Exclusive: UangTeman’s policy paper to Indonesia’s financial regulator: Page 2 of 4

 
No limitation for loan interest
 

 
As a direct online lending platform, UangTeman is a fund provider to its customers, or acts as a balance sheet lender. With this business model, it makes its money from high interest rates, in contrast with peer-to-peer (P2P) lending platforms which generate revenue from service fees.
 
UangTeman argues that putting limitations on interest rates would hamper industry growth, saying that companies would not be able to compete by offering more attractive rates to their customers.
 
It suggests the government regulate the default interest rates instead, or the interest rates charged to borrowers when credit payment is due and the borrower fails to pay on time.
 
Regulators can also put a cap on the maximum fee customers need to pay to borrow money from a direct online lender.
 
These measures would give such lenders room to compete and offer their most competitive interest rates, without sacrificing their own profitability.
 

No rollovers
 
In order to prevent customers from falling into a debt trap without limiting interest rates, UangTeman proposes that OJK disallow rollovers.
 
A rollover in this context is the renewal of the current loan, with customers paying additional fees on top of what they already owe.
 
“Customers will get stuck in debt if we allow rollovers. In UangTeman for example, we require customers to pay back their current loan first before they can request for another,” says Aidil.
 
Full disclosure
 
The UangTeman policy paper also proposes consumer protection measures. For one, regulations should stipulate that fintech startups must put clear and accurate information regarding the loan process, the benefits, the risks, and all the terms and conditions on their websites.
 
Another is that they should provide an online calculator (pic below) to help customers calculate the fee they would have to pay when they borrow certain amounts of money for certain lengths of time.
 

 
The policy paper also proposes OJK enforce consumer protection by ensuring every consumer complaint regarding an online direct lending service is handled properly by the companies concerned.
 
UangTeman also suggests that such lenders be required to declare their codes of conduct on their websites, so that consumers can refer to this before they make any decision.
 
Next Page: Access to credit info, protecting data