Managing The Risk
    Category: Financial Revolution By : Ulisari Eslita Read : 1032 Date : Tuesday, March 01, 2017 - 13:12:39

    Ahmad Zamroni / Forbes Indonesia

    Millions of people in Indonesia aren’t bankable, since it is not easy for financial institutions like banks to set up branches or expand their business due to capital expenses,” says Aida Sutanto, co-founder and chairwoman of PT Investree Radhika Jaya, a peer-to-peer lending fintech. Of Indonesia’s 260 million population, just 60 million, or 23%, have a bank account.

    Financial technology (fintech) is seen as a potential savior to improve financial inclusion. One of the booming categories is peer-to-peer lending, in which the money doesn’t come from financial institutions, but from individuals.

    In Indonesia, peer-to-peer lending fintech is still in its early stages compared its development in places such as China, the U.S. or U.K. However, the market reaction has been robust, as the peer-to-peer lending fintech companies have been growing at more than 100% per year. Investree’s business has grown almost 200% since the firm was started in May 2016. As of the second week of February, Investree disbursed a total of Rp 73 billion, with an average yield of 18%. “From that amount, about Rp 52 billion in funds have been paid and the rest are still ongoing,” says Adrian Gunadi, co-founder and chairman of Investree.

    Investree is a marketplace that matches lenders and borrowers online through peer-to-peer lending. It focuses on two major products: invoice financing for SMEs and employee loans. Why? “We operate on focused segments and have reasonable risks,” says Andi Andries, chief of risk and operations at Investree. Invoice financing is a well established financial service. After providing a good or service, SMEs normally have to wait weeks or months to get paid by a client. Investree will give them a loan using the invoice as collateral, so the SMEs can better manage their cash flow.

    How does it work? The SME applies on the Investree site by submitting the invoice and other related documents. Then Investree’s risk management officers analyze the application. When the SME is approved for financing, Investree puts the details on the platform to find lenders. It usually takes about three days for the SME to get the funds.

    Investree will only fund 80% of the total invoice (the rest is for reserve). For the loan, Investree charges the SME anywhere from 14% to 20% (annualized), plus a 4% fee on average, of the loan amount. Once the client gets pay for the invoice, lenders get their principal back, along the interest. Adrian says the risk of default is relatively low, since the SMEs usually have large, blue-chip firms as clients, who are reliable in paying their bills. Moreover, Investree is careful in selecting the SMEs for the platform—the sector is important. “Today, we are very selective when it comes to companies that operate in commodity or energy sectors, due to the economic slowdown,” he says. Currently, 30% of Investree borrowers for invoice financing come from the creative industry, such as media outlets, event organizers and digital agencies. The rest are in sectors such as outsourcing, food & beverage, construction and consumer goods. 

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