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Wanted: High quality lenders and borrowers
Right now, there are 113 fintech lending companies registered with the OJK, seven of which have obtained licenses. This does not include hundreds of illegal players. Given the iron law in business: When many players enter, many will go out, who will stay in business?
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An employee checks the identity card of a customer at peer-to-peer lending start-up PinjamDuit in Gading Serpong, Tangerang, Banten. (The Jakarta Post/R. Berto Wedhatama)
T
he digital business is certainly dazzling. Just take a look at fintech lending, the growth of which has been phenomenal here in Indonesia. According to the Financial Services Authority (OJK), in the period of December 2018 to May the number of lenders increased from 207,000 to 480,000, around 131 percent. Likewise, the number of borrowers doubled from 4.3 million to 8.7 million. Meanwhile the amount of funds disbursed also grew by around 81 percent from Rp 22.6 trillion (US$1.6 billion) to Rp 40 trillion.
Right now, there are 113 fintech lending companies registered with the OJK, seven of which have obtained licenses. This does not include hundreds of illegal players. Given the iron law in business: When many players enter, many will go out, who will stay in business?
Like any other businesses, fintech lending will be successful if it is able to offer a match between solutions (what) for customers (who) having problems, needs or jobs to be done.
Now who is benefiting from this fintech lending? They are mainly the borrowers and lenders. For borrowers, the benefit is they get loans (for either personal or business needs) faster, more easily and more cheaply. With digital-based solutions, getting loans is now faster and easier compared to conventional solutions, through banks for example.
The question is could borrowers get lower interest rates? Hardly. Why is this difficult? Because the job of lenders is to place funds available in productive places that can provide attractive returns. For productive loans, fintech lending offers rates of return to lenders ranging from 8 percent to 20 percent per year.
According to the Indonesian Fintech Lenders Association (AFPI), productive loan interest rates range from 16 to 30 percent per year. Meanwhile for payday loans, the interest rates charged to borrowers are high, up to 0.8 percent per day or 24 percent per month! With such high interest rates, why do borrowers continue to flock in search of funding from fintech lending?
It is undeniable, we all are familiar with the job of “borrowing”. Those in business are used to borrowing for working capital needs. For personal and family purposes, some of us are also accustomed to borrowing here and there. When fintech lending comes with all its conveniences, the appetite for borrowing increases, even with a higher interest rate than it already is.
