The Role of Islamic Financial Technology (FinTech) Start-Up in Improving Financial Inclusion in Indonesia Case: Angsur

Abstract

Nowadays, there is less than 50 % adult population of Indonesia who has access to banking service. This problem is caused by several factors as well as (1) concentrated banking financial services in Java and Bali (2) unequal distribution of infrastructure development in several regions. There are several strategies conducted by the bank to increase financial inclusion in Indonesia in terms of lending. However, most of Bank only accept physical goods as consumer collateral. We need an innovative and novel approach to address this problem. This paper describes analysis and implementation of Islamic Financial Technology (FinTech) Start-up called Angsur. Angsur brings a new innovative product by giving microlending service to undergraduate students who do not have a credit card by buying the product now, paying later. As digitally active users, undergraduate students produce huge amount data on their social media. Angsur uses social media data analysis to determine their credit score based on digital presence. Instead of using interest terms, Angsur adopts murabahah principal by taking profit margin and gives a chance to customers to pay by instalments from 1 until 12 months. In order to redistribute the wealth and decrease social problem, Angsur takes 2.5 % from sales margin for sadaqah which will be distributed to orphan and people who lives in the slum area. Sadaqah is a voluntary charity by giving some money to someone. A questionnaire, interview, and prototype have been developed to test start-up assumption. The test was conducted to see undergraduate students behaviour and product usability. The preliminary research showed that the students are interested in this service because of its simplicity and innovativeness. More than 80 % of users appreciate the presence of the Angsur Student Partners who act as financial literacy agent. Almost 84% early adopters said that they are happy to shop while doing sadaqah. With their innovative characteristic, Islamic FinTech start-up plays an important role in fostering financial inclusion and decreasing social problem in Indonesia by developing a new technology and new business model. Also, the social media data can be used as an option to evaluate borrower profile.