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Peer to Peer Lending Industry Amidst Covid-19


by Rafif Rizqullah (rafif.rizqullah@launcher.id) and Clara Viriya (clara.viriya@launcher.id)


The Peer to Peer Lending (Layanan Pinjam Meminjam Uang Berbasis Teknologi) industry in Indonesia has taken a vast growth in the last several years back. Supported by a transparent regulation, the industry has successfully created its own ecosystem resulting in the rise of the peer to peer lending in Indonesia. However, since the early months of 2020, the industry has taken a big hit due to the impact on the economy amidst COVID-19.


This industry may well be scuffling with risky loans as lenders in peer-to-peer (P2P) disposition platforms turned down over half loan restructuration request from debtors because the pandemic impacts people’s finances, a survey shows.


The impact towards the economy, especially the Small Medium Enterprises (UMKM) where it resulted into a huge default rate in the industry portfolio as a whole, the biggest impact is felt by P2P lending company that involves in trading, construction and project development. Consequently with the impact towards the small-medium enterprise sector also affects the portfolio in the cash loan sectors, where most of their segment customer is individually working in the small-medium enterprise. This also resulted in the decrease of revenue of the supporting business in the ecosystem of the P2P lending and subsequently, the whole ecosystem of this industry has seen a downtrend amidst the COVID-19.


Out of 1.96 million loan restructuration requests received by eighty-eight P2P disposition platforms in could, only 34 per cent of them were granted, with the rest denied by the lenders, the Indonesian Joint Funding Fintech Association (Asosiasi Fintech Pendanaan Bersama Indonesia – “AFPI”) data show. The total amount of reported outstanding loans that were requested to be restructured in May stood at Rp 1.08 trillion (US$75.9 million), with just Rp 236.9 billion approved by the lenders.


As the P2P Lending are only platforms that assemble the lenders and the borrowers, the restructuring plan is determined by the lender's approval and condition, this is the tough nature of the industry where it does not determine the restructuring proposal presented by the borrowers.


Anticipating the issue, the industry through AFPI has issued several guidelines for the industry player on how to rise back from the issues in the industry amidst COVID-19. Relaxation on several compliances is also one of the support provided both by AFPI and the Financial Service Authority (“OJK”). According to the OJK, the non-performing loan (NPL) ratio in March stood at 4.22 per cent, an increase from 3.98 per cent in January and 3.93 per cent in February. In these times, credit insurance became one of the most crucial factors that play a big role in saving the industry portfolio.


In this weary time, the role of AFPI and OJK become so crucial as a bridge between industry player and their users to balance up the borrower conditions as well as the lenders. This will be one biggest challenge for all the industry player that shall be answered amidst COVID-19.


LID Advisory is a publication prepared by Launcher.id. It is intended to inform in general topics covered only, and should not be treated as a legal advice or relied upon when making business activities or investment decisions. Should you have any inquiries on the matters contained in LID Advisory, or other comments generally, please contact us at contact@launcher.id.

All content presented herein is for informational purposes only. Nothing should be construed as legal advice. Transmission and receipt of this information is not intended to create and does not constitute, an attorney-client relationship with PT Sinergi Konsultasi Indonesia. There is no expectation of attorney-client privilege or confidentiality of anything you may communicate to us in this forum. Do not act upon any information presented without seeking professional counsel.

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