What Is Pinjam

IT IS not always easy for micro businesses or even SMEs to obtain business loans. Indonesian startup Pinjam has steeped in to fill this gap by offering online pawn services and business loans.

Launched in 2015, Pinjam helps to connect users to pawnbrokers.

“After we started getting users, we realised that our solution could be developed further. So, we started focusing on gadai [pawn] as our main product to help people obtain cash,” says Pinjam chief executive officer and co-founder Teguh Ariwibowo.

By the end of 2016, 70% of Pinjam’s users were involved in pawn transactions ranging from two million rupiah (US$148) to five million rupiah (US$370) while 30% sought business loans between 25 million rupiah (US$1,850) to 50 million rupiah (US$3,700).

Pinjam has assisted 2,000 customers and has 30,000 members, most of which are SME players. The site has a user growth rate of 20% to 30% per month.

Pinjam provides 24-hour real-time online estimation to help customers estimate the price of their collateral goods. They offer flexible financing periods ranging from one to 16 weeks with interest rates from 0.5% to 1.75% depending on the loan period, services, and products.

To use Pinjam’s services, users can register through its web-based platform and upload the product to be pawned. Delivery of goods delivery can be made by going directly to Pinjam’s partners or using an on-demand pickup service.

Pinjam also offers solutions for unbanked users to reimburse their cash through Alfamart or Pos Indonesia.

In terms of business models, Teguh believes in collaboration and a shared economy where Pinjam seeks strategic partnerships by sharing revenue with its partners, and pushing down fixed costs.

“Rather than investing in opening an outlet, we prefer to invest in partnerships because they can help us to get closer to users and provide the infrastructure. I hope this business model can grow massively in Indonesia.”

When asked about competition with conventional pawn shops, Teguh admits that Pinjam is not competing directly with them.

“We are not their direct competition because we target different people aged between 25 to 40. Also from a business strategy point of view, our business concept is more into partnerships.

“Basically, we want to get closer to our users and there is a chance for Pinjam to add more products not only as a pawn platform but also a lending platform on its own vertical in the future.”

Pinjam raised seed and Series A funding last year with an undisclosed amount from local venture capital and has plans to raise Series B funds from local investors.

Teguh says that he is looking for local investors because, “According to the regulations, if investors want to enter private sanctions (in private pawnshops), it must be fully-owned by a local company and we are a 100% Indonesian company.

“We also consider what our investors can offer in terms of value, networking and partners as well as mentorship in managerial and entrepreneurship matters. They should also be able to help us to grow. Visibility is important for us.”

Pinjam also works closely with banks and insurance companies to help them generate capital to lend to users.

In terms expansion, Teguh says that Pinjam is registered with the Indonesian Financial Services Authority (OJK) for business in the Jakarta area. He is in discussions with the authority to expand to three to five other provinces across Indonesia.

Based on OJK Regulation No. 31/POJK.05/2016 on Pawnshop Businesses, private pawnshops must have a minimum paid capital of 500 million rupiah (US$37,000) for businesses with the service scope of a district and 2.5 billion rupiah (US$185,000) for businesses with the service scope of a province.

Partnership with Columbia

To implement its business model and continue to build its customer service network to get closer to customers, Pinjam has partnered with cash and credit company, Columbia.

Through this partnership, users will be able to pawn their gold at Pinjam and go directly to Columbia’s 16 outlets across Jakarta to meet an appraiser from Pinjam who will conduct an assessment of their gold.

“We are excited about Pinjam’s initiative to partner with us; of course, this is an innovative development service for Columbia. We hope through this partnership and Gold Pawn in Pinjam, we can contribute to the community, especially our customers,” said Columbia Cash and Credit chief operating officer Nopi Susanto.

In this partnership, Columbia will provide infrastructure and human resources while Pinjam will provide capital and technology.

Teguh says that Pinjam can generally offer higher prices than the market.

“As an example, Pinjam offers an estimated pawn price for gold from 94% to 96%, while the market only offers 92%,” he says.

He says that this is due to the strategic partnership business model that helps to push down fixed costs and also enables Pinjam to offer more discounts to users.