Fintech companies should be seen as complementing mainstream banking and not as a threat, according to startup players in Indonesia.
“Fintech can play an important role in financial inclusion in Indonesia. Fintech can help both unbankable small and medium enterprises and unbankable individuals,” Will Ongkowidjaja, co-founder and managing partner of Alpha JWC Ventures, said, at a recent conference in Jakarta.
Southeast Asia’s largest market Indonesia has been witnessing an emergence of a number of fintech companies such as peer to peer lending company Modalku, mobile recharge platform Sepulsa, e-commerce financing company Kredivo, online micro-lending company UangTeman and many others.
These companies are essentially channeling funds to small and medium companies or individuals, from investors or financial institutions funds.
“Therefore, Kredivo is not taking over the role of banks, instead enhancing the banks and financing institutions in providing credit lines to customers,” Akshay Garg, founder and CEO, Kredivo, said.
Kredivo is collaborating with e-commerce merchants to provide check-out financing solutions for customers. Instead of entering a 6-digit credit card number for buying goods from an e-commerce platform, customers can get a credit line through Kredivo.
“We are fundamentally very clear that we don’t want to be the actual lender. We are solving different side of the equation. And for us to be successful, we have to work with lending partners—either banks or financing companies,” he said.
So far, he said, Kredivo has been partnering with financing firm BFI Finance which provides credit lines. The company is currently in talks with banks and financing firms for similar arrangement.
Iwan Kurniawan, CEO and co-founder, Modalku, echoing similar views, said, “I hope banks would not see us as competitors, instead as a complement for bank services.”
Modalku is a peer to peer lending platform, the first of its kind in Indonesia, that provides loans to worthy small and medium enterprise (SMEs). Modalku is a marketplace that connects the SMEs with zero collateral and credit history, with individual lenders, who want to provide credit to worthy SMEs for good returns.
He said, peer to peer lending is not a new concept. It has been around for 10 years, beginning from UK and in recent years grew so big in China given huge needs from SMEs who are unable to get loans from banks and non-banks.
“We are looking to make an impact in Indonesia. The reason why we exist is because there is a problem both from the perspective of SMEs as well as from (individual) lenders,” he told DEALSTREETASIA.
Iwan said the Indonesian Financial Services Authority (OJK) has been supporting fintech companies, like Modalku, on grounds that they help the government’s drive to increase credit lines to SMEs, which constitute the majority.
Meanwhile, Arwin Rasyid, CEO of Tez Capital and Finance and former CEO of CIMB Niaga, said, during a panel discussion, in many countries, big banks have found ways to collaborate with fintech companies. Such collaboration could also happen in Indonesia.
Arwin said around 50 per cent of Indonesians are below 50 and majority of them are in the age group of 18-37, who are tech-savvy.
“Banks have to adapt with this challenging time. Banks are so big and they have to prioritize other issues as they are heavily regulated. For banks, I don’t think it is a good idea to go against them. Banks should embrace them and capture their ideas and work with them,” he stated.
“Fintech companies understand what mobile can do. They can make bank services more convenient and banks should consider themselves as part of digital ecosystem. Otherwise, banks may lose out. That’s why I think banks should work closely with the fintech companies,” he said.
The fintech industry in Indonesia currently falls in an overlap area between Kominfo (communication ministry) and OJK (financial services regulator). While technology startups come under the purview of Kominfo, financial services are strictly monitored by the OJK.
Earlier, Dumoly F Pardede, Deputy Commissioner of Non-Bank Financial Institutions of OJK, told DEALSTREETASIA, “In terms of technology, fintech companies could get a permit from Kominfo but for the financing services they need a license from OJK.”
“We may release the new rules this year. For now, they can still run the business. They can adjust their business later on when the new regulations are issued,” he had stated.
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