Indonesian authorities have generally opened their arms to fintech companies offering online loans in Southeast Asia’s biggest economy, viewing them as a way of getting credit to tens of millions of people often unable to access bank lending.
But the arrival of a wave of predominantly Chinese fintech lenders, who often do not register and employ aggressive debt collection practices, is now alarming regulators. For Chinese platforms, Indonesia’s youthful market of over 260 million people is an attractive target, particularly after a crackdown on the loosely regulated micro-credit sector at home.
Four people in Indonesia who failed to repay loans on time told Reuters that Chinese fintech lenders took control of their phone contacts – permission is granted when the app is installed – and harassed their colleagues and friends.
One of them, Nesika Yustines, a 26-year secretary in the Tangerang area near Jakarta, said she was stunned when debt collectors repeatedly called her boss to say she had a week to pay back her loan and 20 percent interest.
“They asked for payment from my boss and my boyfriend,” she said. “It’s embarrassing, it’s as if they had become collateral in this.”
Hendrikus Passagi, who oversees fintech for Indonesia’s financial regulator OJK, said some borrowers had lost their jobs because of such calls.
“Those practices go against God. We are a religious country. In Indonesia, if I lend the money to you and you don’t pay, I will not come to your house and humiliate you,” he said.
In China, financial regulators issued tough new rules on online micro-lenders last December, after a barrage of criticism over their tactics.
Looking to set up in new markets, Chinese online lenders have come in groups to Indonesia since 2017 to meet officials, bankers, and executives in order to set up operations, according to two Chinese-based businessmen organising such tours.
Chinese lenders will often set up shell companies in Hong Kong and Singapore to bypass Beijing’s strict controls over cross-border money flows and hire proxy agents as local partners, said Jin Xiang, who runs BlueBoat Global, a company based in Beijing dedicated to helping companies explore new markets.
His company has been organizing tours to Indonesia since late 2017, and the latest tour was conducted last month.
Indonesian regulator OJK produced a blacklist of 226 banned fintech lenders in July and updated it in early September to 407 banned platforms.
The regulator told Reuters more than half were Chinese, but they also included a handful of Eastern European lenders as well as a US lender.
Fintech lenders, who run platforms designed to disburse relatively small loans to individuals and small businesses, are viewed by Indonesian authorities as part of the solution to a $73 billion yearly shortfall between the country’s estimated financing needs and the amount banks provide.
The sector is still growing quickly. Indonesia’s 64 registered fintech lenders disbursed $534 million between January and the end of July while earlier this month, Go-Jek, the country’s biggest online platform, partnered with three local peer-to-peer lenders as part of its move deeper into fintech, or financial technology.
But despite the efforts of Indonesian officials, with help from Google, to block the apps and websites offered by illegal lenders, borrowers say many continue to operate and demand repayment even after being banned.
A 42-year-old office assistant, who asked not to be named, was desperate to renegotiate his loan after debt collectors for online lender Uang Express began calling his relatives and colleagues for repayment of his 2 million rupiah ($135) loan.
Uang Express is one of more than 200 Chinese consumer lending platforms banned for not registering or breaching laws. Its platform was downloaded over 100,000 times in the Google Play Store before being deleted.
When the office assistant tried to visit the lender’s Jakarta headquarters he found a locked warehouse.
Reuters later tracked down the office of Second Installment Financial Technology, which is listed by Uang Express as its parent and is not banned.
“How did you find us? You’re not supposed to find us. That’s the point of fintech,” a spokeswoman said, confirming it was the office of Second Installment, but declining to comment further.
Second Installment Financial Technology runs advertisements on the same web address and email server as Shanghai-based P2P platform Miao Miao Technology, whose platform and logos aimed at Chinese clients are identical to Uang Express.
Uang Express did not respond to requests for comment.
Reuters was unable to reach Miao Miao Technology to confirm whether it had any links with Second Installment.
Indonesian regulators stress that complaints do not apply to all Chinese fintech lenders, praising those that have obtained licences.
“There are good Chinese lenders. The ones that are listed on the stock market tend to be more transparent,” said OJK’s Passagi.
Beijing-based Hexindai Inc, which listed on Nasdaq in November, acquired a 20 percent equity stake in Indonesian online lender Musketeer in August with the aim of capitalizing on Indonesia in its international expansion.
A spokesman for Hexindai said it disapproved of the “vicious debt collection methods” of some Chinese P2P companies and only contacted customers’ chosen emergency contact regarding overdue loans and flagged borrowers to a national blacklist if the loan remains unpaid after 90 days.
But not all follow the rules including the requirement for foreign lenders to have an Indonesian partner to hold at least 15 percent of their local subsidiary as well as local board directors.
Two operators said some Chinese lenders were willing to pay between 500,000 yuan to 1 million yuan ($73,115 – $146,430) for “one-stop services” agents to handle registration and local staff hiring.
“Local people probably don’t know the Chinese are behind those loan companies,” said Wang Lu, the marketing director for another business tour organizer, Xinliu Finance.
With greater scrutiny in Indonesia, he said lenders would be looking at other markets with large populations, underdeveloped financial systems and weak regulations.
BlueBoat’s Jin Xiang said he was already beginning to organize tours to Vietnam, which he cited as a top destination for fintech micro-lenders.