Indonesia’s Peer to Peer Lending Platforms Receive Numerous Debt Restructuring Requests Following COVID-19 Outbreak

Economic activity in Indonesia has slowed down significantly following the deadly Coronavirus (COVID-19) outbreak.

According to local reports, some businesses in the trillion-dollar economy have shut down completely. Peer to peer (P2P) lending platforms are also experiencing major challenges, which include having to deal with numerous requests for debt restructuring.

Adrian Gunadi, chairman of Indonesia’s Fintech Lenders Association (AFPI), recently noted that approximately half of the organization’s members, representing about 80 local P2P lending services, have received requests for debt restructuring.

Gunadi told local news outlet KrAsia that the AFPI has requested that lenders communicate effectively with borrowers. He clarified that the platforms may not be able to complete restructuring independently. He explained that the capital for the loans has been provided by investors and lenders, and not the platform managers or owners.

Gunadi, who is the CEO and co-founder at Investree (a P2P lending marketplace), has been talking to local enterprise borrowers who have received about IDR 2 billion (appr. $127,500) in loans. These borrowers come from industries that were most affected by the Coronavirus crisis. They mainly include distribution services to local  hotels and retail fashion outlets.

Gunadi said that local authorities and agencies are considering various options that will help provide financial relief to borrowers during these challenging times, like deferring payments or easing some of the terms on outstanding loans.

However, he confirmed that ultimately, the lenders are the final “decision-makers.”

Between 3.92–3.98% of all outstanding loans on Indonesia’s P2P platforms were classified as non-performing during January and February 2020. This, according to the country’s financial regulator, the Financial Services Authority.

Local sources said that the rates on such loans could increase substantially if changes are not  made to repayment schedules.

Naila Huda, a researcher working at the Institute for Development of Economics and Finance, said that it is challenging for Fintech firms to file applications for debt restructuring because Fintech apps are “only the loan distributors from lenders to borrowers.”

Huda explained that they are not authorized to provide any discounts for outstanding debt.

She recommended that Fintech firms can offer an interest discount for all new loans or loans that haven’t received approval from lenders.

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