Online Loans in Indonesia Present an MSME Business Capital Solution

JAKARTA – (ACN Newswire) – The rapid development of Indonesia’s fintech industry, especially in the online lending sector, has brought about with it some fresh air, especially for the people in Micro, Small and Medium Enterprises (MSMEs). With the presence of online lending fintech, the MSME sector can continue to grow.

“Opportunities for cooperation have emerged between fintech players and the financial services industry, including savings and loan cooperatives and also government institutions engaged in financing. Collaboration is necessary to ensure that operational efficiency can be achieved and result in lower interest rates, especially for our primary borrowers, the businessmen,” explains Braman Setyo, Managing Director of Indonesia’s LPDB-KUMKM (Agency for Revolving Fund Management for Cooperatives and Small and Medium Enterprises).

According to Braman, the government views the rapid development of online lending fintech openly and positively, and with the variety of online lending services increasing, the capital needs and requirements of MSME players, especially non-bankable ones, are expected to be fulfilled.

“This is because many fintechs are engaged in the financing of productive sectors, and this could be a potential so that non-bankable sectors might also access business sector financing, including LPDB financing access through fintechs, moving forward,” explains Braman.

Kusnaeryah, Daily Chair of the Indonesian Fintech Joint Funding Association (AFPI), says that the presence of fintech in Indonesia brought financial inclusion. “The presence of Fintech P2P lending is specifically to reach people who are not covered by loans because they do not meet the criteria of banks and finance companies.”

In addition, fintechs with technological innovation use data and alternative credit scoring to expand coverage. “With a credit gap that reaches Rp1,000 trillion per year, the chances of fintech growth are very high. Especially now that fintech is increasingly and actively collaborating with banks and finance companies,” he stated.

Kusnaeryah adds that the current presence of fintech can boost MSMEs – no mere discourse, but a state of affairs that has been proven by the presence of fintech P2P lending in various segments. “There is a capital storage platform which funds traders around the minimarket network, there are those who finance the supply chain of farmers.

“There are tanifunds, which finance the agricultural supply chain. There are fintags that finance the marine sector, there are capital companies that finance mothers in eastern Indonesia with the grameen bank model,” he continues.

“The presence of Modalku (MyCapital) and Accelerant has filled the productive financing needs of the business segment from IDR 500 million to IDR 2 billion. Even creative sector entrepreneurs such as event organizers now have funding opportunities from P2P lending platforms such as Investree,” he said.

As of December 31, 2018, there were 88 fintech lending companies registered in the Financial Services Authority (OKJ) database. According to Aidil Zulkifli, CEO of Indonesian pioneer fintech lender UangTeman, these 88 fintech lending companies are serious about their platform and comply with all applicable regulations.

“Every regulation issued by the regulators has the positive effect of ensuring sustainability is the fintech lending industry, as well as guaranteeing the rights and obligations of customers and platforms. Those who are registered are obliged and do comply with these regulations,” explains Aidil.

In addition to complying themselves with applicable regulations, the fintech lending companies are continuously socializing their borrowers to ensure that they are able to understand the rights and obligations they must adhere to while receiving loans.

“Customers who borrow from UangTeman come from various circles including MSMEs. For us, they must always be educated directly or through various media in order to understand the terms and conditions in applying for online loans so that they can avoid situations that could make it difficult for them,” added Aidil.

In addition to educating relating to terms and conditions, customers who borrow from UangTeman are also encouraged to use the funds obtained for productive matters, as the positive use of these loans can provide compounding benefits to the borrowers.

“We are certainly very proud to be able to contribute to improving financial inclusion in Indonesia, especially for those in the MSME sector. We will continue to encourage all customers in the positive use of loans obtained,” elaborates Aidil.

Aidil emphatically reminds all to be aware of illegal online lending platforms; look carefully at the validity and legality of the online lending platform they might plan to use. “If one borrows from a platform that is registered, they will join a community and feel safer as their consumer services are certainly regulated by the OJK,” concludes UangTeman’s chief.

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