Elements of Successful Regulatory Reform that supports Social Ecosystems like AkulaKu

According to them double-digit default rates are the norm at the moment. Ovo, a mobile wallet co-owned by Grab and Tokopedia that also offers a variety of loans to its users, states an 18.35% default rate on consumer loans in a document seen by us.

In fact, Akulaku used to have an unsophisticated risk assessment mechanism, said a person working in credit scoring. Its employees would simply call up loan applicants and ask them to verify the information they had provided on forms over the phone.

Stories like these are abundant, but typically told behind closed doors and off the record.

Investors who would have access to more information and done their due diligence based on real data did not want to comment. Wei Hopeman of Arbor Ventures and Helen Wong of Qiming Venture Partners, both Akulaku board members, did not respond to our request for comment. Sequoia India and Eight Roads Ventures, VCs with smaller equity stakes, declined to comment.

Akulaku also declined multiple requests for comment.

Built for good times

Built for good times

Akulaku is yet to publish its figures for 2019. But in a presentation for its 2018 performance, it claims to have served a total of 2.3 million credit users that year and raked in revenues of US$136 million. It projected revenues to climb “rapidly” to US$1 billion in 2020.

With so many rumours of Akulaku’s tendency to fudge its numbers, it’s difficult to make out the truth. “It’s all smoke and mirrors,” said one financial services company executive.

The fast-growth, high-risk strategy is one that “works in good times,” said another. But in bad times, when optimism fades, borrowers begin to default, and there aren’t enough new lenders to fill the gap, it can all fall apart.

“This cohort (consumer loan startups) are unfortunately one of the most impacted by the pandemic. As employment contracts got affected by the large scale social distancing policies, decreasing take home pay obviously impacts the ability to repay their loans.”


On Mintos, investors worry that Akulaku hasn’t had enough oversight. It may not have operated with solid provisions or safety nets that are supposed to kick in when borrowers default.

“Because these companies are not regulated they can essentially put whatever provisions they want,” reads a comment on one of Mintos’ blog posts about Akulaku. “Obviously, these provisions are way too small and totally inadequate, and don’t reflect the true default rates. LOs show huge profitability and equity ratios, but it’s all paper profits and equity. This is a classic Ponzi setup.”

Indonesian consumer loan companies are regulated by the Financial Services Authority (OJK). Still, it’s entirely possible that practices like inadequate provisions slipped through without anyone sounding the alarm.

When marketplace lending was first regulated in Indonesia in 2016, hundreds of companies pushed for licences. Regulators had very little experience with this new business model. OJK decided to temporarily freeze the registration of new companies in this category.