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Foe to friend: Fintech companies work with banks to reach unbanked
According to Bank Indonesia data, funding channeled by fintech companies totals Rp 60.4 trillion, with more than 14 million borrowers, as of September. That is based on 120 fintech companies registered by the Financial Services Authority (OJK).
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Illustration of financial technology (fintech) (Shutterstock/File)
When financial technology (fintech) start-ups began mushrooming in the country a few years ago, several economists and experts described the phenomenon as a disruption of the conventional banking business.
Fintech firms can provide loans to customers faster than banks by using their technology in determining a person’s credit rating. Banks find it difficult to compete with fintech’s speedy services, as they are bound to rigid regulations.
However, things seem to have changed recently as fintech companies are now collaborating with banking institutions to reach so-called unbanked people by given them access to financing while boosting financial inclusion in the country.
Peer-to-peer (P2P) lending platform Amartha, for instance, has received funds amounting to Rp 150 billion (US$10.67 million) from private lender Permata Bank and Rp 100 billion to Rp 200 billion from Mandiri Capital Indonesia, a subsidiary of state-owned lender Bank Mandiri, to provide loans for businesswomen in villages across Indonesia.
“Without having to invest much in technology, banks could engage in credit underwriting and reach many more people [by working with fintech companies], because many banks have not yet acquired [sufficient] technological capabilities,” Amartha chief and risk sustainability officer Aria Widyanto told The Jakarta Post recently.
Amartha’s borrowers will automatically become bank customers as the loans are booked at Permata Bank and Bank Mandiri.
“When the borrowers use our service, their loans are being booked at the banks, so they will have a credit history and have their profiles recorded in the banking system,” Aria said.
