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Regional lenders, fintech team up to broaden financial access
Banks owned by regional governments may have the opportunity to expand through collaborations with the fast-growing financial technology (fintech) sector, which was once perceived as a threat to the banking industry
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anks owned by regional governments may have the opportunity to expand through collaborations with the fast-growing financial technology (fintech) sector, which was once perceived as a threat to the banking industry.
A collaboration between Bank Jabar Banten (BJB), a regional bank owned by the administrations of West Java and Banten, with fintech company PT Tani Fund Madani (TaniFund), may offer an example of how both parties can grow their businesses mutually.
As an agricultural startup focusing on farmers’ crowd lending, TaniFund gathers together lenders to finance farmers’ production through its online platform, tanifund.com, which was launched in January 2017.
It aims to provide an alternative financing source for farmers who have been struggling to access bank loans as they often lack necessary collateral.
TaniFund CEO Ivan Arie Sustiawan said the company had three sources of funding, from individuals, organizations and banks, with a crowdfunding system based on a profit-sharing mechanism.
“In our collaboration with BJB, the bank channels its money through the KUR [government-backed micro loan program],” he told The Jakarta Post recently.
Aside from collaboration with BJB, TaniFund has partnerships with Bank Bukopin and rural lender BPR Supra Artapersada, he said.
In partnering with the banks, Ivan said TaniFund mitigated credit-risk and managed the funds before channeling them to farmers, as lenders often lacked expertise in analyzing agriculture.
So far, the startup company has managed loans worth around Rp 15 billion (US$1.05 million) disbursed to farmers in several regencies on Java Island, such as Pandeglang in Banten, Ciwidey in West Java and Magelang in Central Java.
Regulators and fintech players believe that the collaboration story between BJB and TaniFund can attract more regional development banks to come up with plans to work together with fintech firms in order to speed up financial inclusion in rural regions.
Twenty-six regional banks currently operate across the country, with greater expertise in reaching out to small districts in a regency compared to commercial banks. Despite helping regions to generate revenue, they still face perennial problems of limited human resources and infrastructure.
Fithri Hadi, the Financial Services Authority’s (OJK) director of digital finance innovation and microfinance development, said fintech firms offered a wide range of services, such as payment, lending and crowdfunding, with the ability to reach a variety of different backgrounds and locations.
“However, fintech [firms] are not substitutes for banks; they still need banks to work and develop themselves,” he told the Post, adding that regional lenders might need fintech companies to help them with transformation to the digital era.
Fithri said remittance through digital wallets was one of many possible collaboration models between regional banks and fintech firms, especially when Indonesian migrant workers often find difficulties in sending money to their families back home.
“Some workers rely on transferring their money through Western Union with expensive fees. Some others who work in palm plantations [in Malaysia] and live far from cities even depend on middlemen services to send their money,” he said.
He said migrant workers could send their money to their families’ accounts in regional banks through apps developed by fintech companies with faster notification.
At least 180 fintech firms operate in Indonesia with different potentials and expertise in technology, 32 of which have been officially registered with the OJK, according to Indonesian Fintech Association (AFTECH).
Rudie Hardiono, operational director of East Java’s regional lender Bank Jatim, acknowledged his firm’s interest in collaborating with fintech companies to enrich its banking features, but expressed the need to conduct further studies on possible partnerships. (roi)
