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P2P lenders should cut risks to bring down rates, analysts say
However, the experts also note that a reduction of interest on loans should not keep P2P creditors from getting “proper” returns.
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Illustration of financial technology (fintech) (Shutterstock/File)
T
o:p>The maximum rates charged by peer-to-peer (P2P) lenders, despite having come down in recent years, are still too high a burden for the predominantly lower-income borrowers, analysts say.
While urging P2P platforms to bring down the rates they charge, the experts also note that the rates would need to remain sufficiently high to give P2P creditors “proper” returns.
They suggested that P2P lenders be transparent about how they calculate fees incurred from a loan and that they tighten lending criteria rather than continuing to operate in a "high risk, high return" area.
The Financial Services Authority (OJK) is in the process of devising new rules to regulate P2P lending, including caps on loan interest. Up until now, to determine the interest rates they charge, the players only refer to a Code of Conduct from the Indonesian Fintech Lenders Association (AFPI).
"We would try to find an equilibrium point between meeting borrowers' concerns for a safe, convenient and affordable service while maintaining lenders’ appetite [for high returns]," OJK commissioner Agusman, who oversees P2P lending, said in a press conference on Monday.
Yusuf Wibisono, executive director of the Institute for Demographic and Poverty Studies (IDEAS), noted that there was a general principle of the OJK to refrain from capping interest rates for P2P lending, similar to the agency's treatment of banking and other financial industries.
However, Yusuf argued that P2P lending was unique in that it targeted unbanked people living on lower incomes and compensated for the high risk by setting high interest rates.
