Indonesian Fintech Lenders Association (AFPI) deputy chairman Sunu Widyatmoko acknowledged that several customers faced difficulty in accessing loans as the coronavirus outbreak unfolded.

“The COVID-19 pandemic has caused several platforms to decrease new loan disbursement,” he said during a webinar held by the AFPI on Monday.

He explained that the loan process was now tougher for new applications and that it was an inevitable consequence of an industry that targeted underserved and unbanked users, or the so-called “bottom of the pyramid”, whose loans would inevitably incur more risks.

Financial Services Authority (OJK) data show that loan disbursement from fintech P2P lending has slowed in recent months.

The growth of loan disbursement was only 3.12 percent year-on-year (yoy) in May to a total of Rp 109.18 trillion (US$7.59 billion) from Rp 106.06 trillion as of April. During the same period last year, loan channeling grew 10.87 percent annually to Rp 41.03 trillion. 

At the same time, bank loan disbursement grew just 3.04 percent yoy in May, much slower than 5.73 percent in April, as the coronavirus battered the real sector.

The pandemic has disrupted business activity as social restrictions implemented to curb the virus spread have forced offices, shops and factories to close. The government now expects the economy to grow just 1 percent this year or even contract 0.4 percent from a growth of 5.02 percent recorded in 2019.

However, Sunu said, not every lender was hitting the brakes when it came to lending, as different lenders had their own risk preferences.  

Despite the slowdown in overall loan disbursement growth, the AFPI reported a positive gain among loan channeling to productive sectors, especially health sectors, with small and medium enterprises offering medical supplies and equipment benefiting from the trend. 

Sectors related to food distribution, agriculture products, packaged meals, as well as the telecommunications sector are projected to continue to grow, AFPI managing director Kuseryansyah said in a written statement published following the webinar. 

Amid the growth trend, the OJK warns customers of illegal P2P lending platforms that mushroom during the pandemic.

The authority’s investment alert task force has blocked 694 illegal platforms so far this year, bringing the total number of such platforms blocked to 2,591 between 2018 and 2020. In June alone, 105 illegal platforms were identified by the task force.

“Borrow from a fintech P2P lending firm that has already been registered with the OJK,” the task force’s chairman Tongam Lumban Tobing said during the webinar. 

As of June 11, as many as 160 fintech P2P lending platforms were registered with the OJK, 33 of which already have business permits while the rest have been certified as legal fintech platforms. 

The public was at risk if they borrowed from the illegal platforms, as they normally exploited users' private data, requiring users to give access to unnecessary databases, he added. They often give unclear interest rates and loan tenure while not providing a traceable office address and have a questionable management framework. 

“We actively carry out a cyber patrol with the Communications and Information Ministry on a daily basis,” OJK fintech regulation, licensing and supervision director Munawar Kasan said.

The authority also collaborates with the central bank, banks and tech giant Google to suppress the spread of unaccountable lending platforms.

The AFPI, on the other hand, has established a Fintech Data Center (FDC) in an effort to minimize fraud within the industry. Aside from that, its members are bound to a code of conduct and code of ethics to prevent abuse in handling consumers' data, with those breaching the codes of conduct subject to sanctions.

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