The Jakarta Post
Indonesia’s peer-to-peer (P2P) lending platforms are looking forward to further growth in 2021, amid the promising increase of users and disbursement this year, and low bad loans ratio, despite the raging COVID-19 pandemic.
P2P lending platform KoinWorks COO Bernard Arifin said that while the company had experienced a decline in loan requests during the first large-scale social restrictions (PSBB) period from March to July, it had enjoyed an increase in loan requests nearing the end of the year.
KoinWorks has disbursed Rp 2.5 trillion (US$175.5 million) in loans to small and medium enterprises (SMEs) as of November, a 38.8 percent increase year-to-date (ytd) from Rp 1.8 trillion by 2019 year-end. Meanwhile, its users grew 61 percent year-on-year (yoy) to 549,000 users currently.
“At this rate, coupled with the technology adoption by SMEs, we are optimistic about the future of fintech lending in 2021,” he said in a press briefing on Monday, adding that the company was aiming for profitability in 2021.
The company recorded a non-performing loan (NPL) rate of 0.64 percent at present, he said.
Financial Services Authority (OJK) data show that the country’s fintech lending platforms have disbursed a total of Rp 56.16 trillion in new loans as of October this year, marking a 23.88 percent yoy increase. The industry’s average of bad loans stood at 7.58 percent as of October, down from 8.27 percent in September.
Bernard said that during the pandemic, 10 percent of the company’s portfolio requested loan restructuration, but he added that the number of restructured loans was now down to “only a few.”
A recent proposed revision of an OJK regulation, which stipulates a higher core capital requirement for fintech companies to secure a permit, would also lead to more trust within the industry and digital lending players and attract more investors, he said.
The revision of OJK regulation No. 77/POJK.01/2016, requires fintech companies to have Rp 15 billion in core capital to get a permit, up from Rp 2.5 billion currently.
“I think investors still have a big appetite to fund fintech companies, especially because the SME lending potential is attractive,” he said.
The revision also mandates fintech lending platforms to have productive loans account for 40 percent of its total loans gradually, up from the current 20 percent.
P2P platform Modalku was also optimistic about its upcoming growth potential.
The platform booked accumulated outstanding loans of Rp 20 trillion to date, disbursed in Indonesia, Malaysia and Singapore, which is double the figure by the end of December 2019, according to the company’s cofounder and CEO Reynold Wijaya.
While the pandemic had also affected Modalku’s portfolio, it had maintained an average 1 percent NPL rate, Reynold said.
“Hopefully, Indonesia can see economic recovery that can also boost our business growth as SMEs’ need for funding is still big,” he told The Jakarta Post on Tuesday, adding that factors such as the increasing rate of digital penetration and higher public awareness of fintech will also boost P2P lending usage.
Modalku received $40 million through its series-C funding in late April. Reynold said at the time that the funds would be used to support the company’s SME clients during the pandemic.
According to the Global COVID-19 FinTech Market Rapid Assessment Study by the Cambridge Centre for Alternative Finance at the University of Cambridge Judge Business School, the World Economic Forum and the World Bank Group, the global fintech industry grew this year despite the pandemic.
However, the study noted that transaction volume and number on the digital lending platforms globally were down 8 percent yoy in the first half of the year compared to the first half of 2019, a contrast from 20 percent growth yoy on digital payments.
The number of new loans issued was also down 6 percent yoy globally in the same period, compounded by a 9 percent rise in loan defaults.
“Online lending, much like bank loans, is procyclical. When the economy is down, credit disbursement will also go down,” a joint statement on the study reads.
In the Asia-Pacific region, fintech firms indicated an increase in transaction volume and transaction numbers across all verticals. However, digital lending firms in the region reported a 10 percent and 5 percent decline yoy in the number of new borrowers and repeating borrowers, respectively.
“Fintech platforms are also worried about their capability of raising their capital in the future. This should be something for fintech communities to pay attention to, considering the significant economic opportunities brought by fintech,” James Duddridge MP, Minister for Africa at the Foreign, Commonwealth & Development Office (FCDO) said in the statement.