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Multifinance firms blame declining purchasing power for rise in bad loans
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Representatives of Adira Finance offer products to consumers at Jakarta's Central Park Mall on July 18, 2024. (Adira Finance/-)
T
he Financial Services Authority (OJK) has revealed an increase in nonperforming financing (NPF) at domestic multifinance firms to 2.75 percent in July from 2.69 percent a year earlier, which industry players attribute to weaker purchasing power of Indonesian consumers.
Publicly listed PT Adira Dinamika Multi Finance (Adira Finance) recorded an NPF of 2.2 percent in August, worse than the 1.9 percent in December last year.
Sylvanus Gani Mendrofa, finance director of Adira Finance, explained that the overall rise in NPF across multifinance firms was driven by several factors, including weaker purchasing power within the middle-class segment.
He added that the increase in the cost of basic necessities had not been followed by a corresponding rise in people’s incomes, resulting in lower net incomes for consumers.
The firm vowed to manage its NPF amid the “concerning trend” by cautiously implementing risk management strategies. Aside from that, it said it was targeting specific segments that aligned with its risk appetite and conducting effective collection.
“We have also increased the number of employees in specific spots [branch locations] where additional support is needed,” he said on Monday, as quoted by Bisnis.
Read also: Auto financing falls 15% in July due to slump in new car sales
