Why FIs Should Be Lending to the Informal Workers in Indonesia
Indonesia’s informal workforce—drivers, warung owners, freelancers, artisans, gig workers, and millions of self-employed professionals—makes up well over 60% of the national labor force. This is not a fringe demographic. It is the backbone of domestic consumption, the quiet engine powering micro-enterprises, and the segment that ultimately defines Indonesia’s economic resilience. Yet this very group remains largely locked out of the formal lending ecosystem, especially when it comes to long-term, life-changing financing such as housing loans.
For Financial Institutions (FIs), this gap represents one of the largest untapped lending opportunities in the country. The question is no longer why they should serve informal workers, but how fast they can innovate to capture the market responsibly.
The Big Why: An Untapped Majority with Real Purchasing Power
1. The Market Is Massive and Growing
More than half of Indonesia’s working population earns income through informal channels. Despite inconsistent documentation, their aggregate spending power remains solid. The rise of digital platforms—such as Gojek, Grab, Tokopedia, Shopee, and TikTok Shop—has further formalized portions of their cash flow, increasing predictability.
But FIs still evaluate them using outdated metrics built for salaried employees. As a result, eligibility becomes artificially restrictive, rather than risk-based. Unlocking financing for this group is not charity; it’s market alignment. FIs that fail to adapt are leaving billions in potential assets on the table.
2. Housing Demand Is Accelerating Among Informal Workers
Indonesia’s housing backlog remains above 9 million units, with middle- and lower-middle households eager to buy. Informal workers are disproportionately represented in this segment:
They tend to migrate to cities for opportunity
They value homeownership as a cultural milestone
They are willing to pay, but lack traditional documentation
Every year, hundreds of thousands of potential borrowers are rejected despite having stable, recurring, albeit unstructured income. That is latent demand waiting to be unlocked.
3. Credit Risk Is Manageable with the Right Lens
Informality does not equal high risk. What increases risk is a lack of visibility. Across emerging markets, lenders that have developed behavioral scoring, cashflow-based underwriting, and alternative data models have consistently posted strong repayment performance among informal borrowers.
The data shows three truths:
Informal workers may earn irregularly, but their annualized income is surprisingly stable
Many operate micro-businesses with daily sales cycles, creating frequent repayment capacity
Borrowers with a strong need-based loan (such as housing) tend to prioritize repayment
The key is designing a model that understands their rhythms rather than forcing them into a corporate mold.
Why FIs Must Build a Structured Assessment Method
The national financial system cannot sustainably expand into this segment without a disciplined, replicable approach. For FIs, the path forward lies in innovative, structured assessment frameworks that reflect real income patterns.
1. Move from Salary-Based to Cashflow-Based Underwriting
Informal workers rarely show pay slips. However, they generate daily sales, e-wallet flows, delivery logs, marketplace transaction history, supplier invoices, and utility payments. These form the backbone of a 12-month cashflow snapshot, which is far more accurate than a traditional payslip.
2. Layer Alternative Data to Strengthen Visibility
Alternative data is no longer experimental—it’s essential. Examples include telco usage and airtime top-ups, mobility patterns (distance traveled, trip frequency), digital wallet behavior, social commerce sales, inventory turnover, and geo-location stability. Together, these elements create a borrower behavioral profile that is more predictive than static documentation.
3. Incorporate Psychometric and Character-Based Scoring
For segments without deep digital footprints, FIs can complement underwriting with business interviews, home visits, psychometric scoring, community references, and micro-enterprise audits. This approach mirrors proven microfinance practices, now enhanced by digital verification.
4. Standardize Risk Buckets for Informal Borrowers
Not all informal workers are equal. FIs should categorize borrowers based on the stability of income source, seasonality, asset ownership, digital footprint depth, and repayment behavior in any existing loans. This ensures targeted pricing, tailored loan structuring, and lower portfolio volatility.
Why This Matters More in Housing Finance
Housing is the most transformative financial product an informal worker can access. It creates long-term household stability, unlocks collateral formation, boosts consumption, strengthens the local economy, and introduces borrowers to wider financial inclusion. But housing finance also demands long-term sustainability from FIs. That’s why a structured, data-rich assessment is crucial—defaults in housing portfolios are costly, but preventable with proper evaluation.
A robust assessment framework allows FIs to confidently offer realistic loan tenors, price risk appropriately, reduce NPL probability, meet regulatory expectations, and scale lending with predictable outcomes. This is where innovation meets prudence.
How FIs Can Start Lending to the Informal Segment Safely
A pragmatic roadmap:
Build segmented scoring models tailored for key informal categories (drivers, micro-retailers, gig workers, freelancers, etc.);
Integrate alternative data sources through partnerships with telcos, marketplaces, and digital wallet platforms;
Develop cashflow reconstruction tools leveraging digital logs and in-person surveys;
Pilot micro-mortgage or step-up mortgage products in collaboration with developers;
Adopt hybrid app-based and field verification processes to reduce fraud risk while scaling volume;
Create risk-sharing schemes with developers or third-party credit partners like private credit funds; and
Automate risk monitoring dashboards for detecting delinquency patterns.
Early movers will dominate. Latecomers will play catch-up.
Where Grit Prospera Fits In
Grit Prospera works at the intersection of housing, private credit, and financial innovation, enabling FIs and developers to serve the informal market responsibly. Our role is to build structured financing frameworks for informal borrowers, provide underwriting support for developers and lending partners, offer private credit solutions that bridge early funding gaps, design mortgage exit pathways through local banks, and help FIs derisk informal lending through data-driven assessment. This is not theory—it’s a roadmap for expanding housing access with measurable safety and measurable return.
Conclusion: Serving the Majority Is the Real Opportunity
Indonesia’s informal workforce is the majority. Ignoring them is no longer an option. Forward-looking FIs that develop structured assessment models will not only open new revenue channels but also strengthen national financial inclusion and housing development.
The future of lending is not about tighter gates—it’s about smarter frameworks. The Institutions that adapt today will shape Indonesia’s housing landscape for decades ahead.
About GP Insights
GP Insights is Grit Prospera’s official thought-leadership series, published four times a week, offering analysis on real asset investment trends, credit innovations, and housing finance strategies across emerging markets | GRIT PROSPERA NUSANTARA ALL RIGHTS RESERVED.
About Grit Prospera
We are an integrated private firm specializing in bridging both private credit and private equity across the housing and real estate value chain. Through its dual-capital approach, Grit Prospera provides flexible and strategic partnerships to developers, infrastructure ventures, and related enterprises, enabling scalable, ESG-aligned growth across Indonesia’s property sectors. | www.gritprospera.com