Despite their good intentions, social businesses often face difficulties securing loans from banks or other financial institution.
Seventy five per cent of social businesses in Indonesia are in seed stage, preventing them from having either the required collateral or the ability to pay a high interest rate.
“Social entrepreneurs solve social issues as part of their business and they have great potential to improve lives in a sustainable way, but one of their difficulties is access to funding,” says Dhini Hidayati, Business Lead and Co-Founder of GandengTangan.
“Which is why we created this platform to connect …. the borrowers and lenders,” she adds.
GandengTangan — ‘holding hands’ in Indonesian — is a lending-based crowdfunding platform for social businesses. It was launched in March 2015 as a medium for social businesses to pitch loan for their projects. Instead of simply donating, supporters can lend funding with zero per cent interest.
Why lending? Apart from encouraging businesses to be more accountable and sustainable, there are long-term benefits for GandengTangan’s partners.
“Lending-based crowdfunding can help early-stage businesses build a track record before they go to the next [group of] investors,” she explains. “For the lenders, it allows them to multiply the impact of their investment without adding [more money].”
GandengTangan also helps promote their partners through a series of digital campaigns, something that sets them apart from other crowdfunding platforms such as KitaBisa, which leaves promotions up to each project.
It is currently being funded through bootstrapping and angel investment, though their recent win at Telkomsel Next Dev 2015 entitled them to an undisclosed amount of funding as well as mentoring and marketing. They are also going to South Korea for a management trip.
From clean water to slippers
By end-October, GandengTangan had successfully funded five out of 10 projects launched on the platform, with two in the process of being relaunched after failing to secure the required funding by deadline.
One project that it has successfully funded is Komodo Water, a microbusiness that provides clean water for last-mile communities on Komodo Island. Through a campaign on GandengTangan, the business managed to buy a new truck to help distribute water.
There is also Du’anyam, which was founded by a former doctor on the island of Flores.
“There is a very high maternal mortality rate on the island, and the founder noticed that it is related to the heavy work these pregnant women are still doing in the field,” Hidayati explains.
“This business helps Flores women distribute their handcrafts such as slippers, baskets, tissue boxes … to hotels in Bali and Lombok. So, the women can maintain their income without having to do dangerous work in the field.”
Prior to Next Dev, GandengTangan had joined various startup competition to get stronger market validation, mentoring and a wide network.
For the next step, Hidayati says the startup would like to focus more on product development.
“We would like to do more market validation to understand better what businesses need … Also to know better about the lenders, so we can come up with clearer marketing targets,” she explains.
Image Credit: GandengTangan