Jakarta. Twenty-five-year-old Ajeng and her fiancé Edo, 28, have been saving up money for the past year to get married in May next year.
With a budget of roughly Rp 100 million ($7,400), Ajeng and Edo’s wedding, like most Indonesian weddings, will include three parts: an Islamic ceremony, or akad nikah; a traditional Javanese ceremony; and a wedding reception.
But unlike most weddings in Indonesia, where the parents are expected to pay for the occasion, they footing the bill themselves.
“Both of us wanted to be independent. That’s why we’re splitting it equally,” says Ajeng, who for the past two years has worked as a personal assistant in Jakarta, while Edo has been employed at a bank for three years now.
“I know most people are supported by their families but we both insisted on doing it ourselves,” she adds.
Indonesian weddings are notoriously costly. Depending on the ethnic group and religious beliefs, an Indonesian wedding ceremony can last one to three days, and the penchant for getting together means that big weddings, attended by hundreds to thousands of guests, is the norm.
The average cost to get married in Indonesia, including a wedding reception for 500 guests and the honeymoon, comes out to about Rp 116 million, almost triple the average annual income, according to the financial consulting website HaloMoney. For the same price, newlyweds can put a down payment on a three-bedroom house on the outskirts of Jakarta.
This is where the start-up Indonusa Bara Sejahtera comes in as it tries to reel in young couples like Ajeng and Edo through its website, Wedlite.
The company is partnering with local multi-finance firms – non-bank financial institutions that typically provide credit for purchases of everything from cars to household electronics – to help young couples reach wedded bliss.
Since its founding in January this year, Wedlite has attracted at least two local multi-finance companies, BFI Finance Indonesia and Batavia Prosperindo Indonesia.
“At first, it was a personal experience,” says Abraham Viktor, the founder and chief executive of Wedlite. “I thought of how I could afford to get married, especially with the extravagant culture of weddings in Indonesia, and there wasn’t a solution yet in the market.
“My hypothesis is that most parents or extended families used to pay for the wedding. Most young people who are in the working class now have to pay for themselves,” he adds.
Backed by partnerships with multi-finance firms, Wedlite gives out loans to couples ranging from Rp 7 million to Rp 100 million and repayment periods of six months to five years. To date, the website has booked up to 732 applicants requesting an average of Rp 50 million in funds.
In the following week, Wedlite plans to disburse up to Rp 300 million in loans, Abraham says. It charges applicants 0.9 percent to 2.2 percent interest a month – on a par with the collateral-free personal loans offered by banks, but lower than the interest from using a credit card.
Money up front
Unlike Ajeng and Edo, many couples have neither the time nor the means to save up for their wedding, so an offer like Wedlite’s comes as welcome relief.
Vic Timothy, 32, who got married in May, is among those who used Wedlite’s services to finance his wedding.
The cost for his wedding, including a reception for 400 people, came out to Rp 150 million. Just over half of that, or Rp 80 million, came from a loan from Wedlite, repayable in two years’ time at a monthly interest rate of 1 percent. But Vic lucked out.
“For the most part, I made decision because there was a financial need. I also calculated that I’d be able to pay the loan back with the angpao, and I did,” he said, referring to the envelopes of cash that guests at a reception usually put into a collection box for the bride and groom.
“My wedding was in May, and I paid the loans back with the angpao in June,” says Vic, whose stroke of good fortune continued with him joining Wedlite for work soon after his wedding.
Still, Vic cautions that couples who look to loans to pay for their wedding should manage their existing debt carefully before borrowing.
“I had already paid off my apartment at the beginning of the year, so I had room to take out another loan,” he said. “I don’t think you should work to pay off your house, your car and your wedding all at the same time.”
Wedlite’s Abraham says the terms of the loans still hold even if the couple calls off the wedding.
To weed out the applicants, Wedlite’s imposes requirements similar to most loan applications. Borrowers are asked to submit pay slips as well as collateral for the loan, such as deeds to homes or motor vehicles.
“We reject about 30 percent of applications, although most are also because of administrative issues,” Abraham says.
“The risk management is safer than most consumer loans because the money is transferred straight to the wedding organizers. People also place a unique cultural value on weddings. It’s very sacred.”
Sudjono, a director at automotive lender BFI Finance, says it’s still too early to talk about non-performing loans in the nascent wedding financing business. “In terms of risk management, it’s generally still the same procedure. We still do a credit assessment,” he says.
Firdaus Djaelani, a commissioner at the Financial Services Authority (OJK) in charge of non-bank financial institutions, says the regulator is still “monitoring the trend” of wedding financing.
“If multi-finance firms want to develop this trend further, they will need to report to us. But for now, they can use the regulation on multi-finance business operations,” he says, referring to a 2014 OJK regulation that expands the business scope of multi-finance firms in Indonesia.
“We need to be careful; however, the risk is relatively small right now,” he adds.
To date, multi-finance firms have managed to keep non-performing loans at 2 percent of total outstanding loans, Firdaus says. NPLs at banks amount to 2.4 percent.
The cost of wedded bliss
The rising standards of wedding ceremonies in Indonesia’s big cities – and with them, the costs – have pushed most young couples to seek alternative financing, says Lidya Triana, a social demographic expert and professor at the University of Indonesia’s department of sociology.
“There is this demand for Indonesians in big cities to reach a certain standard of weddings, from the ideal venue to pre-wedding photo shoots. [Weddings] have become a lifestyle and they’re packaged to be as appealing as possible, which is not cheap,” she says.
At the same time, younger Indonesians are growing increasingly independent of their extended family, and tend to keep life events, including weddings, within the nuclear family.
Lidya says wedding ceremonies have become a sign of prestige or social status in the city, pressuring most couples to live up to a certain standard.
“For some people who want the lifestyle but don’t have the financial capacity yet, they will usually seek loans, whether it’s from relatives or banks,” she says.
There are an estimated 42 million Indonesians between the ages of 25 and 34 – the typical age of marriage in the country – and with more than 120 million currently under the age of 25, the wedding industry is likely to stay busy for the next 20 years.
Indonesia’s young and increasingly affluent population has always provided lush ground for companies in all sectors to flourish, from consumer goods to financial institutions. The expansion of financial institutions to weddings, says BFI's Sudjono, is therefore just another chapter in that narrative of growth.
“Wedding financing is just another way for us to reach our consumers,” he says.