Indonesia’s Julo dives into education loans as others exit the space

In The Top Up this week, we look at Julo venturing into student financing and observe the scrutiny of online lending interest rates in Indonesia. [Read from your browser]( The Top Up 💵 Welcome to The Top Up! Delivered every fortnight via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in fintech. If you’re not a subscriber, get access by [registering here](. IN FOCUS In today's newsletter, we look at: - How diversified fintech platform Julo [can compete against]( a small group of niche players in the student financing sector - Why the Indonesian government’s investigation into the high interest rates charged by online lenders may be misguided - Popular Vietnamese e-wallet MoMo [reaches a revenue high]( while widening operating loss in 2022 --------------------------------------------------------------- Hello {NAME} I was a scholar from elementary school to college and am, in fact, the first and only member of my immediate family to attend university. In college, the scholarship I received was called Bidikmisi and was government-sponsored. While it covered all my tuition fees, the monthly allowance was modest, so I had to rely on my own funds for daily expenses. Today, I discovered that Bidikmisi students can actually apply for student loans through a special channel provided by state-owned bank Mandiri. This would have been a great help during my college years. Mandiri is not alone in offering student loans. Another bank, BRI, also provides such a service through its Briguna Pendidikan product. In the tech sector, there are only a few major players in the educational financing market, which is largely underserved. Recently, a new contender, Julo, has entered the scene, even as others have exited. How this diversified fintech platform can seize the opportunity is what I detail in this week’s Big Story. Speaking of loans, Indonesia’s Business Competition Supervisory Commission has accused a local fintech association of setting a 0.8% daily interest rate, which it considers too high, and an investigation is underway. Does this allegation mirror the situation on the ground? Find out more in this week’s Hot Take. -- Budi  --------------------------------------------------------------- THE BIG STORY [Can Julo’s 1m users be enough to seal its success in Indonesia’s student financing industry?]( The digital credit platform recently entered the education sector, even as three out of six previous players have either withdrawn or scaled down their operations.  --------------------------------------------------------------- THE HOT TAKE Probe into Indonesian online lending interest rates is groundless Here’s what happened: - Indonesia’s Business Competition Supervisory Commission (KPPU) [said recently]( that it is investigating the online lending interest rates set by the Indonesian Joint Funding Fintech Association (AFPI). - According to the commission, AFPI has determined a 0.8% rate per day, which it said violates a 1999 Indonesian Law concerning the prohibition of monopolistic practices and unfair business competition. - KPPU will establish a task force to address the issue, with an initial investigation to be completed within 14 days. Here’s our take: KPPU said that all 89 of AFPI’s registered peer-to-peer lending players adhere to the fintech association’s specified interest rate. This is simply not true. For instance, [Modalku]( the Indonesian brand of Funding Societies, levies interest rates ranging from 1% to 3% per month, or an equivalent of 0.03% to 0.1% per day. Meanwhile, [Pintek]( charges 0.9% to 2% per month. This was also confirmed by AFPI chair [Entjik S. Djafar]( who said that the average interest rate for productive loans ranges from [0.03% to 0.06%]( per day. In fact, since November 2021, AFPI has recommended a cap on interest rates, loan charges, and other fees amounting to [a maximum of 0.4%]( per day. AFPI admitted that interest rates for online loans once reached 0.8% but said that was before the association was established. The rate was needed to cover the high costs of risk control and credit scoring, primarily due to the limited availability of data, Djafar said. Yet, even a daily rate of 0.4% implies an annualized rate of 146%. In this regard, Indonesia’s Financial Services Authority (OJK) - which oversees the fintech industry, including online lenders - has [clarified]( that the 0.4% rate only applies to short-term consumer loans. For productive purposes (e.g., loans for business investment), the interest rate is roughly 12% to 24% per year. As of now, there are already 148 registered members of AFPI, with 101 of them holding licenses from OJK. These firms have disbursed 38% of the total 678 trillion rupiah (US$43 billion) in loans to the productive sector, including SMEs. Besides P2P lending, AFPI also accommodates players operating in the profit-sharing, multifunction, and general funding categories. See also: [Uproar among Indonesian online lenders over draft OJK regulations]( KPPU’s scrutiny has garnered attention from industry observers. Legal expert Asmanidar issued a [statement]( highlighting that the high interest rates present a grave concern for customers, leading to a range of issues, from financial strain to severe outcomes such as divorce and even suicide. She also said that the issue with online loans extends beyond exorbitant interest rates; it also encompasses inhumane debt collection practices that involve intimidating or terrorizing customers. Last month, Katadata [compiled]( a list of cases involving suicides that occured since February 2019 due to customers’ inability to meet the repayment obligations of online debts. However, despite its good intentions, the regulator has missed the mark this time. This case also underscores that coordination among regulatory stakeholders in Indonesian fintech is still lacking. AFPI stated that it has not yet received a formal letter from KPPU but intends to arrange a meeting with the entity to discuss and resolve the matter. -- Budi Currency converted from Indonesian rupiah to US dollar: US$1=15,685 rupiah.  --------------------------------------------------------------- NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [MoneyHero cuts loss by 56% in H1 ahead of SPAC listing]( The Nasdaq transaction values MoneyHero at an enterprise value of around US$310 million and an equity value of roughly US$283 million. 2️⃣ [MoneySmart hits profitability, eyes IPO by 2025]( The company saw revenue of US$17.6 million in the first half of 2023, a 37% increase compared to the same period last year. 3️⃣ [Indonesia’s Luna raises fresh round to develop SaaS retail platform]( The round was led by Singapore’s TNB Aura through its investment vehicle, TNBA Scout, which targets pre-seed and seed companies. 4️⃣ [As Maya’s revenue grows, its digital bank bet deepens losses]( The Philippine digital bank reported a loss of US$156 million in 2022, a roughly 45.6% jump from the year before.  --------------------------------------------------------------- FYI [VN fintech unicorn MoMo’s revenue grew 18% to top $355m in 2022]( MoMo’s net operating loss widened by 38.8% last year but the dollar-value increase in revenue still exceeded the uptick in cost.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preferences center. In the meantime, if you have any feedback or ideas, feel free to get in touch with Terence, our editor-in-chief, at terence@techinasia.com. See you in a fortnight! P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. You can also break our hearts and remove yourself from all Tech in Asia emails over [here](  Copyright © 2023 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894