INDEF: Fintech "Lending" Contributes to GDP of up to 25,97 Trillion Rupiah

The independent research institute INDEF (Institute for Development of Economics and Finance) together Indonesian Fintech Association (Aftech) reveals the role   in Indonesia over the last two years was able to increase the Gross Domestic Product (GDP) to Rp25,97 trillion. Other, more general impacts are also beginning to be felt, in terms of household consumption and employment.

INDEF economist, Bhima Yudhistira, explained in terms of household consumption of products fintech increased to Rp8,94 trillion every year. World based business fintech can boost labor compensation by Rp4,56 trillion. The sectors that experienced the most growth were trade, finance, and insurance.

Post-employment absorption fintech has reached 215.433 people. Not only from the tertiary sectors, but the premier sector. For example agriculture, experienced a fairly large absorption of up to 9 thousand people. It can be seen from the loan disbursement figures from fintech translucent Rp7,64 trillion in 2018 and much of it was channeled to the trade and agriculture sectors.

"In addition, investment in [companies] fintech in Indonesia reached Rp5,69 trillion, obtained from the portion of the formation of Indonesia's GDP multiplied by the amount of investment fintech the world," said Bhima, Tuesday (28/8).

According to Bhima, the expansion of the agricultural sector further emphasizes that fintech is not a substitute for banking, but a complement to existing financial services.

Quoting from the World Bank 2015, the ratio of lending to GDP is still at 39,1 percent. Furthermore, credit services for MSMEs are still very low.

"The portion of MSME credit to total credit is stagnant in the range of 20-22 percent. On the other hand, only half of the adult population has an account at a bank. These figures show that banking services, especially in the credit service segment, are still very low."

director Aftech, Ajisatria Suleiman, recommends the government to strengthen the role fintech, so we need a policy that can reduce customer acquisition costs, minimize risk fraud, and provide consumer protection.

He expects risk fraud from fraudulent customers and the risk of default can be minimized by strengthening access to biometric-based identity and access to credit bureau services.

"There is now settings at OJK related to e-KYC and credit information, so what is needed is implementation at the technical level, especially those that are cross-ministerial, for example between the Ministry of Home Affairs and the Ministry of Communication and Information," said Aji.

Deeper research results

INDEF and Aftech conducted research using Input-Output (IO) analysis. This study is motivated by the low penetration of financial services in Indonesia, especially in the field of credit or financing. Described in more detail, the impact of GDP growth can still change as it develops fintech in the next few years.

By sector, which has a significant impact on the existence of investment disbursement of funds fintech are the technology industry, service companies, banking, finance, and the distribution of pension funds. The five are very closely related to internet-based technology.

Next, impact fintech household consumption occurred due to a significant increase in sectors directly related to fintech or activities. It can be seen from the procurement of electricity payment consumption is the largest, after the trade sector and services of other financial institutions.

For the impact on the workforce, national income increases with investment in the sector fintech and distribution of funds to the community. Such as farmers, traders, or personal investors have the potential to get an increase in income or wages due to development fintech.

The sector that received the largest increase in income after trade and insurance-based financial institutions. Because fintech will also take advantage of insurance services, especially credit insurance.

Currently, OJK records 66 companies fintech in Indonesia that has been officially registered and obtained a permit.