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Jakarta Post

P2P lending helps SMEs earn more, scale up business: Research

  • Eisya A. Eloksari

    The Jakarta Post

Jakarta   /   Fri, July 3, 2020   /   02:14 pm
P2P lending helps SMEs earn more, scale up business: Research Illustration of financial technology (fintech). (Shutterstock/File)

Borrowers of peer-to-peer (P2P) lending platform Investree, which mostly comprise small and medium enterprises (SMEs), had seen a significant increase in revenue and were able to scale-up business since joining the platform, a study by the University of Indonesia shows.

The SMEs had seen an income increase of between 20 percent and 50 percent since joining Investree, including some of the small businesses in manufacturing, services and construction, among others, according to the study by the university’s demography center at the School of Economics and Business.

Meanwhile, 44 percent of the entrepreneurs in Investree had also been able to employ more people since borrowing from the P2P platform.

“This research found that fintech lending is able to support financial inclusion and has had a positive impact on SMEs,” UI School of Business researcher Dewa Wisana said in a press briefing on Thursday.

The P2P lending helps the borrowers give out short-term loans that enable the SMEs to scale up their business, eventually qualifying them to take out bigger bank loans, Dewa explained.

Small businesses contribute more than 60 percent to GDP. However, in April, the Cooperatives and Small and Medium Enterprises Ministry reported that around 37,000 SMEs had reported declining sales and trouble with distribution, among other problems, because of the ongoing health crisis.

Online sellers that borrowed from the P2P lending platform were able to increase their income from the initial average of Rp 807 million (US$57,046) to Rp 3.5 billion, the survey also revealed.

The survey data is calculated based on 261 interviews with the P2P lender clients in Java between December 2019 and January.

While the study did not reflect P2P lending during the epidemic, Investree cofounder and CEO Adrian Gunadi said the company still recorded a 90-day loan return rate (TKB 90) of 99.5 percent in June.

Previously, Indonesian Fintech Lenders Association (AFPI) data showed that P2P lending platforms had seen Rp 1.08 trillion in outstanding loan restructuring requests in May, but only a fraction, Rp 236.9 billion, had been approved by lenders, sending a signal of potential risky loans.

Read also: Requests for loan restructuring on the rise as COVID-19 hits P2P borrowers

Institutional lenders made up 72 percent of the platform’s total lenders in April, while the proportion of retail lenders then rebounded in May to more than half of the total lenders.

“Our retail lenders had decreased during the partial lockdown period because borrowing money was not their priority. However, fintech lending is still a viable alternative for SMEs,” Adrian said.

In April, Investree also announced its first trench of series C funding worth $23.5 million, as well as a plan to expand its market to Thailand and the Philippines this year.

Meanwhile, Research and Technology Minister Bambang Brodjonegoro said fintech lending needed to cater to more SMEs, especially during the pandemic, when the global economy was experiencing a recession.

“Going digital by selling on e-commerce can save SMEs and fintech lending can help by supporting their financing,” he said in the press briefing keynote speech.