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Booming securities crowdfunding opens doors for SMEs
A burgeoning financing mechanism gives retail investors easy access to small businesses, with all the risks and benefits that entails.
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The securities crowdfunding mobile app Bizhare is shown on a smartphone. (Courtesy of Bizhare/-)
T
he Financial Services Authority (OJK) has declared securities crowdfunding (SCF) one of five areas it wants to focus on to develop Indonesia’s capital market and help small and medium enterprises (SMEs) acquire funds.
Rp 583 billion (US$39.11 billion) worth of stocks have been issued through the country’s booming SCF industry, according to data from the Indonesian Crowdfunding Services Association (Aludi) per Aug. 16, with last year alone accounting for a staggering Rp 412 billion, far surpassing the target of Rp 300 billion.
SCF has been hailed as a way to get investors to jump into the breach when banks are unwilling to extend credit to SMEs. This entails risks, but SCF platforms say they carefully curate businesses and apply meticulous filters.
“We thoroughly check [the issuers], both financially and legally. We make sure they already are a PT, we make sure their business has been running for one or two years, and we also pay attention to their revenue and profit, whether they have reached the amount we want them to meet,” said Heinrich Vincent, CEO of Bizshare, one of Indonesia’s biggest SCF platforms.
Vincent further told The Jakarta Post that SCF firms also took into consideration business potential to weigh up what issuers plan to do with the funds they are looking to get.
“The platforms can make and stretch their own filters. There are some minimum requirements governed by [OJK] regulations, but how deep we explore and use them as risk mitigation, that’s up to each platform to decide,” Vincent said.
“Since it’s people’s money, we have to conduct detailed due diligence so we can protect the investors. […] We use services of professional analysts both for the financial and legal aspects to protect the investors,” he vowed, adding: “When listed, [SMEs will] already have a comprehensive prospectus for investors to peruse.”
