Southeast Asia: The Financial Market of Tomorrow

Peer-to-peer or P2P lending market is booming in Southeast Asia. This fast-growing part of the world homes over 650 million people, many of which are either completely unbanked or significantly underserved by conventional financial institutions. The marginalized people welcome any alternative source of credit with flexible conditions.

 

The popularity of peer-to-peer lending in Asia has grown tremendously outweighing some of the major economies in Europe. Asian countries have actively promoted their growth in the last five years

 

Peer-to-peer lending is crucial for the Southeast Asian market

 

Indonesia is truly lagging in terms of financial inclusion. Over two-thirds of the population of Indonesia have no access to conventional financial services. This leaves a sizeable market for Loanch to address. Technology is key in improving the quality, access, and affordability of financial services for the millions who are not well served.

 

Indonesia — the current primary market of Loanch — is one of the countries where fintech lending is developing very dynamically. Indonesia's P2P lending market is expected to reach 430 trillion Indonesian rupiahs (about $29 billion) in loans by 2024. In Indonesia, loan agreements in P2P lending platforms are highly regulated.

 

Fact: According to Statista, the total transaction value in the Alternative Lending segment is projected to reach US$49.19m in 2022.

 

The current P2P model remains highly necessary, where more productive loans will increase in percentage, but the personal loans sector that Loanch is a part of will continue to grow as well because it is large and there is a significant need. The challenge for the industry is creating a positive image with better interest rates. If we, as an industry, can continuously improve it, the confidence level of regulators, stakeholders, and the general public will be good. 

 

The potential market is enormous

 

The credit gap in Indonesia is anywhere between 68 bn USD to 165 bn USD. This gap exists for various reasons – banks' risk appetite, geography limitations, and high obstacles to obtaining a loan (such as security, paperwork, etc.). There's still a tremendous need for personal loans and SME financing that the P2P lending market has the opportunity to fill.

 

Indonesia and COVID

 

Up until April 2020, about 25 million consumers had taken out at least one loan from online lenders. We, of course, have to consider the fact that April 2020 was at the high point of COVID-19, which impacted these numbers greatly.

 

Before Covid, the industry was issuing about 22 billion rupiahs (1,5 million US dollars) worth of loans each month. With the beginning of lockdowns and the economy taking a huge hit, many platforms stopped underwriting loans to manage risk before restarting again by October 2020. The industry is currently issuing 9.5 trillion rupiahs (over 600 million USD) worth of loans per month. Despite the loan values increasing significantly, the loss rate (defined as no payment after 90 days due) is better than before.

 

The COVID-19 crisis hit the Indonesian economy quite hard. However, the underlying demand for finance remains high, especially for a working capital loans for SMEs. COVID-19 has forced businesses' technology adoption and digital acceleration, especially in a largely.

Loanch Team