In Indonesia, micro, small, and medium enterprises (MSMEs) face a significant dilemma when it comes to financing options. Peer-to-peer (P2P) lending presents a solution that offers greater ease of access compared to traditional banking. However, this convenience comes at the cost of higher interest rates, which raises questions about the sustainability of such financing methods. Edy Misero, Secretary General of the Indonesian MSME Association (Akumindo), emphasizes that P2P lending fills a crucial gap that conventional banks often fail to address.

As of August 2024, outstanding loans from P2P lending to MSMEs soared by 32.87% year-on-year, reaching IDR 4.97 trillion. In stark contrast, bank loans for MSMEs grew a mere 4.3% year-on-year, totaling IDR 1,379.4 trillion. This growth marks a decline from July 2024, where bank loans had grown by 5.1%, reflecting a cautious lending environment among traditional financial institutions.

Edy points out that banks are increasingly stringent in their credit assessments to mitigate the risk of defaults. For example, the government’s initiative allowing loans up to IDR 100 million without collateral has not been widely adopted by banks, as they fear potential non-performing loans. Edy argues that P2P lending operates differently; while it comes with higher interest rates, it also offers more flexible terms and faster approvals.

Despite the high interest rates, Edy asserts that many MSME operators prioritize the ease of obtaining funds over the cost of borrowing. He believes that as long as the profits from the loans exceed the repayment burdens, the interest rates become secondary. "We need fast funding; low interest isn’t the primary concern," he states.

Heru Sutadi, Executive Director of the ICT Institute, shares his concerns regarding the P2P lending model. He highlights that while it provides an accessible option for MSMEs, the high interest rates remain problematic. Current regulations cap interest rates for productive loans at 0.1% per day, which will decrease gradually in the coming years. For consumptive loans, the maximum is currently set at 0.3% per day, dropping to 0.1% by 2026.

Heru argues that these high rates mean that many MSMEs might still find it challenging to secure necessary funding through P2P channels, especially when compared to the rates offered by traditional banks. The annualized cost of borrowing can become exorbitant, pushing some businesses away from considering P2P as a viable option.

Nailul Huda, Director of the Digital Economy Center for Economic and Law Studies (Celios), points to the role of P2P lending as an alternative financing source, particularly as banks tighten their lending criteria. Huda suggests that the increasing caution among banks could further drive MSMEs toward P2P and other non-bank financial options like multifinance.

As the demand for financing continues to rise, it is crucial for MSMEs to weigh the pros and cons of P2P lending against their immediate financial needs. While this financing method offers accessibility and speed, the accompanying higher interest rates present a challenge that cannot be overlooked.

BISNIS.COM