Fintech Industry Flourishes
Employee activity at the Halomoney financial technology office in Kuningan, Jakarta, Friday (17/2). Halomoney is a financial product comparison site.
JAKARTA, KOMPAS – Technology-based financial businesses are blooming in Indonesia. The total amount of funds they manage continues to increase and the total amount of lending is also increasing. Public trust in these businesses is also growing. Such a condition reflects the financing gap that exists with conventional financial institutions.
Anna Amanda, 27, is a client of KoinWorks, an app providing peer-to-peer lending through financial technology (fintech). She said the financing model that KoinWorks facilitated had helped startup business owners like herself.
“I have no assets that I can use as collateral to apply for a bank loan. If I can prove my business is sustainable, fintech investors are apparently interested in financing me. This is a new and interesting experience. I never thought that I could secure funding without collateral,” said Anna in Jakarta on Sunday (19/2/2017).
Anna owns a chocolate business that she markets through her Instagram account, @chocolatefountainjkt. She said she was greatly helped by the peer-to-peer financing model. Apart from the lack of need for collateral, the model is also online-based and therefore makes things more efficient.
Anna is just one example from thousands of people using peer-to-peer financing facilities enabled by the fintech industry. It is an innovation that provides financial services and improves funding access to people, such as through mobile apps.
In just two years, the global fintech industry has increased the total amount of funds it manages from US$12.05 billion (Rp 156 trillion) in 2015 to US$18.64 billion (Rp 234 trillion) this year through a number of services, including peer-to-peer payment, funding and lending. Fintech has a huge market due to the gap between financing needs (Rp 1,649 trillion) and banking services’ funding capabilities (Rp 660 trillion).
Investree CEO Adrian Gunadi, Modalku CEO Reynold Wijaya, KoinWorks CEO Benedicto Haryono and Halomoney CEO Jay Broekman said they had seen rapid fintech development in Indonesia, based on the increase in managed funds, the number of parties involved and the number of fintech businesses.
Overcoming constraints to access
Reynold Wijaya said the presence of an online peer-to-peer lending marketplace aimed to overcome funding constraints for small and medium enterprises (SMEs), as not all small and medium business owners could easily obtain funding from banks.
By utilizing digital technology, peer-to-peer financing businesses can immediately process SME funding proposals. With technology, the cost to attain new customers is much lower. In the past year, Modalku has gained 150 SME clients with a total distributed fund of Rp 80 billion.
“Since our inception, we have decided to focus on SME clients, both individuals and companies. Some of our clients are individuals with small-scale restaurant businesses,” Reynold said.
Investree also has a peer-to-peer lending marketplace business model. It targets medium-scale businessmen and employees.
Adrian Gunadi sees internet trends and the increasing usage of mobile equipment as a part of lifestyle changes. Both highly influence the development of online-based loan businesses.
Investree currently has 50 medium-scale business clients from the creative, food and beverage and outsourcing industries. Employees, on the other hand, usually use loans for home renovations, education and children’s needs.
Debtor’s criteria
Investree risk and operations chief Andi Andries said medium enterprises wishing to apply for loans at the online marketplace must have project billing information. The Investree team will use this information to assess the credit distribution risk level.
For individual clients, Investree collaborated with a number of companies in Jakarta. The company currently has 100 employee clients. Similar to medium-scale company clients, Investree conducts credit assessments on individual clients to find out their levels of risk. Company profiles and individual clients’ checking accounts are included in the assessment. The lowest interest rate is 0.9 percent per month and the highest is 2.2 percent per month.
Andi said funds could be disbursed within days from the submission of a proposal. Credit for company clients, for instance, is usually disbursed within three days. Currently, Investree has a total of 335 borrowers with total loans of Rp 73.4 billion. Of this amount, Rp 52.4 billion has been paid off.
Halomoney is a fintech company in the financial product brokerage business. It works by providing financial information. Jay Broekman said his office was optimistic about the growth of the fintech industry in Indonesia. Among the country’s 260 million people, a 2016 survey by the Financial Services Authority (OJK) found a financial literacy level of 29.7 percent, a significant increase from the 21.8 percent in 2013. The survey also found that the country’s financial inclusion index, which measures how many people have access to banking products, was 67.8 percent in 2016, an increase from 59.7 percent in 2013.
Benedicto Haryono said the huge funding gap in the banking industry offered an opportunity for the growth of funding models through fintech.
Pioneering fintech businesses, many of which have only existed for less than a year, have attracted around 2,000 investors and 120 clients. KoinWorks has actually received 8,000 funding proposals. Most of them, however, could not be accepted as their profiles do not match the company’s goals. Most of the clients that the company accepts are pioneering business owners and online-based companies.
Since Dec. 28, 2016, the government has begun regulating the fintech industry. The OJK’s non-banking finance industry (IKNB) regulator chief executive Firdaus Djaelani said the regulations were made to improve public access to financial services in order to boost economic growth, reduce poverty and improve the equitable distribution of income.
Of the 600 fintech businesses currently operating, only 157 are registered at the OJK. The OJK is still verifying all the registered fintech businesses before giving its official approval.
(MED/AHA/WIE/IDR/HEN/MAR)
