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Story of Education Fund Loan Providers in Indonesia

It could be an alternative solution for people to reach their higher education goals

There are many problems in Indonesia related to education. It is not only a matter of effective curriculum and learning, but also access to education itself. The capital or costs incurred to gain knowledge from courses or higher education levels are not cheap. For some people, it is quite burdensome. The government has issued several programs and incentives to assist this access, one of which is KIP-Kuliah.

Another alternative that can be an option is an education fund loan platform. The concept is like a loan service for capital, the difference is that the loaned funds must be intended for education. Of course with different agreements and responsibilities on each lending platform. Some startups that have loan products or services for education funds include: Smart, CoinSmart from KoinWorks, and FundEducation.

Pintek Co-founder & President Director Tommy Yuwono explained, in Indonesia 1 out of 4 high school graduates do not go on to college, because the cost of education is expensive.

"Can be said cost of education in Indonesia compared to income per capita 150% of GDP, while in America the cost of education compared to per capita income is only 51% of GDP," said Tommy.

KoinWorks Co-Founder & CEO Benedicto Haryono conveyed the same thing. Given the high number of middle class people in Indonesia and the limited number of scholarships each year, loan services for education funds can be a solution for the inaccessibility of higher education costs in Indonesia.

"In addition, the Government also [should] provide full support so that the education loan program in Indonesia can actually be implemented. Moreover, currently the government's development focus is on improving the quality of human resources towards "Advanced Indonesia", where improving the quality of human resources can be achieved through good quality of education," continued Benedicto.

Education covered by the education loan platform is not only limited to formal education such as college or vocational school, but also courses in various fields, such as programming, data science, business, to language courses.

Usually, loans for education funds are also subject to monthly or agreed installments, as well as the amount. There is a mechanism out there too ISA (Income Share Agreement), a mechanism that allows loan repayments to be made by imposing a pay cut after work. The amount and other matters depend on the applicable agreement.

Illegal fintech cases and challenges faced

The financial technology industry in Indonesia was hit by bad news thanks to the massive number of unlicensed fintech companies entering Indonesia. This negative sentiment has more or less had this influence on the entire industry, including niche education loan.

Benedicto said that the rise of illegal fintech had an impact on the KoinWorks brand as a fintech company. However, according to him, as time goes by and the industry continues to grow, public understanding regarding fintech services is getting better. It is evident from the number of KoinWorks users in 2019 which increased by 178% compared to the previous period.

Meanwhile, DanaDidik CEO Dipo Satria assessed that the rise of illegal fintech cases had an impact on the public's stigma towards the fintech industry in Indonesia. To fight the negative stigma, Danadidik conducted a series of socializations in front of students and campuses.

"Fintech student loans such as DanaDidik which has been registered and supervised by OJK when in fact it can be the answer for students who want to study independently but are hindered by expensive tuition fees. The stigma of campuses and students about borrowing (online loans) because of illegal loans makes prospective borrowers worry," said Dipo.

He also added that the education fund loan is a niche This is a new product that not many people know about, so introducing products and industries to the general public is an important part of DanaDidik's journey.

Public trust in the financial technology industry in Indonesia is also a special concern for Tommy. According to him, all owners of legal lending services, AFPI, as well as OJK are working together to fight illegal fintech cases by jointly educating the public. It becomes one of the main challenges that must be fought together.

"In addition, there is a negative perception of 'loans'. In fact, not all loans are negative. For example, the loan services that Pintek provides are loans for investment. We make it easier for people to invest through education, which will be very useful for themselves in find a job, can help meet the needs of his family, also contribute to the country's economy. So, not all loans are negative, "said Tommy.

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