Board of Commissioner of Indonesia FSA (Photo by TheInsiderStories)

JAKARTA (TheInsiderStories)–Indonesia’s Financial Service Authority (FSA) had requested for the Communication and Informatics Ministry to block 227 unregistered financial technology (FinTech) Peer to Peer (P2P) lendings operating in Indonesia, 155 of which come from China.

FSA‘s Investment Alert Task Force Head Tongam L. Tobing said on Friday (27/07) that the 227 FinTech P2P lending firms had failed to meet the necessary requirements as per the FSA regulation 77/POJK.01/2016, which oblige them to have an office in Indonesia, a Indonesia-based server and a registered legal entity as limited liability firm or cooperative.

FSA’s Investment Alert Task Force had to the Ministry of Communications and Informatics to block these illegal FinTech P2P lendings. FSA also coordinated with Google and some e-commerce namely Bukalapak and Tokopedia to block Illegal FinTech from their platforms.

Tobing added FSA earlier made two summons to the developers but they ignored the registering and licensing obligation. The summons was made on February 19, 2018, and July 25, 2018, which 22 out of 69 illegal developers presented in the second summon.

FSA cannot call all illegal developers because many developers have no offices in Indonesia as they are running virtual business.

FinTech P2P lending grows rapidly in Indonesia. Bu June 2018, 64 officially registered P2P lenders had disbursed loans totaling Rp7 trillion, growing by 173.4 percent from end of December 2017.2017.

There are 63 registered FinTech and a company namely PT Pasar Dana Pinjaman that pocketed FSA permission to disburse loans. However, Indonesia FinTech Association recorded 235 FinTech companies as its members.

According to the FSA data, the average interest rate of Fintech lending is above 19 per cent per annum, significantly higher than conventional banking’s interest rate of 11.18 per cent.

Chairman of FSA Wimboh Santoso earlier compared technology-based P2P lending firms with modern loan shark since they offer loans with a high-interest rate.

Despite the criticism, the FinTech lending is expected to improve Indonesia’s low level of financial inclusiveness. Indonesia has a population of 263 million people, but 165 million are without banking access.

Currently, only one in the three adults have bank accounts and Indonesia’s savings-to-GDP ratio, at around 34 per cent in 2015, was the lowest among Asia Pacific countries.

According to Indonesia’s financial regulator in 2016, the national loan demand reached Rp1,600 trillion. Unfortunately, only about Rp600 trillion that can be catered by banks and other financial institution. This means, there is a shortfall of Rp1,000 trillion. This shortfall resulted in many small businesses cannot access the loan, resulting in a GDP loss of 14 per cent by 2015.