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Indonesian fintech sector is burgeoning, but not without growing concerns

Online lending is proving dfficult to navigate for regulators and ambitious startups

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Indonesian fintech sector is burgeoning, but not without growing concerns

P2P (peer to peer) lending has grown popular in Indonesia. These online lenders promise quick loans with few questions asked. According to Indonesia Investments, credit disbursement through P2P lending in Indonesia has soared 204.7% this year.

Hundreds of fintech startups launched in Indonesia with variations of the P2P loan model; some of the older players are starting to see traction, while some others are facing various challenges due to increasingly stringent regulations.

The Financial Services Regulator, OJK, at some point put out a list of more than a hundred online lenders it had halted from pushing into the market without going through the mandatory registration with the regulator first, but that doesn’t appear to deter startups from participating in the online lending gold rush.

CashCash, an app developed by a Chinese company for the Indonesian market, was one of those on OJK’s list. Despite the fact that its website and Android app are currently inaccessible in Indonesia, the company recently announced a multi-million dollar series A round led by Creation Partners Capital, with participation from Zhen Fund, Zero2IPO, and others.

In response to our request for comment, the company told KrASIA that it is currently in the process of applying for a license to operate in Indonesia. And the company’s website has been inaccessible because its website’s domain name was recently changed.

Launched at the end of 2017, the company is an online platform that aggregates and recommends loan products, which means it’s not technically a P2P lender itself, and it does not provide any self-operated P2P products.

It aggregates more than 60 3rd party online lenders and does allow users to borrow and pay back directly within the app, with added community features that let users exchange information before they decide to take a loan.

OJK did not respond to our request for comment.

A growing controversy

The flooding of Chinese P2P lenders into Indonesia is due in large parts to the tightening of regulation in China itself,  Tongam L Tobing,  the leader of a special task force for investor protection within OJK, had told local media. According to him, these firms opted to enter Indonesia because it’s a promising market thanks to its huge population and a steadily growing middle-class.

In the past few weeks, more and more stories of controversial online loan companies have cropped up, based on numerous consumer complaints most of which involve unethical intimidation from debt collectors and soaring interest rates. Additionally, there are also fears that these platforms might misuse customer data.

“P2p lending platforms that were flagged by the public to the legal aid institution and are not registered with the OJK, nor are affiliated with our organisation, are illegal,” said Sunu Widiatmoko, deputy chairman of AFPI, a subdivision of the Indonesian Fintech Association.  He told KrASIA that OJK has set strict regulations for fintech firms, including debt collecting methods. He declined to comment on CashCash’s specific case.

The startup’s backers seem confident that regulatory issues in Indonesia will eventually be resolved, but CashCash says it’s also preparing to enter other markets like the Philippines, India, and Vietnam, as well as other financial services verticals.

Editor: Ben Jiang & Nadine Freischlad

(Update: 18:02 PM, November 26, 2018, the article has been updated to reflect the company’s response to our inquiry regarding the reason its website was inaccessible.)