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Surge in P2P loan defaults could trigger 'natural selection': Analysts
Analysts and industry observers generally feel that the recent increase in the default rate on P2P lending platforms can only be a good thing, as it would narrow the field and lead to greater competition.
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P2P lending platforms have seen a surge in loan defaults as of July 2022, which could lead to “natural selection” in the industry, according to Center of Economic and Law Studies (CELIOS) executive director Bhima Yudhistira. (Shutterstock/*)
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ndonesia’s peer-to-peer (P2P) lending platforms are currently in a tight spot, as the platforms’ default rate has jumped while their profitability has plummeted, a condition that analysts have called “concerning” and required concrete action to save the fintech industry.
According to data from the Financial Services Authority (OJK), defaults on P2P lending platforms eached Rp 1.2 trillion (US$78.4 million) in July, or a default rate of 2.67 percent, almost double the amount during the same period last year.
It is the reverse of the condition last year, when defaults in P2P lending fell 45 percent year-on-year in an improvement from 2020: That year, defaulting among P2P borrowers surged almost threefold during the height of the COVID-19 pandemic to reach a default rate of 8 percent.
Consumption loans made up more than 90 percent of all loan defaults in July, with the difference comprising productive loans, like credit for small and medium businesses.
P2P lending platforms also saw their performance worsen during the first seven months of this year with cumulative net loss of Rp 145 billion, almost double the aggregate net profit booked during the same period last year, when the industry started becoming profitable.
Executive director Kuseryansyah of the Indonesian Joint Funding Fintech Association (AFPI) said earlier in the week that fintech firms were still capable of managing the situation, even though some had performed worse.
He said that total loan defaults had increased in line with the increase in loan disbursements, which had reached Rp 45 trillion as of July, almost double the amount during the same period last year.
