Deal focus: LeapFrog seals debut Indonesia deal

Last week, Africa and Asia-focused microfinance specialist LeapFrog Investment secured its first deal in Indonesia, leading a IDR562 million ($45 million) round for the home-grown financial services provider Reliance Capital Management. The GP also brought in a couple of LPs - Netherlands development finance institution FMO and Bermuda-based reinsurer PartnerRe - as co-investors.

Michael Fernandes, Southeast Asian head at LeapFrog, believes Reliance is well-positioned to serve the emerging Indonesian consumer market across different areas of financial services.

"We're targeting the emerging consumer class, who are coming out from poverty but are below the middle class," says Fernandes. "This group of people is just entering the financial market. For them, simple products like life insurance, hospital cash and key assets insurance are important. Very often they are depending on one or two key assets to earn their income, such as a farm or a shop."

Reliance serves some 750,000 individuals in 20 major cities nationwide. The group has been providing brokerage services for 15 years but it also a major player in health insurance, active in general insurance, and two years ago gained a license to do life insurance. In addition, the group is involved in into mutual funds and its listed-securities arm last year purchased a 20% interest in domestic bank BKE with an option to buy the maximum-permitted stake of 40%.

"Providing simple saving products with stable returns are very interesting," Fernandes says. "The challenge in this market is that, it's difficult for the emerging consumer class to save money in the banking system. The costs are very high for small amount of saving."

LeapFrog projects that Indonesia's life insurance sector will see annual growth of more than 20% over the next five years, while general insurance and health insurance will expand 15% and 12% per year, respectively. The banking sector will also go far, given only 36% of adults in Indonesia had a savings account last year, versus 78% and 81% in Thailand and Malaysia.

The Reliance deal marks the second investment in Southeast Asia from LeapFrog's $400 million second fund. The first came in December when the GP partnered with Lombard Investments to acquire a 21.75% stake in Thailand's Syn Mun Kong Insurance for $57.5 million.

LeapFrog has already completed four transactions in India this year, and Fernandes expects four or five more in South Asia and Southeast Asia.

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• Topics
• Expansion
• Southeast Asia
• Financials
• LeapFrog Investments
• Southeast Asia
• Indonesia
• Growth capital
• Financial Services