer details, but the company is working on testing new products and looking at how they can utilize data obtained through operations. “We use rather unconventional ways by looking at the transaction data that we saved in our platform,” he said. “We also look at other trades,” he added, referring to data. “We combine all those different trades as well to generate our credit risk assessment.”

In Indonesia, Southeast Asia’s largest economy, more than 80% of the population is unbanked or underbanked, according to research by Google, Temasek and Bain & Co. published in 2022. The unbanked are people without bank accounts, while underbanked refers to people with bank accounts but insufficient access to services like credit. The situation means that there is a huge untapped market for banking services and many businesses like Bukalapak are trying to fill it.

In 2021, Bukalapak became Indonesia’s first unicorn — a private company valued at USD 1 billion or more — to go public. As of now, it is helping more than 16 million warungs across Indonesia to go digital.

According to venture capital firm Flourish Venture, traditional warung represent 70% of sales in the country’s USD 257 billion grocery market, but the roadside kiosk operators are facing the challenge of increasing competition with modern and larger retailers. Bukalapak sees expanding financial products as helping warung owners to be more competitive to succeed in the market.

Bukalapak booked its first profit in 2022, though it came largely as a result of a marked-to-market gain from its investment in Allo Bank, despite its Mitra business making up 54% of the company’s overall business, up from 44% from the previous year. “We’re very focused on making sure that our business is reliable, and it’s profitable,” he said. “Definitely [we’re ] not just relying on the investment [gain].”

While making money is important for Bukalapak, Gani is keeping his focus on empowering users.

“Our main objective is really to bring them up to another, really to increase their income level, in the hope that can also impact not just their business, their family, but also the people around them,” Gani said.

According to Mitra Bukalapak, warung operators increase revenue by three times on average through digitalization. Gani says that can be done because, “We bring in so much, not just physical products, we bring in so many virtual products, we bring in access to financial products that they probably have no way of accessing.”

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.


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