Meanwhile, conventional banks have managed to keep their 90-day past-due loans at around 3 per cent last year but their growth contracted by as much as 6 per cent during the same period as banks focused on managing their worsening loan quality through loan restructurings. The growth remained negative until June this year.

“In contrast, the lending fintechs rapidly grew their SME and micro loan volume for the remaining period in 2020,” Manggi Habir, a visiting fellow with ISEAS – Yusof Ishak Institute wrote in a paper published in July this year.

“Growing loans in a recession remains a risky initiative, reflected by a rise in their problem-loan ratios during that year.”

Although peer-to-peer lenders regularly put problematic borrowers in a centralised database, assessing a first-time borrower’s credit worthiness remains a challenge.

“Fintech’s target market of SMEs and small entrepreneurs does not produce regular financial statements. So fintechs often rely on alternative data, such as a borrower’s bank statements or utility and mobile phone bills to assess financial capacity as well as reliable and prompt bill payments,” Mr Habir wrote.

“But the availability and authenticity of the data, even when available, are difficult to verify. Furthermore, there are privacy and personal data security issues involved in obtaining and using these data.”

Even with fintech loans growing and bank loans remaining flat, the former only accounts for 0.3 per cent of all loans.

One reason is that the 148 licensed and registered fintech lenders have to compete with a sizable number of illegal fintech companies which operate outside of the government’s scrutiny and oversight, Mr Habir noted. Since 2018, the government has blocked more than 1,350 illegal fintech platforms.


Fintech companies are hoping that the exponential growth they have enjoyed will have lasting impact in a post-pandemic world.

“We are hoping that our financing products remain steady, even after the pandemic,” Mr Gunadi of Investree said.

“The probability of an increasing need for financing is expected during the pandemic recovery period. Thus, we are preparing to cater to their needs by offering various financing products as well as collaborating with innovators in providing the best solution for SMEs.”

Mr Iswara of DANA believes that growth will remain strong in the years to come.

“We are optimistic to see more digital wallet adoption in the future,” he said.

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