MUFG continues to invest in Indonesia

Written by Kapronasia || January 03 2024

Mitsubishi UJF Financial Group (MUFG), Japan’s largest bank, is increasingly investing in Indonesia's burgeoning financial services sector as its home market is mature, slow to digitally transform and constrained to some degree by an aging population. In contrast, Southeast Asia’s largest economy offers low-hanging fruit in many different segments of financial services.

Over the past year, MUFG has stepped up its Indonesia investments in several regards. One of its key investments is the Jakarta-based fintech unicorn Akulaku, which received a capital injection of US$200 million from the Japanese megabank a year ago. Akulaku, which is backed by Alibaba and operates in the Philippines and Malaysia in addition to Indonesia, offers a virtual credit card and installment shopping platform, as well as an investment platform and neobank.Along with the investment, Akulaku and MUFG will enter into a framework agreement for Akulaku to work with MUFG companies across Southeast Asia on technology, product development, financing, and distribution. "Akulaku's strong technological capabilities in credit, risk management, mobile banking, and customer acquisition will bring solid value to this partnership," the two companies said in a press release. 

In February 2023, MUFG announced the launch of a US$100 million fund focused on Indonesian startups called MUFG Innovation Partners Garuda No. 1 Limited Investment Partnership. The fund will make strategic investments in startups that can work with Danamon, a commercial bank acquired by MUFG in 2019. Danamon’s goals are to increase product competitiveness, promote digitalization and partner with portfolio companies to tap into their customer contacts.

In June 2023, MUFG acquired the leading Indonesian automobile loan provider Mandala Finance for in Indonesia for 7 trillion rupiah (US$465 million), giving it a strong foothold in a fast-growing market. At the time of the acquisition, Nikkei Asia estimated that the combined loan balance for the new entity that combines Mandala and MUFG’s existing auto loan provider Adira was US$2.4 billion.

Indonesia is Southeast Asia's largest market for automobiles, including motorcycles. Auto sales rose 18% to 1.04 million units in 2022, while motorcycle sales increased 3% to 5.05 million units, according to Nikkei Asia. 

Meanwhile, in December, consumer finance firm Home Credit Indonesia raised US$100 million from the local unit of MUFG that it plans to use for ESG-based financing.

More M&A deals by MUFG and Japan’s other megabanks SMBC and Mizuho targeting Indonesia’s fintech sector are expected in 2024 as Southeast Asia’s largest economy offers strong long-term fundamentals, particularly in consumer and SME financing.