Indonesia's peer-to-peer (P2P) lending platforms are looking forward to further growth next year, 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 chief operating officer 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 2.5 trillion rupiah ($177 million) in loans to small and medium-sized enterprises (SMEs) as of last month, a 38.8 per cent increase year-to-date from 1.8 trillion rupiah by 2019 year-end.

Meanwhile, its users grew 61 per cent year-on-year to the current 549,000.

“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 December 21, adding that the company was aiming for profitability next year.

The company recorded a non-performing loan (NPL) rate of 0.64 per cent at present, he said.

Financial Services Authority (OJK) data show that the country’s fintech lending platforms have disbursed a total of 56.16 trillion rupiah in new loans as of October this year, marking a 23.88 per cent year-on-year increase.

The industry’s average of bad loans stood at 7.58 per cent as of October, down from 8.27 per cent in September.

Bernard said that during the pandemic, 10 per cent 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 15 billion rupiah in core capital to get a permit, up from the current 2.5 billion.

Bernard said: “I think investors still have a big appetite to fund fintech companies, especially because the SME lending potential is attractive.”

The revision also mandates fintech lending platforms to have productive loans account for 40 per cent of its total loans gradually, up from the current 20 per cent. P2P platform Modalku was also optimistic about its upcoming growth potential.

The platform booked accumulated outstanding loans of 20 trillion rupiah to date, disbursed in Indonesia, Malaysia and Singapore, which is double the figure by the end of December last year, according to the company’s co-founder and CEO Reynold Wijaya.

While the pandemic had also affected Modalku’s portfolio, it had maintained an average one per cent 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 December 22, 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 eight per cent year-on-year in the first half of this year compared to the first half of last year, a contrast from 20 per cent growth year-on-year on digital payments.

The number of new loans issued was also down six per cent year-on-year globally in the same period, compounded by a nine per cent rise in loan defaults.

“Online lending, much like bank loans, is pro-cyclical. 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 per cent and five per cent decline year-on-year in the number of new borrowers and repeating borrowers, respectively.

UK Minister for Africa at the Foreign, Commonwealth & Development Office James Duddridge said in the statement: “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.”

THE JAKARTA POST/ASIA NEWS NETWORK