Bad Loans Increase, Fintech Lending Industry Alarm

Bad credit recorded an increase, in line with the swelling of operational expenses throughout July 2022. The Financial Services Authority (OJK) noted that outstanding bad debts reached Rp. 785,94 billion in January 2022. The value ballooned to Rp. 1,21 trillion as of July 2022, an increase of 8% from the previous month of Rp. 1,11 trillion.

Individual loans accounted for the largest portion of the non-performing loan structure, amounting to Rp1,10 trillion. Then, the remaining business entity loans amounted to Rp. 118 billion. In detail, female customers dominate bad debts, amounting to Rp563 billion. Meanwhile, from their age, customers 19-34 years old are mostly recorded in bad loans.

Meanwhile, loans online non-current or 30-90 days amounting to Rp3,21 trillion, and current loans or delays of up to 30 days amounting to Rp41,29 trillion.

Furthermore, this industry recorded an increase in losses of Rp. 114,08 billion from January 2022 of Rp. 7,42 billion. When detailed, operating expenses reached Rp4,69 trillion and operating income was only Rp4,61 trillion. The biggest burden was from employment posts, which rose nine times to Rp1,21 trillion.

Quoting Tempo Newspaper, Research Director of the Center of Reform on Economics (CORE) Indonesia Piter Abdullah, weak performance , such as an increase in the rate of bad debts, will ultimately have an impact on banking performance. "Not only that. If bad credit the higher, their ability to provide financing to the business world also decreases. Business opportunities to get a loan are also reduced. In the end, this will hurt the economy," he said.

Simply put, business is a link between the owner of the funds as a lender and the party who needs funds as a borrower. OJK notes outstanding lending in this industry reached Rp45,72 trillion, an increase of 88,84% year-on-year.

The source of the disbursed funds comes from domestic loans, banks being the highest lending group at Rp15,8 trillion. The rest are individuals, legal entities, and the non-bank financial industry.

Indef economist Nailul Huda said, the increase in non-performing loans was in line with the growth in fintech lending in recent times. "The paylater system with a fairly large proportion of consumer credit has not been matched by the selection of borrowers (borrowers) of high quality. The credit scoring analysis still needs to be improved a lot,” said Nailul.

On the other hand, efforts to collect funding from lenders are also overshadowed by relatively tight competition. According to him, insufficient funding often has to be made up at the expense of income. This condition can be seen from the trend of increasing the company's operating expenses, so that the losses incurred are even greater.

Late payment

Meanwhile, the above conditions are reflected in what happened to iGrow at the moment. Exactly a year earlier, the company also experienced a similar condition, late in returning loans from the owners of funds in various projects. As a result, the Actioncalendar The iGrows who suffered the same fate gathered in a Telegram group, named iGrow Investors. Some shared their experiences on social media and readers' letters asking for clarity.

For Actioncalendar showering column review and rating iGrow app on Google Play with various complaints. The majority mentioned that the company was not transparent in explaining the status of the project being funded. This step was taken, one of which was because the comments column on the iGrow Instagram account had been closed.

Quote from Deal Street Asia, the management of iGrow has notified the participants about the delay Actioncalendar affected. “This condition has been handled by the team collection us, namely making efforts to raise funds from related projects in accordance with standard operating procedures and OJK regulations. We have offered solutions and explanations for some projects through the information feature in the iGrow app, while other projects are still under investigation and verification by our collection team.”

The company said agricultural projects face a variety of challenges and risks that could affect crop yields. Among other things, crop loss due to erratic weather, natural disasters, pests, and rising or falling prices in the market can disrupt the cash flow of borrowers [farmers], and ultimately, disrupt payments to lenders.

Previously in the agricultural sector, there were TaniFund, Tanijoy, Crowde, Angon, and Vestifarm who stumbled upon a similar case.

In general, invest in the platform p2p loans indeed not free from risk, in the midst of the high yields offered. What's more, putting money into this challenging agricultural sector. When viewed from upstream and downstream, the problems in agriculture are so abundant, not only about difficult access to capital. Therefore, this sector is ogled by many players.

OJK provides a ratio to see the business health of these fintech lending players based on TKB90. TKB90 is a measure of a loan that is successfully settled within 90 days of its maturity date — the opposite of the more common NPL ratio. The lower the TKB90 number, the higher the NPL level.

When TaniFund stumbled on May 9, its TKB90 rate stood at 93,53%, below the national average of 97,68%. This TKB90 must be published on the main page of the site and must be updated every month. Meanwhile, TKB90 from iGrow is currently 93,71%.

Meanwhile, according to OJK data, the industry's TKB90 is currently 97,33%. This figure is slightly better than the previous month, namely June 2022 at 97,47% or May 2022 at 97,72%.