“Buy now, pay later” (BNPL) startups have gained popularity by targeting consumers, but BNPLs for businesses are also starting to take off. An example is Fairbanc, which is based in Singapore but focused on Indonesia. It allows small businesses to take out short-term credit to purchase Fast Moving Consumer Goods (FMCG) inventory. Fairbanc announced today that it has raised $4.8 million in pre-Series A financing led by Vertex Ventures.
Other participants in the round included Indonesian conglomerate Lippo Group, Asian Development Bank and Accion Venture Lab. Fairbanc also received previous investments from East Ventures, 500 Global and Michael Smapoerna.
Fairbanc will use its new funding to expand in Indonesia and explore new markets such as Vietnam and the Philippines in partnership with Unilever. It also plans to expand into vertical markets beyond fast-moving consumer goods, including within the B2B supply chain.
Fairbanc has partnerships with 13 consumer brands, including Unilever, Nestle, Coca Cola and Danone. It says it has already hired more than 350,000 traders in less than 12 months. Of that number, 75,000 buy stocks with the BNPL feature, which have one to two weeks for fast-moving products.
The users are mostly last-mile micro-sellers who buy $50 to $300 of each brand’s products every week. Fairbanc also finances small retailers that sell smartphones.
According to a survey by Unilever and Fairbanc, 80% of Fairbanc users do not have a bank account, meaning they do not have a bank account, and about 70% are women. The startup claims that traders have increased their sales by an average of 35%.
Fairbanc was founded in 2019 by Wharton graduate Mir Haque, who first led the startup in Bangladesh before choosing Indonesia as its main market. Haque was born in Bangladesh and described it to MovieUpdates as “the birthplace of microfinance”. After living and working in the United States for nearly 25 years, he moved back to Bangladesh in 2018 to digitize microcredit, aiming to create a digital credit platform for micro traders who didn’t need a smartphone or digital literacy.
“After some market research, I saw an opportunity for large scale lending ecosystems in the offline market with Unilever by integrating our API with their own app which is used by their offline sales agents to take orders from the merchants,” he said. “But it didn’t work in Bangladesh because the market was oversaturated with microfinance, and many merchants had overlapping and delinquent loans.”
As a result, Fairbanc decided to start a trial with Unilever in Indonesia instead. Haque says this resulted in 35% revenue growth for nearly 500 small merchants with no defaults for a year. “Because merchants have to pay last week’s BNPL to place orders for the current week, this ‘stop delivery to refund’ model results in very low defaults,” he said.
Indonesia was chosen as Fairbanc’s first market after the Bangladesh pilot because “not only is it a much larger market in terms of population and GDP compared to Bangladesh, but it also doesn’t have the problem of too much microfinance chasing the same merchants,” he said. Hake: “I think for the same reason that banks in Bangladesh were not as enthusiastic as Indonesian banks are.”
Before founding Fairbanc, Haque worked at companies such as Google, Adobe, McKinsey and Deutsche Bank. The company’s founding team also includes Kevin O’Brien, former chief technology officer of the nonprofit lending platform Kiva, and Thomas Schumacher, who co-founded emerging markets microcredit platform Tala.