Inside Indonesia’s post-Covid P2P loan restructuring purgatory

SME lending marketplaces sound like a great proposition for Indonesia. There’s a US$166 billion credit gap to fill, after all. In reality, the model is still flawed in many ways. Covid-19 is turning into an existential crisis

Bad loan or good loan? Overwhelmed by the pandemic, SME lending marketplaces in Indonesia are kicking the decision-making can down the road

Instead of writing off bad loans as defaults, they’re kept in limbo with endless restructuring plans

Retail lenders feel like they’re getting shortchanged. If a loan defaults, they’re entitled to insurance money. They could recoup at least part of their investment

The lack of standards around loan restructuring is something the sector needs to address

Jimmy Chandrawinata, a business intelligence analyst at a Southeast Asian airline, thought he’d found the perfect way to invest some of his savings. It was 2018, and peer-to-peer (P2P) lending platforms were becoming popular in Indonesia, having gained regulatory approval in 2016. They promised returns of around 16% if you lent to micro, small and medium-sized enterprises (MSMEs) listed on their loan marketplaces.

Chandrawinata chose to go with KoinWorks, one of the early movers, founded in 2015. It had support from credible venture capital firms, like East Ventures and Mandiri Capital—a fund associated with Indonesia’s Bank Mandiri. It has raised at least US$72 million through a mix of venture capital and debt over the years.

AUTHOR

Nadine Freischlad

Nadine is based in Indonesia. She covers Southeast Asia's super apps, the changing nature of work and employment, and other structural shifts happening as a result of digital disruption.

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