Practicing the New Normal for Fintech Lending Business

The pandemic effect on most business sectors also lies in the fintech lending industry, which must prepare a number of initiatives to prevent default on its borrowers. Fintech players are required to prepare themselves for "the new normal".

To discuss this topic, DailySocial invited CMO KoinWorks Jonathan Bryan as the speaker for the #SelasaStartup first week edition of May 2020.

KoinWorks is one of the pioneers of fintech p2p lending startups in Indonesia. In February 2020, the company announced new funding in two schemes, loans and equity with a total value of $20 million or equivalent to 316 billion Rupiah.

Here's the summary:

Credit restructuring

Following the regulator instruction, KoinWorks also applied credit restructuring for borrowers affected by the pandemic. However, the relaxation cannot be used equally for all borrowers. Indeed, platform players cannot act like banks.

They're positioned between borrowers and lenders. Platform players position themselves to help businesses run still and not to cause a loss for lenders.

The Borrower must present data to demonstrate the validity that the business is really affected by Covid-19. Whether it's from a bank book report, if they are in the form of an offline business, it can show the closing store.

"The business must not end, what we build is adjusting the schedule to the borrowers by extending the tenor. It aims to ensure that the business can pay and survive," he explained.

More selective and exploring other business potential

Jonathan continued that one of the products available at KoinWorks is loans for online sellers. This line still shows a positive trend as in the previous year.

The trend of increasing loan demand usually occurs at the beginning of the year, both when one e-commerce celebrates its anniversary, the Eid moment, and as we enter the year-end moment and national online shopping day (harbolnas).

Towards that moment, there will be a significant increase in loans about two to three months before. The seller needed loans to stock up when there's a massive purchase.

"The increase [in loans] can be 1-2 times [year-on-year] in high season, especially during Eid. This year, we are tightening up, as giving to the most affected segments of Covid-19 such as tourism. We've done some mapping."

Prepare for the new normal in fintech

When restructuring and scoring are tightened, the final step is to anticipate the second wave of the pandemic impact. From the results of the company's internal research, Jonathan said there are many findings that can be drawn from the investment climate in various developed countries.

"In our opinion, this pandemic is to end after Eid. However, it is the second wave we feared because of its easy spread. After entering the recovery phase, there are strategies on how to be defensive and aggressive. Therefore, you have to pick the right battle for each business."

When the recovery time is done, it's time to return to the initial mission, which is to help SME businesses grow more aggressively. "All businesses that make it past the post-pandemic, can be sure to get up and jump for multiple times for it has passed the worst part. That is what we want to provide, it might be until the end of this year the recovery will take time," he concluded.

– Original article is in Indonesian, translated by Kristin Siagian