Indonesia financial inclusion: GoJek’s metal ignition

The story starts with a pot in a village and a motorbike in a city.

Ten years ago Aldi Haryopratomo was working for Kiva, a San Francisco-based non-profit with an online lending idea, and had been touring around Vietnam and Indonesia on a motorbike looking for microfinance banks. It was sometimes a struggle.

“People would take my laptop and try to shake it to get the money out,” he says. “They had never seen online lending.”

Seeing the villages first-hand, it occurred to him that what communities needed to climb out of poverty came down to the most basic things, starting with affordable access to pots and pans. In his native Indonesia, this is how life worked at the truly grass-roots level: a pot that would cost Rp300,000 ($40) in a store in the city was twice that price in the village because they could only ever be bought on credit. With costs so prohibitive, villagers couldn’t afford enough pots, and so they would take turns using them.

Aldi learned a simple lesson about business from this.

“Rather than build something from the top down and saying: ‘I’m an e-commerce company’, why don’t you start with asking: ‘What does the user need?’” he says. In this case: “I need to buy a pot that helps me cook rendang [a spicy meat dish] for Eid so I don’t have to wait seven days to eat it because I have to take turns using my pot.”

So he founded Mapan, also known by its holding company name, Ruma, in 2009.

Mapan rests upon the fact that in any village or community, there is a natural leader.

“If you can find the community leader, who may not be the most wealthy or the most powerful but the person who really cares about the village, and ask them what they need, you can come up with a solution you might not have thought of yourself.”

In the first village where Mapan tried this out, this person was a woman who owned a shop in front of the school; people would leave their children at her shop and everyone called her auntie.

“Everyone trusts her with their children: she must have some influence,” says Aldi. “You’re not going to give your children to someone you don’t trust.”

More often that person is a teacher, who is usually already a community leader.

“It depends,” says Aldi. “There is no one occupation. But when you go to a village, people will tell you. You can see it sometimes: the way they walk, the way people talk to them, the way they smile. There’s a lot of trademarks to these influencers.” 

Having identified this person, Mapan seeks to use them for two things.

First, “these leaders are like your user research, your eyes and ears to the village,” says Aldi. They give a clear sense of what is needed, rather than what outsiders think they need.

Second, they form something called an Arisan, a rotating savings and loan group for the village.

The idea for this came from the woman who needed the pot to cook rendang for Eid. Aldi and his team, by negotiating directly with suppliers, were able to get pots at a quarter of the price the villagers were paying on credit, by ordering in bulk and telling the manufacturer to ditch things like handles and glass tops and just focus on making a good quality pot.

Adding in shipping costs and commission for the village leader as an incentive got the cost to Rp250,000 per pan, less than half the local price.

But it was still too much for a village capable of paying only modest instalments. So Aldi went along to a weekly community meeting one Wednesday and together they figured out a plan: the community would form a collective of five people who take turns to make the payment, meaning at the end of each month one person gets their item, and within five months everyone’s got one. There is no interest, just commission to the person, usually a woman, who leads the Arisan.

It took off. Within two and a half years, one million families in 120 cities were using Mapan. That’s a lot of pots.

Meanwhile, Aldi’s old friend Nadiem Makarim had started something of a revolution in Indonesia’s cities.

You don’t have to spend too long in a Jakarta traffic jam to see the merit in getting around on a motorbike. While you sit gridlocked in a taxi on Jalan Sudirman, the bikes zip past – a somewhat perilous but highly effective mode of transport.

For years, some of these bikes have served as taxis. They are called ojek and are found all over the country.

Nadiem was a loyal ojek customer, and noticed a disconnect. Ojek drivers were spending all their time looking for customers and ojek customers were spending all their time looking for bikes. The idea of GoJek, which he founded in 2010 with just 20 ojek drivers, was to build a platform that would link them together; more broadly, as he has often since said, it was to find people with time and no money and connect them with people with money and no time.

GoJek is one of Indonesia’s modern success stories. The original 20 drivers became recruiters, and the operation’s reach steadily expanded to the point that its green-helmeted drivers are now a ubiquitous sight in Jakarta and Indonesia’s other big cities.

GoJek swiftly and successfully branched out into food delivery and other areas.

By 2014, the firm was able to raise $1.5 billion in a fundraising round whose participants included Temasek, KKR, Tencent, Warburg Pincus and JD.com. It is the most valuable startup in Indonesia, the flag-bearer among southeast Asian unicorns alongside Grab, its closest equivalent and rival, which is Singapore-based but also aiming most of its resources at Indonesia.

Like Grab, GoJek then developed a payment wallet initially just to pay for GoJek’s own services, but then for payments more broadly.

Nadiem and Aldi studied together at business school and have remained friends. By now fully established in different fields – Nadiem in the cities, Aldi at the rural level – it occurred to them they might be able to work together.

“We have always had the same passion,” says Aldi. “How do we leapfrog this country into prosperity and equality?”

So they piloted a programme in Jogjakarta, Java, in November 2016, where they would bring the two together directly into a family. The husband would be a GoJek driver; the wife would be an Arisan leader. GoJek would bring in income, Arisan a method of using it effectively and responsibly.

Aldi says one family went from earning one million rupiah to Rp10 million in three months.

“It was crazy. They went from poverty to middle class, like that. When you see things like that you start thinking maybe one plus one creates more than two, because it helps families more holistically.”

Nadiem had big ambitions for GoPay, and had been looking for ways to build it beyond its basic origins. Now he had the answer.

In December 2017, GoJek announced an audacious triple acquisition in financial services and technology: it bought Kartuku, Indonesia’s largest offline payments processing company; Midtrans, the biggest online payment gateway, and Mapan. Aldi would become chief executive of the merged GoPay business.

(Kartuku’s chief executive, Thomas Husted, is now CFO of GoJek, and Midtrans’s Ryu Suliawan runs the merchant platform.)

“The three businesses have different strengths,” says Aldi, in GoPay’s Jakarta head office, a funky urban space several floors above a shopping mall, where GoJek helmets hang from the ceiling over reception. “Midtrans makes it so easy to pay online, on any website, super seamless. And that’s one segment of the service we need to have.”

Kartuku, with its focus on payment hardware offline, is another part of the service, “something as a user that you have to get right.” And then Mapan is about rural and semi-rural families and community support systems. The legacy GoPay remains the wallet people use to pay for services.

“The more services you have, the better a bridge you can build,” Aldi says. “The goal is to get the user off the island of being unbanked and not having access to things. The bigger the bridge, the more things you can put on it, and the better it will be both for the people providing the service and needing the service.”

The premise is fine, but there’s surely nothing easy about a three-sided merger.

“We recognize that integration is not easy,” Aldi says. “The most important part is that each team is empowered to do what they do best. It sounds vague but it means each team is independent, it can solve the real problems of users.”

The idea is that the business has several free-standing verticals, but customers can move between them.

“It doesn’t mean the company has changed and suddenly become part of this monolith, but it means the companies are more aligned towards a similar goal,” says Aldi.

Having worked its way into Indonesia’s heartlands like this, it is easy to see why GoJek, and by extension GoPay, has attracted such ardour from some of the world’s smartest investors. Indonesia offers immense potential: 260 million people with a median age of 28, a growing middle class, and a population that is largely unbanked. Aldi, very much a patriot and an optimist, also believes there is a spirit of community that is distinct to Indonesia.

“We’re not just going to use what happens elsewhere and put it here,” he says. “We always focus on: What is unique about Indonesia that we can put together and scale?

“Think about how many great cooks of fried chicken there are in Indonesia that have never had the opportunity to become a national chain because they never had the ladder to go up to the next level,” he says.

Aldi argues that now they can sell their food on the GoFood service to build custom; use the transaction history this generates in order to secure a bank loan to build a branch; gain the training to handle cashflow; and generally start climbing the ladder.

“What we can do as an institution is make that woman be a national chain because she has the best fried chicken in the country,” he says. “And that ability to create transformational change will have a ripple effect because other people will start wanting to do it.

“The problem is there is a cloak that covers the good and the bad. You can’t tell which is which because it’s all cash. But once you start giving people the opportunity to accept payments via digital means, you start having transaction records, and that connects you to banks who couldn’t serve them before because it was too expensive to access them.”

Aldi, all smiles, seems elated at the difference the business can make. But how does it work in practice? Does his idealism survive the practical realities of life?

Several hours later, Euromoney is sitting on a padded children’s playroom floor talking to a woman called Ibu Opay. She is a Ketua Arisan (Arisan leader) in a town called Bekasi, a satellite town to the east of Jakarta.

Before Mapan, her situation was bleak. She was left as the primary source of income for her family. She needed, among many other things, an oven, and heard about Mapan; a salesman approached her and said, if you want to buy the oven, become an Arisan leader.

As you may imagine, the utopian idea of everyone working together is a little trickier in practice. Ibu Opay managed to put four groups together – and they all cancelled.

The problem was trust. The salesman was online, not there in person, and people needed to see the goods arriving. In the end, taking what must have been quite a risk, Ibu Opay formed a group by herself, making it appear that she was five people when in fact it was only her. She was counting on the fact that once goods started arriving, her neighbours would come back in, and so it proved.

“I had to convince the community that this was something that could be done,” she says, speaking through a translator. 

This is surely cause for concern: what if Ibu Opay had been unable to convince her neighbours to join and had been lumbered with stuff she didn’t need and couldn’t pay for? Is the system so easily gamed?

But that nervy start apart, Mapan has delivered for Ibu Opay what Aldi said it would: she got her oven, effectively, for half the price she would have paid if trying to buy through credit.

But what does happen when things go wrong? What if one of the five can’t pay?

“If someone can’t pay in the middle of the Arisan cycle, she can withdraw and the goods will still be delivered,” Ibu Opay says. The goods then come to Ibu Opay and she can sell them, though presumably she will be on the hook for the missing payment.

“The problem of cancellations is common,” she says. “It is one of the risks of being the leader.” Goods being delivered late also creates challenges, although since her branch office is nearby she can normally sort that out by dropping in.

“I made all of the group commit before the Arisan started that if you have paid payments and stop in the middle of the cycle, you cannot take the money back,” she says.

Commit how? In writing? She says it depends: if the sums involved are over Rp1 million she will make a written agreement; below that, it’s verbal.

Also, there’s an informal kind of credit assessment always going on at the village level. If someone is renting their house, Ibu Opay will be less comfortable with their creditworthiness than if they own it.

Mapan has worked out well for Ibu Opay, not just financially but clearly in terms of her standing in the village. She speaks of a sense of network, a sisterhood among Arisan leaders. She turns up with a flashy smartphone that she has been able to buy because of bonuses from Mapan; on it, she displays her book-keeping through an app that shows her the amounts of payments expected each month, the bonus she will get, and the status of orders. (She also keeps records manually: she gives members a book to record payments, keeps one herself, and reconciles the two.)

She doesn’t, though, take payments from members using the phone; that still comes to her in cash, which sits with her for a month until collections are made in person at her house, no doubt using a GoJek bike.

Still, it would be wrong to suggest that her community was stuck in the past beforehand. She has had a bank account since well before the Mapan days, though many of her neighbours do not; and she first heard about Mapan through Facebook, so clearly had a phone capable of seeing it even then.

The widespread appearance of affordable smartphones is vital to the whole GoPay/GoJek model, although there is acceptance that not everyone is tech savvy just yet: one quirk of the GoJek/GoPay alliance is that you can use a driver as a sort of deposit-accepting ATM, handing money to them in order to top up your balance.

She notes a positive difference in her community. It’s not just the accumulation of stuff, but the constructive use of it. A neighbour who didn’t have a fridge before now sells ice cubes (a commonplace practice as most in Indonesia don’t own freezers). Another who bought a blender mixes and sells juices.

“It encourages housewives to build a home industry themselves,” she says.

There is also the advantage, delicately stated, that they don’t need to go to their husbands to ask for money for various daily needs.

Out on the street, Euromoney meets a number of vendors who have aligned themselves with GoPay. Opposite the Al-Azhar mosque in Jakarta, a string of roadside stalls has sprung up where worshippers park their bikes. Now all these stalls are branded with GoPay signage showing that they accept cashless payment, and offering introductory rebates too.

Adin Bahruddin sells cigarettes and other things from his stall. He linked up with GoPay in June after a few months of discussion.

“It makes payments easier for customers, and the branding and promotion are attractive,” he says, through a translator. “Right now we are giving cashback and that is driving transactions.”

Is it good to be cashless?

“I prefer half and half,” he says. “With cash I can immediately spend it to top up my stock.”

GoPay is working on this: trying to find a way to allow merchants to use their electronic income for stock immediately. Adin says the brand has been very important in driving trust.

“My customers are already used to GoJek, so they trust GoPay because it’s embedded,” he says.

Another group tried a similar cashless initiative, he says, and got nowhere because it couldn’t build that trust; also a state-backed competitor failed to gain traction because of the need to download a separate app. Convenience is everything.

Across the road is Hasan Basri, who has been running a stall selling Indonesian rice cakes with peanut sauce for 30 years. Like Adin, he’s been persuaded to wear a white T-shirt with writing in Berhasa which translates as: ‘Becoming a small entrepreneur with big hope.’

He has also found GoPay convenient.

“I don’t need to prepare cash change. It just comes in.”

He, too, likes some cash coming in to buy supplies; in practice he spends the cash this way but uses GoPay exclusively to save, building a retirement fund and checking it on his phone every day, though he says he can’t retire until he finds a successor. He has never yet withdrawn any funds but trusts GoPay because he trusts GoJek; it probably helps that there are hundreds of GoJek drivers going past, or stopping to pray or buy food.

Back in the GoPay offices, a question is troubling us. Aldi comes from a background of social enterprise and his entire mission in life appears to be to elevate the poor. But, now that Mapan has been bought by GoJek, he is working for a company that is part owned by some of the most successful but tough investors in the world: KKR, Warburg Pincus, Temasek, Tencent. How does he reconcile the profit-driven ethos of these backers with his own social inclusion philosophy?

“It’s interesting,” he says. “I did evolve. I started as a non-profit. Mapan was a foundation first, then a company. And now I’m in GoJek, which is a very commercial company but with a social mission.

“The way to reconcile the two is that as long as there is no conflict between the way that you make an impact and the way that you earn profit, there is no problem.”

The substance of his argument is that inclusion is a decent business case: that if one can make a positive impact on families through services, then there will be a margin to be made on those services.

“That’s different from only having one business and having to squeeze the most out of that business,” he says. “If you only have one business line – selling a pot – you have to keep selling them pots even though they don’t need them. That’s different from our company, which has a portfolio of things we can use to help the family.”

He says that at the GoPay level, investors are not hands-on, even Tencent, whose expertise in building the WeChat/WeBank channel would appear relevant.

“We are a company that can operate pretty independently,” he says. “One of our secret sauces is we are closer to the user than to the investors. This bottom-up approach is better than any other model that I’ve seen.”

How does it fit with the banks? GoPay considers itself a bridge to banks rather than a competitor to them, and has a number of partnerships: many GoJek drivers have bank accounts with BCA, for example, while there is a lending partnership with BNI, and BTN provides preferential housing loans for drivers.

While it’s clearly different from peers around the region like Ant Financial/Alipay and Tencent’s WeChat in China, and PayTM in India, the business has learned from them.

“Alipay taught us that a diversity of financial services is important,” Aldi says. “PayTM taught us that on the ground coverage is very important, which is why we invested in offline.”

For the future, it would be natural for GoPay to follow GoJek in to Vietnam, though it has not yet done so; that is the clearest fit in Asia, with a high population, similar demographic and even greater adoration of motorbikes. Perhaps we might one day see a spin-off of GoPay, just as Ant Financial/Alipay has become separate from Alibaba.

But this is big picture stuff. For the moment, the point of the whole thing is the individual, millions of them, creating a bigger ecosystem.

“It’s like a coral reef,” Aldi says. “The more vibrant it is, the more fish will come.”