Used cars are a risky biz to lend to, but Carro is banking on banks

Singaporean used car marketplace Carro made small but important investments in Bank Index and Allo Bank, likely to expand its auto-financing business. But used car financing is a high-risk market—partnering with banks may help but only if the ecosystem it’s trying to tap into finds Carro’s services equally rewarding

Used car financing is a segment embedded with risks, pushing up interest rates for the borrowers

It’s also a fiercely competitive market—58% of Indonesia’s multifinance companies are in the auto-finance sector.

The prospect of relatively cheaper funds and access to data from the banks it has invested in could help Carro retain its competitive edge

Carro’s investments could help widen the lending pool for banks, which have been reluctant to lend to such risky segments so far

Cars are perhaps among one of the most expensive purchases a person would make in their lifetime. About 70-80% of car purchases that happen in Indonesia are facilitated by loans, says an automotive industry expert at a leading consultancy. So it’s not surprising that Singapore-based used car marketplace Carro decided it wanted to own a slice, even if modest, of Indonesia’s banking segment.

Earlier this month, the seven-year-old company invested in two Indonesian banks—IDR 71.7 billion (~US$5 million) in conglomerate Chairul Tanjung-owned Allo Bank and an undisclosed amount in the SME-focused Bank Index.

However, they are both minority investments, just a fraction of what the banks actually raised.

AUTHOR

Yunindita Prasidya

Based in Bali, Dita writes about Indonesia’s growing digital economy, including how technology is shaping the lives of young Indonesians and impacting traditional industries. She was previously a reporter at The Jakarta Post.

View Full Profile

Others tell you what. We tell you the ‘So What?’

Read articles that decode the most significant shifts happening around business, technology, startups and healthcare. 1000+ articles for subscribers of the India edition. 150+ articles for subscribers of the Southeast Asia edition. Plus premium newsletters that help you make sense of the world around you.

So much journalism in India is superficial.

Articles are generic, almost cookie-cutter in their approach. And they don’t provide enough context on the issues they cover. The Ken is different. I don’t always agree with everything they say but I appreciate their commitment to publishing deeply reported narratives and investigations. Their reporters find new ways to analyze tech among other industries. And that’s always worth a read.

Sid Talwar / Co-Founder and Partner / Lightbox Venture Capital

As entrepreneurs, we thrive on being in the know at all times.

A personal subscription to The Ken was a no brainer. But as startup founders, this isn't enough. Team members also need to be in the know, for everyone handles customer-facing responsibilities and an ecosystem change that impacts customers also impacts us

Kiran Jonnalagadda / Co-founder / HasGeek and Internet Freedom Foundation