In Part 1 of this article, we had an overview of the entire Indonesian market, and zoomed into consumer behaviour and consumer finance market. In the second section, we will look into the regulatory environment, identify key players in consumer finance, analyse opportunities and risks, and give recommendations to investors and foreign companies.

Regulatory Environment

The Indonesian government is aware of the rising demand of consumer finance sector and encourages the expansion of small and medium loans.

In October 2016, The Financial Services Authority (OJK) announced that it has started drafting a regulation on Fintech development, signalling the support on the expansion and the supervision to enhance consumers’ trust over P2P lending. The draft of the regulation is expected to be completed by March 2018.

OJK also planned to implement several plans focusing on the areas of Fintech Innovation Hub, certificate authority, Sandbox regulatory, Reporting Centre for Information Security Incidents and Centralized Vulnerability Assessment. So far, OJK has passed a regulation on P2P lending services in December 2016, which is meant to protect consumers and enable fintech companies to exist in the P2P lending space. Currently, foreign company must form a joint venture with local firm, and the maximum share holding cannot exceed 85%, which is much higher than that (e.g. 49%) in other industries.

The government has set a goal to expand bank account ownership to 75% of the adult population by 2019 in the announcement of National Strategy for Financial Inclusion (SNKI).

Market of Unbanked Loan – Past and Present

At present, Indonesia’s domestic mobile payday loan is mainly for white-collar P2P loans and personal micro-loans. Funding Societies, such as Taralite, Tunaiku, Investree, Koinworks and Amartha provide loans for small and medium-sized businesses and personal loans for white-collar workers. Small and short-term loans have been a gap in the market, but the landscape has changed quickly: Uangteman and Pundi-Pundi were once the only players in this segment, but were overtaken just a few months after their launch by Chinese companies who recently aggressively entered the market.

On the list of top 50 finance apps in Indonesia, more than 10 apps provide cash loan service and 3 apps provide instalment service. Out of these, about 9 apps are developed, operated or funded by Chinese companies.

The top 3 cash loan apps are RupiahPlus, DanaRupiah and Kredit Pintar. They are all launched in 2017. Although the approval process is easy and fast, applicants do need a bank account to receive the approved loan amount.

Unlike the short entry periods of cash loan apps, instalment apps are more established in Indonesian market. Kredivo and TangBull have been operating for 2 years and 1 year respectively, and both have agreements with a large number of e-Commerce websites and merchants. Nevertheless, My Home Credit Indonesia, as the new player, has entered the market since April 2017. However, instalment apps require the applicants to link with their Facebook account and upload a photo of their Indonesian Identity Card (KTP).

Opportunities and Risks

For investors and corporate innovators who are looking at the opportunities in Indonesian consumer finance market, there are both opportunities and risks that must be considered.

Given the market size and market demand of small and medium loans, the cash loan market in Indonesia has huge business potential. As the registration and approval process is simple and fast, initial rounds of customer acquisition can be easy. However, due to the low penetration of bank account and awareness of consumers, the long-term customer acquisition may lead to low increment with higher costs. Further, customer retention may be a problem that every cash loan company needs to solve because existing customers can switch to other similar services without any inconvenience.

While the customer acquisition can be easy if consumers have bank accounts and proficiency in mobile apps, the credit risks cannot be ignored. Currently, the Indonesian personal credit system is not yet fully developed and companies need to rely on contact and social media information provided by the borrowers to conduct their risk control process. Building a reliable credit system is costly and time-consuming, and the Indonesian government will keep a strict control on such development.

Although the Indonesian government has been encouraging growth in the industry, as the consumer finance providers proliferate, the trend of regulation may be tighter in the future. For example we may see a limit to foreign investment, restricting time and size of loans or regulation on interest structure. However, foreign companies can seek for joint ventures with big local players to mitigate this risk.

During the collection process, the collectors will encounter a lot of different scenarios in local context, such as not understanding the payback process, refusal to pay back and even disappearance of the borrowers. While no systematic guide exists on how to deal with these circumstances, the collectors can only analyse these different circumstances one by one, which requires a lot of manpower. In the long run, this practice is unlikely to be sustainable.


Overall, both opportunities and risks exist in consumer finance market. Indonesia is a growing market with huge potential and demand in consumer finance. With a high consumer confidence index of 120 (4th globally) [1] and 10% (very low) of household debt to GDP [2], the growth in consumer lending is foreseeable. On the other hand, financial inclusion and financial literacy is low, creating challenges in long-term customer acquisition which only can be solved through educating the consumers at high cost of time and investment. Players are crowding into the market, increasing competition and raising the cost of operations. It is expected that there will be over 150 companies in the cash loan market by March 2018, and the number is predicted to reach 300 by June 2018. Investors and corporate innovators should look into companies who can address the challenges of long-term customer acquisition and retention, credit control and collection, collaboration with local players and responding to the fast-changing market conditions and regulatory environment.


  1. Q4 2016 Global Consumer Confidence,
  2. Indonesia Household Debt: % of GDP,


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