A call to the boss: Indonesia contends with aggressive Chinese online lenders
24/09/2018 02:30
(Repeats Sept. 21 story with no changes to text)
By Fanny Potkin, Shu Zhang and Tabita Diela
JAKARTA/BEIJING Sept 21 (Reuters) - Indonesian authorities
have generally opened their arms to fintech companies offering
online loans in Southeast Asia's biggest economy, viewing them
as a way of getting credit to tens of millions of people often
unable to access bank lending.
But the arrival of a wave of predominantly Chinese fintech
lenders, who often do not register and employ aggressive debt
collection practices, is now alarming regulators.
For Chinese platforms, Indonesia's youthful market of over
260 million people is an attractive target, particularly after a
crackdown on the loosely regulated micro-credit sector at home.
Four people in Indonesia who failed to repay loans on time
told Reuters that Chinese fintech lenders took control of their
phone contacts – permission is granted when the app is installed
- and harassed their colleagues and friends.
One of them, Nesika Yustines, a 26-year secretary in the
Tangerang area near Jakarta, said she was stunned when debt
collectors repeatedly called her boss to say she had a week to
pay back her loan and 20 percent interest.
"They asked for payment from my boss and my boyfriend," she
said. "It's embarrassing, it's as if they had become collateral
in this."
Hendrikus Passagi, who oversees fintech for Indonesia's
financial regulator OJK, said some borrowers had lost their jobs
because of such calls.
"Those practices go against God. We are a religious country.
In Indonesia, if I lend the money to you and you don't pay, I
will not come to your house and humiliate you," he said.
In China, financial regulators issued tough new rules on
online micro-lenders last December, after a barrage of criticism
over their tactics.
Looking to set up in new markets, Chinese online lenders
have come in groups to Indonesia since 2017 to meet officials,
bankers, and executives in order to set up operations, according
to two Chinese-based businessmen organising such tours.
Chinese lenders will often set up shell companies in Hong
Kong and Singapore to bypass Beijing's strict controls over
cross-border money flows and hire proxy agents as local
partners, said Jin Xiang, who runs BlueBoat Global, a company
based in Beijing dedicated to helping companies explore new
markets.
His company has been organizing tours to Indonesia since
late 2017, and the latest tour was conducted last month.
Indonesian regulator OJK produced a blacklist of 226 banned
fintech lenders in July and updated it in early September to 407
banned platforms.
The regulator told Reuters more than half were Chinese, but
they also included a handful of Eastern European lenders as well
as a U.S. lender.
LOCKED WAREHOUSE
Fintech lenders, who run platforms designed to disburse
relatively small loans to individuals and small businesses, are
viewed by Indonesian authorities as part of the solution to a
$73 billion yearly shortfall between the country’s estimated
financing needs and the amount banks provide.
The sector is still growing quickly. Indonesia's 64
registered fintech lenders disbursed $534 million between
January and the end of July while earlier this month, Go-Jek,
the country’s biggest online platform, partnered with three
local peer-to-peer lenders as part of its move deeper into
fintech, or financial technology. urn:newsml:reuters.com:*:nL3N1VQ3BZ
But despite the efforts of Indonesian officials, with help
from Google GOOGL.O , to block the apps and websites offered by
illegal lenders, borrowers say many continue to operate and
demand repayment even after being banned.
A 42-year-old office assistant, who asked not to be named,
was desperate to renegotiate his loan after debt collectors for
online lender Uang Express began calling his relatives and
colleagues for repayment of his 2 million rupiah ($135) loan.
Uang Express is one of more than 200 Chinese consumer
lending platforms banned for not registering or breaching laws.
Its platform was downloaded over 100,000 times in the Google
Play Store before being deleted.
When the office assistant tried to visit the lender's
Jakarta headquarters he found a locked warehouse.
Reuters later tracked down the office of Second Installment
Financial Technology, which is listed by Uang Express as its
parent and is not banned.
"How did you find us? You're not supposed to find us. That's
the point of fintech," a spokeswoman said, confirming it was the
office of Second Installment, but declining to comment further.
Second Installment Financial Technology runs advertisements
on the same web address and email server as Shanghai-based P2P
platform Miao Miao Technology, whose platform and logos aimed at
Chinese clients are identical to Uang Express.
Uang Express did not respond to requests for comment.
Reuters was unable to reach Miao Miao Technology to confirm
whether it had any links with Second Installment.
'TOUR OPERATORS'
Indonesian regulators stress that complaints do not apply to
all Chinese fintech lenders, praising those that have obtained
licences.
"There are good Chinese lenders. The ones that are listed on
the stock market tend to be more transparent," said OJK's
Passagi.
Beijing-based Hexindai Inc HX.O , which listed on Nasdaq in
November, acquired a 20 percent equity stake in Indonesian
online lender Musketeer in August with the aim of capitalizing
on Indonesia in its international expansion.
A spokesman for Hexindai said it disapproved of the "vicious
debt collection methods" of some Chinese P2P companies and only
contacted customers' chosen emergency contact regarding overdue
loans and flagged borrowers to a national blacklist if the loan
remains unpaid after 90 days.
But not all follow the rules including the requirement for
foreign lenders to have an Indonesian partner to hold at least
15 percent of their local subsidiary as well as local board
directors.
Two operators said some Chinese lenders were willing to pay
between 500,000 yuan to 1 million yuan ($73,115 - $146,430) for
"one-stop services" agents to handle registration and local
staff hiring.
"Local people probably don't know the Chinese are behind
those loan companies," said Wang Lu, the marketing director for
another business tour organizer, Xinliu Finance.
With greater scrutiny in Indonesia, he said lenders would be
looking at other markets with large populations, underdeveloped
financial systems and weak regulations.
BlueBoat's Jin Xiang said he was already beginning to
organize tours to Vietnam, which he cited as a top destination
for fintech micro-lenders.
($1 = 6.8387 Chinese yuan renminbi)
(Reporting by Shu Zhang in BEIJING and Fanny Potkin and Tabita
Diela in JAKARTA. Additional reporting by Cindy Silviana in
Jakarta; Editing by Ed Davies and Raju Gopalakrishnan)
((f.potkin@thomsonreuters.com;))