The Indonesian Fintech Lenders Association (AFPI) has reportedly decided to establish a special task force to assist peer-to-peer (P2P) Fintech companies with the significant increase in bad loans – which may have resulted from the socioeconomic challenges created due to the Coronavirus crisis.
Adrian Gunadi, chairperson at the AFPI, told reporters on September 30 that the task force would be assisting firms with improving the 90-day success loan settlement rate (TKB90). The task force group also plans to help with lowering the bad loan rate by enhancing related risk management policies.
Gunadi noted that the AFPI will explore different strategies in order to improve the loan collection processes. It will also work cooperatively with Indonesian credit insurance firms and various supporting third parties.
As reported by the Jakarta Post, Indonesian P2P Fintech companies saw the number of bad loans increase to nearly 8% in July 2020, which is considerably more than 4.22% in March 2020, when the pandemic began (according to latest AFPI data). The March figure had also been a major increase from the 2.62% reported in March of last year, the Financial Services Authority (OJK) confirmed.
The AFPI claims that the significant rise in the number of bad loans is most likely due to the negative impact of COVID-19 on borrowers’ earnings or income levels.
Tris Yulianta, the Fintech management, surveillance and licensing director at OJK, revealed that Fintech lenders’ TKB90 rate has been faltering during the COVID-19 pandemic, which means there’s a significantly increased risk of credit insolvency.
The TKB90 rate of 158 registered or licensed Indonesian P2P Fintech lending service providers stood at 92% in July 2020, which was down a bit from 93.8% in June and about 95% in May 2020.
“The TKB90 rate has been in decline since April, and currently stands at around 91%. Therefore, we urge all [peer to peer] platforms to improve their credit scoring quality, risk management and the ‘know-your-customer’ system.”
“We’ve discussed with the companies how to reduce their bad loan rate and have required them to improve their risk mitigation, while consistently monitoring their development….some of the companies have shown results that are beyond their action plans.”
Indonesia’s P2P lending platforms had issued Rp 116.97 trillion (appr. $7.86 billion) in loans (as July 2020). That’s more than twice the amount of loans provided during the same time period last year (from January to July 2019).
As reported in early September 2020, the Indonesian Fintech Lenders Association had offered to assist with disbursing funds allocated to the COVID-19 related national economic recovery program.