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Big banks sink teeth into P2P partnerships
In this mutually beneficial relationship, banks have the capital and P2P platforms have the market.
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Paper carrier: A customer counts money she has just withdrawn at Bank Bukopin in Jakarta on June 30. The banking industry has encouraged cashless transactions to help curb the spread of COVID-19. (JP/Wendra Ajistyatama)
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ig banks have been expanding partnerships with peer-to-peer (P2P) lenders over the past few years to channel loans to Indonesia’s underbanked population, a mutually beneficial relationship expected to continue at least over the short term.
Top lenders Bank Mandiri, Bank Negara Indonesia (BNI), Bank Rakyat Indonesia (BRI) and Bank Central Asia (BCA) have announced partnerships with major P2P lenders such as KoinWorks, Amartha, Modalku, Investree and Modal Rakyat.
The banks use the P2P to access micro, small and medium enterprises (MSMEs), an economic segment that contributes 60 percent of the gross domestic product (GDP) but which is risky to serve. The P2P lenders benefit from having access to bigger capital.
“Most banks are having problems in disbursing loans to MSMEs because their business model is not designed to accommodate such services,” Indonesian Banks Association (Perbanas) head of policy Aviliani told The Jakarta Post on Nov 22.
But at the same time, “Without collaboration with banks, [P2Ps] would shrink, as there is not much money to lend. If the economic scale is small, it would be difficult for them to live,” added Aviliani, who expects the trend to continue for quite some time.
The trend marks a change in the dynamics between banks and fintech lenders, which used to be seen as competitors in banks’ markets.
P2P lenders offer smaller loans with shorter terms, and use artificial intelligence-based (AI) credit-scoring systems, which enable them to approve loans faster than banks’ credit-analysis methods. These features make it easier for P2P lenders to serve MSMEs.
