Video interview and the latest updates on how they are affected by COVID-19
During my trip in the fall of 2019 to Jakarta in Indonesia, I visited a number of loan originators of short term consumer loans. One of them was Kredit Pintar or Atome as they are called outside of Indonesia. Kredit Pintar is a loan originator at Mintos. The current Mintos loan originator rating of Kredit Pintar is B+ and they part of my crowdlending portfolio. They have been in operation since 2017 and have 600 employees. All loans have “buyback guarantee” and they offer short term direct to consumer loans. Kredit Pintar is currently the biggest player on the P2P market in Indonesia and has the top consumer lending app in South East Asia. They are a tech first company and use artificial intelligence to credit score the borrowers. They currently offer loans in Indonesia and the Philippines.
See the video of the office tour in Jakarta and the interview
Boan Sianipar, the Vice President at Kredit Pintar gave me a short office tour, late one evening, of one of the three offices they have in Jakarta. Afterward, we had a talk about the company, how they do credit scoring, how they do collection, how they use payment insurance and more. The sound is not that good during the office tour, but way better during the interview, right after the office tour in the video.
How is Kredit Pintar affected by the COVID-19 pandemic
I talked to Boan again some days ago, to get the latest updates and information on how they are affected by the coronavirus outbreak, the downturn in the economy, and the fact that a larger number of investors have decided to stop their autoinvest on Mintos either out of fear or with the intent to move their funds out of P2P and into the stock market to take advantage of the low stock prices. Here is the questions I asked and the answers I received.
How is everything going at Kredit Pintar during this COVID-19 outbreak?
It has been hectic, but we are doing well here in Jakarta. We are working from home.
The government is trying to stop the spread of the virus and I think that luckily, Indonesia caught it late, so what we were able to learn from other countries like China and South Korea in terms of how to manage the crises. We even imported some of their medicine to help us here.
As for how the virus affecting Kredit Pintar, we continue to monitor and adapt to the evolving COVID-19 outbreak from both a personal and business standpoint. The business operations of Kredit Pintar continue as usual and the whole team is focused on managing the portfolio during these unprecedented times.
During these times, we benefit from being a technology-first company. Kredit Pintar has not seen a material spike in default rates as of this date. The company’s view remains unchanged and we continue to see attractive opportunities in the Indonesian consumer lending space over both the medium and long-term.
But of course, we are being more cautious. We are being more careful. We are reviewing the situation every day. We don’t want to be caught up in anything bad.
Mintos is only one of our many funding sources so we don’t feel an impact right now but let us see if it continues to go on for the next few months. But in Indonesia, I think we are still in the early stages, so there could be an impact later. But things can change every day.
You were very much focused on growth when we made the video interview in the fall. How is the outlook now? Are you this focused on growth or have you cut back on employees?
We still have the same amount of people working for us at this time. But our focus is not that much on growth at the moment. We are preparing to scale down if we need to. Every day we have multiple calls to try to understand what the current market situation is like and to review performance. But in these trying times, the business strategy will have to change.
Some people have the opinion that in the crises we may see more defaults, but the quality of some of the lenders could also increase as an otherwise economically strong group of people would suddenly need a loan. What do you think about that?
I think that is a very optimistic view. We will see. We don’t know what the macroeconomic effect of this will be. Probably, in the future, some businesses could be shut down and people will lose their job. In that case, they might not be able to pay. So we will always be careful with new borrowers. We don’t just want to directly approve them. We do not want to close opportunities, but we are being more conservative and safe in these times.
Do you have a higher demand for loans in these times?
It terms of demand, I do not want to comment on that right now. I think it can be misinterpreted in different ways. But if you read the news, the government is also doing a lot of relaxation policies. So if people want to borrow it does not have to be only P2P lending. It could be through the banks and multi finance companies as well, as the government is also pushing them to not close the opportunities on lending.
So it seems to me that in this COVID-19 crisis, people have more options for lending that in the last financial crises?
One more thing that hit me when I edited the video interview. I am very interested in knowing if there are any limitations to the insurance we talked about. The external company Kredit Pintar use to cover bad debt. Will it cover if the borrower becomes unemployed and cannot pay? I know investors will be very interested in this insurance, what company is supplying it and under what term it works.
Regarding Insurance. Apologies, but I don’t think I can share any details with you. Rest assured investors’ money is safe.
Has anything else changed since I was there and did the video interview?
Just a few things. We added a few more people to senior management. Maybe some of the numbers of registered and licensed P2P companies have changed as well.
Final thoughts and comments
The only thing I did not like was this secret insurance from an overseas company, that should covers bad debt. If I cannot get any details on the company name or the insurance terms, then I personally those to take it out the equation when I evaluate Kredit Pintar as a loan originator. So, at least for me, these loans are still unsecured consumer loans without payment insurance. As you could also hear in the video interview, if the internal collection process fails, Kredit Pintar writes of the loan. The amount is usually to small for this to be worth to go to court for. This is how it works for small direct to consumer loan providers in Indonesia, the Philippines and Vietnam. For a defaulted direct to consumer loan in Denmark, you would go go court and try to recover and collect the bad debt. In Denmark, at least you will always have a claim against the borrower.
When I asked different people I came in contact with in Indonesia if they knew who Kredit Pintar was, most of them actually knew the company. So it seems to be a well know brand in Indonesia. If you would like to invest with Kredit Pintar, you can do it through the Mintos marketplace by clicking the green button below to create an account.
A scary personal note from Indonesia about COVID-19
As some of you may know I like to go out once in a while to social dancing events. It is a great way to meet people and socialize without getting hammered. I went to a posh hotel named Paloma in Jakarta one night to dance. As I did not bring my phone to the social dance event, I had a girl named Sita take a few pictures and later send them to me.
It turned out that this girl was later the first person in Indonesia to catch the coronavirus and it originated from that specific location, Paloma. This is crazy! She has already well again and is in good health. However, just from that case there are now 1986 cases registered and 181 deaths, including several specialized doctors. Please be safe, everyone. Stay at home. Don’t go out dancing just yet. 🙂