Advancing Financial Technology in Indonesia

Investree’s P2P services help the unbankable achieve greater access to financing

By Karmila Bain
Tuesday, February 14, 2017

If you combine the burgeoning number of financial technology (FinTech) companies in Indonesia with the government’s aim to make banking and financial services available to vast sections of the population who have no access, either due to geography, lack of funds or no collateral, then one of the main results is the rise of peer-to-peer (P2P) lending.

One of Indonesia’s leading P2P firms is Investree, which says its simple mission is to use technology to bring together people who need funding with people who are willing to lend.

Investree, like many other such start-ups, believe that FinTech’s main strength is that it is simple, fast, online and minimizes the documentation back and forth between borrower and lender. In other words, the main goal of FinTech is to make the process as easy as possible.

Investree officially launched in May 2016, and says it aims to facilitate up to Rp 70 billion in loans by the end of January and up to Rp 300 billion by the end of the year. It operates in Jakarta, Surabaya and Semarang,

Adrian Gunadi (co-founder and CEO) and Dickie Widjaja (Chief Information Officer) of Investree shared their story and thoughts on the future of FinTech with AmCham Indonesia.

AmCham Indonesia: What exactly does Investree do?

Dickie Widjaja: Investree is engaged in P2P lending, an online marketplace that brings together people who have money with people who need money.  We offer two types of services – invoice financing and employee loans.

Invoice financing is a system of loans for medium-sized companies that do not qualify to apply for a bank loan, but have projects that are running or have been completed but payment is still outstanding from clients.  When applications are made for this type of service, we will need around two to three days to review the application. After the agreement has been made with the borrowers, we will publish it and let the [prospective] lenders pitch-in via our platform.

The second product we have is employee loans, also known as payroll financing. This is a benefit we give for people employed by our corporate partners. With this scheme, the loan will be repaid by taking it from the borrower’s salary, directly from the company to Investree.  The difference with this product compared to conventional payroll financing is that we will not limit the eligibility only to permanent employees. This is because our loan period is relatively short; the longest will be 12 months. 

For both of the products we have a range limit for the total loans that can be granted - Rp 25 million minimum and Rp 2 billion maximum for invoice loans, and Rp 5 million to Rp 50 million for employee loans.

Why did you choose Invoice loans as one of your products?

Dickie: This is because there are still many people in this country who are unbankable. All of Investree’s founders are ex-bankers and we know that this big gap is happening in our society. As a result, those unbankable individuals, communities and small and medium sized enterprises have no access or eligible collateral for bank services. Often their problem is that they have made transactions but the disbursement has often come late. That is why invoice financing will be very critical for them to continue operations. We are here to help solve that problem.

How are lender-borrower relations managed by the platform?

Dickie:Our lending process follows the first-come first-served mechanism. We will only provide the lender with an assessment for a candidate and they can choose whomever they would like to help based on assessment grades by Investree. We categorize the grades into three simple levels, A1 to C3. Each level has a different rate, size and risk. The grade depends on the amount of money borrowed, the financial condition of the borrower and the candidate’s relationship with their clients.

Normally, there will be around 33 people joining for one loan. We also apply a quota system. For each employee loan, a lender can deposit their money of at least Rp 1 million, with no maximum amount. For business loans, it is based on the size of the loan: if the loan is under Rp 100 million, the threshold will be Rp 5 million to Rp 15 million for each lender. But if it is greater, up to Rp 2 billion, the range will be Rp 10 million to Rp 200 million. This is also our way to educate people to diversify their risk, to not put all their money in one place.

As a player within the emerging FinTech industry in Indonesia, how do you see the prospects for the near future?

Dickie: FinTech is like an umbrella and consists of many types, such as digital payments, e-money, digital lending, etc. I am optimistic FinTech will have significant prospects because there are still many unbankable people in Indonesia. If we continue to use the conventional ways, we will need more capital expense to reach a wider target. That is why we need innovation; this P2P lending is part of that.

We need also to recognize the fact that we have around 354 million gadgets for our 253 million people. Our smartphone penetration is quite high and FinTech will help by maximizing those assets in the financial sector.

How do you see FinTech impacting conventional banks? What is the ideal relationship between the two?

Dickie:I think banks should not see us as a threat, but as complementary. Peer-to-peer lending will not exist without banks. As long as we use money, banks still hold an important role. We hold a lot of discussions with banks in terms of collaboration or marketing management. In other sectors in Indonesia we see how conventional players sometimes feel they are being attacked by innovation.  Fortunately, we can anticipate that in the finance sector. The Financial Services Authority [OJK] also recognizes such things and they can handle it well from the beginning.

Adrian Gunadi:I think banks and FinTech also have different markets and products. It will be challenging for banks to jump into the FinTech market because banks have their own legal system and strong management system. To change the system is not as easy as flipping a coin. Banks will need more time to enter the FinTech sector. Does it mean conventional banks cannot reach into FinTech? Again, it’s back to the use of collateral. FinTech will have more flexibility on that.

I think the best way to synergize is to strengthen our own expertise within the sector. Banks have power in the legal system, good databases, good reputations and branding. For FinTech such us as Investree, our strength is speed, innovation and transparency, and there is the room for collaboration.

Do you think the latest OJK regulation on P2P is helping to grow the sector further? What should be done next to continue the progress?

Adrian: The regulation has already fulfilled our expectations. It supports the growth of P2P technology startups and has the correct regulatory stance. For instance for the capital requirement, it makes sense for those of us who are dealing with lending operations. One thing that we have to remember is we are running on public money. The capital requirement is needed to prevent something bad coming, so it’s better to prepare well. With the regulation from the OJK, we are more confident on marketing communication. The public will also find it convenient to try peer-to-peer lending because customer protection as well as data security is stated in the regulation.

I think in the next regulations, the issue of certification should be highlighted. This is needed in order to show the credibility of P2P lending providers. The cross-sharing data within FinTech entities also needs to be highlighted. I hope OJK will soon have its own FinTech desk, like Bank Indonesia already has.

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