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Modalku be Aware of the Increasing of Bad Credit due to Covid-19 Impact

Modalku be Aware of the Increasing of Bad Credit due to Covid-19 Impact

Modalku Co-Founder and CEO Reynold Wijaya said the company has been monitoring the development of the corona pandemic since January. The main thing observed was economic dynamics that affected the businesses of MSMEs in certain sectors that were borrowers in Modalku.

Micro, Small and Medium Enterprises (MSMEs) are one of the sectors affected by the corona pandemic. Therefore, financial financing technology startups (fintech lending) prepared several risk mitigation measures, especially the possibility of the ratio of bad loans (NPL) increasing.

“Our growth strategy is currently focused on MSMEs and their networks. Also discussing to find the best solution to support the continued development of MSME business in Indonesia, “Reynold said in a press release on Tuesday (31/3).

Therefore, Modalku has prepared a number of steps to monitor and manage risks in the portfolio in the future. The company will implement a more comprehensive selection process for prospective borrowers and MSMEs who have become borrowers in Modalku.

There are a number of industries that are of concern to Modalku in assessing loan applications. These include food & beverage, travel, cross-country trade, and service industries that depend on the workforce of countries affected by the pandemic in Southeast Asia.

Modalku Will Respond to Changes in Macroeconomic Conditions Faster

Second, Modalku will react more quickly to changes in macroeconomic conditions by adjusting the limit amount and the loan term. Limit and tenor figures will be adjusted to the type of loan and business profile of each MSME. Hence, the adjustments need to be made on a case-to-case basis.

Third, maximizing collaboration with e-commerce platforms where most of the sellers enter the micro-segment. Because sellers in e-commerce actually have more opportunities in the middle of the corona pandemic.

Modalku be Aware of the Increasing of Bad Credit due to Covid-19 Impact

That’s because people choose to shop online to avoid direct contact or in the context of physical distancing.

“Periodically, we will continue to manage these steps carefully and develop risk management capabilities in accordance with the current global economic situation,” he said.

The company will also continue to coordinate with the Financial Services Authority (OJK) and the Indonesian Joint Funding Fintech Association (AFPI).

“This is done do the steps that we take are according to OJK’s regulations,” he said. At present, the company continues to operate and reach users through the Live Chat feature.

Until March 2020, the Modalku Group has distributed business loans of more than Rp 13 trillion. The fintech lending company provides loan services without collateral up to Rp 2 billion. In other country, this fintech is operates under the name Funding Societies.

However, AFPI Claims Bad Loans are Not Increasing amid Corona Pandemic

The Indonesian Joint Funding Fintech Association (AFPI) claims that there has not been a significant change in non-performing loans (NPLs) in peer to peer (p2p) lending during the corona pandemic.

“When viewed from last February, there is still no visible increase in NPL due to the Covid-19 outbreak,” AFPI’s Head of Institutional and Public Relations Tumbur Pardede said, Tuesday (31/3).

Modalku be Aware of the Increasing of Bad Credit due to Covid-19 Impact

AFPI has also proposed relaxation to the FSA related to the extension of the success rate (TKB) of fintech lending from 90 days to 180 days. “We want it to be 180 days, but that is the authority of the OJK,” AFPI Daily Chairman Kuseryansyah said, Monday (3/23).

Kuseryansyah explained the impact of the TKB’s relaxation to 180 days, which is that later every fintech lending that has a customer loan settlement portfolio of more than 90 days can still handle it internally. “This is more realistic amid a corona pandemic,” he said.

In addition, AFPI also asked for relaxation of the rules relating to the expansion of the loan ceiling. “For example, from the previous limit of borrowing at fintech lending only IDR 2 billion, to IDR 3 billion or Rp 4 billion,” Kuseryansyah said.