Fintech lenders in Indonesia back government by providing loans to SMEs as part of COVID relief effort

Asosiasi Fintech Pendanaan Bersama Indonesia (AFPI), which is an association of 156 fintech lenders, reportedly intends to work in cooperation with the Indonesian government to distribute funds intended to offset the economic woes and challenges created as a result of COVID-19.

Since September 2020, the Indonesian The government has issued 25% of the planned 695 trillion IDR (about $ 46.8 billion) it has set aside for COVID-related financial assistance for local businesses.

AFPI has created credit profiles for various Indonesian companies. The association has would have collected data on 25 million local entities since June of this year. AFPI manages this data using appropriate analytical tools developed to reach underbanked or financially underserved Indonesians and their micro, small and medium enterprises (MSMEs). The data can be used to help disburse COVID relief funds to local residents and businesses the government plans to help.

Most AFPI members offer peer-to-peer lending (P2P) services.

Chatib Basri, AFPI Advisory Board member said:

“One of the merits of P2P platforms is the data. And these data are the main problem in the disbursement of [funds from the government, whose]… The data is out of date, especially for the lower middle income segment…. There must be good collaboration between regulators and industry. Collaboration on data could be a “quick win” … “

Adrian Gunadi, President of the Indonesian Association of Fintech Lenders (AFPI), confirmed on September 23, 2020 that P2P lender Investree has received an allocation from Mandiri State Bank so that it can disburse funds under the national economic recovery plan. As reported According to the Jakarta Post, the funds will be provided to several small business owners.

Adrian, whose comments came during the Jakpost Fintech Fest (a virtual discussion / event), noted:

“This is one way we could see fintech playing a very big role, especially when everything goes digital because of the pandemic. The government is moving towards a contactless economy.

He added:

“I think this is where fintech will become more relevant. It needs to be part of a larger ecosystem so that we can accelerate relief efforts for Indonesia. “

Ravi Ivanuri, adviser to the Big Four audit firm PricewaterhouseCoopers (PwC), said financial authorities in other countries have been striving to improve their digital financial services during this unprecedented time. However, he says Indonesia is leading the charge in the Southeast Asian region when it comes to developing and sustaining an enabling environment for fintech. But Ravi also recommended that more coordination is needed between regulators and local businesses.

He also mentioned:

“Maybe in one, two or three years, if there is more and more collaboration between these regulators, there will be more clarity for fintech players as to how to comply with these different regulations. “

As of June 2020, there were 161 licensed or registered P2P lenders operating in Indonesia. Only 12 of them are Sharia-compliant, according to recent data from the OJK, the country’s financial regulator. The country’s P2P lending platforms have been successful in helping around 20.6 million borrowers by connecting them with 539,460 lenders.

But COVID has had a major negative impact on some segments of the Indonesian fintech industry. Its non-performing loan (NPL) ratio jumped to 7.99%, part of a worsening trend that began in March 2020 (when the coronavirus crisis began). The NPL stood at 4.22% in March 2020, which is significantly higher than the 2.62% last year.

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