In early March 2020, the U.S International Development Finance Corporation (DFC) and the U.S Agency for International Development (USAID) announced their agreement to release a new investment fund in response to the recovery from the pandemic. There are specific focuses in various countries, one of which is related to education. In Indonesia, Pintek’s education financing startup has earned the trust.
DFC and USAID provided a “loan portfolio guarantee” worth up to $16 million to help Pintek optimize its potential. The fund is also used to cover defaults and return investments to customers. It is known, the pandemic has ruined the economy of societies. However, certainly, there is a rigorous analysis and scoring scheme to state defaults that can be covered by these funds.
The fund is expected to increase Pintek’s capacity, therefore, it can reach more students at the vocational school and higher education levels throughout Indonesia.
“Pintek, through its Pintek Institutions loan product, helps educational institutions both higher education and vocational education to provide equipment, improve facilities, and also their operational. This partnership with the US Government is expected to help Indonesia’s education sector, provide better educational outcomes and improve work skills,” Tommy Yuwono, the Co-Founder & Managing Director of Pintek said.
James Polan, DFC’s Vice President of the Office of Development Credit said, “Our partnership with Pintek is to provide opportunities for access to education for children, especially for those whose parents are directly affected by the pandemic. We are very pleased to see lending companies like Pintek in creating financing solutions that can address today’s major challenges.”
In order to support lending, Pintek has secured debt funding from Accial Capital worth 298 billion Rupiah earlier this year. Previously, in December 2020, they also managed to obtain follow-on funding led by Finch Capital, the total equity funding obtained has reached 70 billion Rupiah.
The education financing business model becomes one of the attractive opportunities in Indonesia amidst various limitations to education services, both formal and non-formal. There are several mechanisms offered, for example using an Income Share Agreement – allowing students to get full education funding, then pay when they get a job. Other forms are offered in the form of loans with a certain tenor. Usually, funding (70% to 100%) is channeled directly to the targeted institutions.
Based on Edtech Report 2020, there are currently several startups that focus on playing in this area. Apart from Pintek, there are Dana Cita, DANAdidik, EiduPay, and KoinWorks.
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Original article is in Indonesian, translated by Kristin Siagian
