Co-Founder and CEO Modalku, Reynold Wijaya.

JAKARTA (TheInsiderStories)Indonesia’s financial technology (FinTech) peer to peer (P2P) firms had disbursed loans totalling Rp7 trillion (US$486.435 million) by June 2018, FinTech Licensing and Supervision Arrangement Director of Financial Services Authority  (FSA) Hendrikus Passagi said on Friday (13/07).

It grew 173.4 per cent from Rp2.56 trillion (US$177.903 million) by the end of December 2017. The loan disbursement booked by 64 officially registered Fintech P2P companies.

“It proves that public is more aware of the existence of FinTech,” he said, as quoted by Kontan.

FSA estimated FinTech loan disbursement could reach Rp20 trillion (US$1,389 billion) this year.

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 company members.

One of the biggest is Modalku that disbursed Rp1 trillion (US$69.39 million) loan to 3,500 creditors by June 2018.

Another Fintech company is Akseleran that disbursed more than Rp67 billion (US$4.6 million) since its launch in October last year to June 2018. The company targets loan disbursement of Rp200 billion (US$13 million) this year.

In addition, there is PT Mulia Inovasi with Danain platform that introduced collateral-based FinTech lending in Indonesia. The company received a license from FSA on April 20, 2018.

Danain negates the majority of FinTech P2P lendings that removes the collateral requirement in order to get many clients. The collateral-based lending is an innovation to decrease loan risk, which is always an excuse for P2P lending companies to charge high-interest rates.

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 labelled technology-based P2P lending as 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 mean, 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.