The concept of offering a stake in a company through crowdfunding, or equity crowdfunding (ECF), has emerged in Indonesia. There are three ECF startups that are licensed by Indonesia’s Financial Services Authority (OJK) as of December 2019—Santara, Bizhare, and CrowdDana.
ECF platforms help businesses or projects raise funds through crowdfunding mechanisms. Those who participate as investors receive shares.
It’s similar to making an investment, in that anyone who seeds their money into a business or project will eventually receive a portion of the profits.
In 2018, OJK issued regulations for the ECF model, defining the operational boundaries for platforms and investors, and stating limits on the amount of money that can be raised from crowdfunding.
Three trailblazers
Santara and Bizhare operate under the same concept. Both are creating opportunities for SMEs to raise funds by offering shares.
CrowdDana, however, sells shares or investments in property assets, making them more accessible to the public.
Santara’s CEO, Avesena Reza, claims that the company currently has the largest distribution of funds, the broadest investor base, and the most companies who offer shares to the public via ECF platforms. However, he did not reveal the exact number.
The company has big plans for 2020, and has set goals to build up its capabilities in portfolio management, risk management, and network distribution, as well as add new technology to its platform.
“We’ve made various improvements in terms of technology, such as user experience, easy access, integration with Dukcapil (Civil Registry Service Office), collaboration with other technology players. We also plan to implement blockchain technology later this year, as a back-office recording mechanism for all digital assets,” Reza explained.
Bizhare founder and CEO Heinrich Vincent has made similar claims. He said the company already has 35,000 investors from 34 provinces throughout Indonesia. The platform’s distributed funds have reached IDR 27 billion (USD 1.77 million), with dividends to investors totaling at IDR 1.5 billion (USD 98,665) as of January 2020.
“Our plan in 2020 is to help more SMEs in Indonesia gain more benefits and rapid expansion, by improving our analysis system while conducting education and utilizing digital technology to assist them. In addition, we will also launch a secondary market feature for investors, to be able to sell their shares, as well as other surprises that we will inform soon,” Vincent said.
Meanwhile, CrowdDana hosted two boarding house projects that were successfully funded earlier this year. The combined value was IDR 14.6 billion (USD 960,509). In their latest interview with Daily Social, they mentioned there will be a new vertical on the platform, namely the food and service industry.
“From the public and franchise business owners’ responses, the demand is huge. On the investor side, investing in a restaurant or service business is also easier to understand compared to property. From the [franchise owner’s] side, they are to expand the business but have no access to financial funding,” CrowdDana’s co-founder and chief product and marketing officer, Stevanus Iskandar Halim, said.
Other parties have plans to enter the ECF industry and have applied for licenses. One of them is Likuid, a platform that offers stakes in creative projects.
Ongoing public education about EFC
Reza and Vincent appreciate the regulations issued by OJK. Both agreed that the current policy protects the industry and its stakeholders. However, ongoing coordination between the government agency and EFC platforms is needed to keep the regulation relevant to the field.
“To date, the equity crowdfunding regulation in Indonesia is enough to keep all parties fulfilled—the providers, issuers, and investors. Although, there are still some things to improve, especially in terms of adjustment to players on the field,” Vincent said.
Meanwhile, Reza said that the OJK’s rules covering EFC activities are a good step in legitimizing this type of transaction, with the licenses ensuring that these platforms are not scams.
Currently, the challenge has been in educating the public and business owners. For the general population, there is an urgency to seek out investment options besides gold and mutual funds. Equity crowdfunding might just fit their needs.