Online loan financing decreases, pay later increases
A written statement from the Financial Services Authority (OJK) revealed last week that the receivables of financing companies (PP) or multifinance have continued to rise, although the growth rate has slowed down.
As of July 2024, the outstanding credit of these financing companies increased by 10.53 percent year-on-year (yoy), compared to 10.72 percent in June 2024 (yoy), reaching Rp494.10 trillion.
"This credit growth is primarily supported by an increase in working capital financing, which rose by 9.43 percent (yoy) compared to June 2024, where it was recorded at 11.46 percent (yoy)," stated the OJK.
The risk profile of financing companies remains stable, with a gross Non-Performing Financing (NPF) ratio of 2.75 percent (June 2024: 2.80 percent), and a net NPF of 0.84 percent (June 2024: 0.87 percent).
"The gearing ratio of PP has also decreased to 2.40 times (June 2024: 2.44 times), significantly below the maximum limit of 10 times," the OJK report indicated.
Meanwhile, the growth of venture capital financing continues to experience contraction, with a decline of 10.67 percent yoy in July 2024 (June 2024: -10.97 percent yoy), amounting to Rp16.18 trillion (June 2024: Rp16.22 trillion).
The growth of online loan credit, specifically in the fintech peer-to-peer (P2P) lending sector, reached 23.97 percent year-on-year in July 2024, amounting to IDR 69.39 trillion. This figure is lower than the growth observed in June 2024, which was 26.73 percent year-on-year.
The aggregate non-performing loan ratio (TWP90) for P2P lending remained stable at 2.53 percent, compared to 2.79 percent in June 2024.
In contrast, the Buy Now Pay Later (BNPL) financing provided by financing companies surged by 73.55 percent year-on-year in July 2024, up from 47.81 percent in June 2024, reaching IDR 7.81 trillion, with a gross non-performing financing (NPF) ratio of 2.82 percent, down from 3.07 percent in June 2024.
The share of BNPL products in the banking sector, currently at 0.24 percent, also experienced significant growth in July 2024, although at a slower pace compared to June.
As of July 2024, the outstanding BNPL credit balance in banks grew by 36.66 percent year-on-year, compared to 49.43 percent in June 2024, totaling IDR 18.01 trillion, with 17.90 million accounts (up from 17.48 million in June 2024), and the credit risk decreased to 2.24 percent from 2.5 percent in June 2024.
Regarding institutional performance, the Financial Services Authority (OJK) reported that as of July 2024, there were 7 out of 147 P2P lending companies that had not met the minimum equity requirement of IDR 100 billion.
Additionally, 26 out of 98 P2P lending providers had not fulfilled the minimum equity obligation of IDR 7.5 billion. "Of these 26 P2P lenders, 12 are currently undergoing analysis for their capital increase applications," stated the OJK.
In terms of compliance enforcement and integrity, during August 2024, the OJK imposed administrative sanctions on 19 financing companies, 7 venture capital firms, and 21 P2P lending providers.
Administrative sanctions comprise 28 monetary penalties and 36 written warnings. These sanctions are imposed for violations of the OJK Regulations (POJK), based on the results of supervision and/or follow-up inspections.
The OJK expresses the hope that the enforcement of laws and the imposition of sanctions will encourage financial industry players to enhance governance, prudence, and compliance with applicable regulations.
