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Interest rate cap eats into peer-to-peer lenders’ earnings
A prolonged trend of declining profitability could dent the survivability of the firms.
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Serving the public: A person walks past the Papua office of the Financial Services Authority (OJK) in Jayapura on Oct. 27. The OJK has opened branch offices across the country to improve its services to the public. (Antara/Indrayadi TH)
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new Financial Services Authority (OJK) rule that caps interest rates in the peer-to-peer (P2P) lending industry has affected the sector’s earnings this year, forcing several firms to cut costs in order to stay afloat.
P2P lending firms in Indonesia saw a Rp 27.3 billion (US$1.70 million) net loss in the first three months of the year, a stark departure from the Rp 206.7 billion profit they booked as a whole in the same period last year.
Analysts and industry players say a prolonged trend of declining profitability resulting from the rule change could dent the survivability of the firms.
Yasmine Meylia, executive director of the Indonesia Fintech Lending Association (AFPI), told The Jakarta Post on Friday that P2P lending firms had been grappling with a number of uncertainties over the past few months, including the February general election and the effects of global economic dynamics on the domestic economy.
Some firms were in the process of exploring new markets and products as well, which had contributed to the sector’s overall losses.
Separately, Yasmine noted that the OJK had placed the daily interest rate cap at 0.3 percent this year, down from the previous 0.4 percent, a fact she said had contributed to the industry’s losses in the first quarter.
The OJK plans to reduce the cap further to 0.2 percent a day in 2025 and 0.1 percent a day and 2026, according to the institution’s circular No. 19/2023.
