Indonesia contends with aggressive Chinese online lenders

JAKARTA: Indonesian authorities have generally opened their arms to fintech companies offering online loans in South-East Asia’s biggest economy, viewing them as a way of getting credit to tens of millions of people often unable to access bank lending.

However, 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-yearold 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% 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 would 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 organising 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 US$73bil 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 US$534mil between January and the end of July while earlier this month, Go-Jek, the country’s biggest online platform, partnered with three local peer-topeer lenders as part of its move deeper into fintech.

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.