The Communication and Information Technology Ministry has handled as many as 447 illegal financial technology cases during the period from January to June 2021 by blocking their sites.
The National Police Force confirmed to have received 370 reports of illegal online loan services as per October 2021. As many as 91 cases were solved, with others still being investigated.
Perhaps once or oftentimes people have received messages on their cellphones offering credits, with attractive promises, replete with a contact number or even an e-mail address.
The offer is also accompanied by the ability to provide assistance, such as for debt coverage or with credit card bills.
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Illegal online loan services usually approach prospective borrowers with interesting offers, and the registration is relatively easy. Just use your identity card, and the funds will then be transferred right away into the account.
Yet based on information obtained from victims of these illegal practices, most of them were stuck with high interest rates, and it is not clear how long the credit period will end.
If the customer is unable to repay the loan, the illegal loans service will intimidate them into paying, often with means that could be considered a breach of privacy.
Usually, they will use the customer's personal data complete with photos to be distributed to social media, of course, along with untrue narratives, sometimes even with pornographic content.
In the midst of the current pandemic, scores of people have become jobless. Several of them then attempt to become entrepreneurs in order to survive. However, everyone needs some funding to start a business.
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The difficulty in accessing credit from banks and official financial institutions under the Financial Services Authority has compelled scores of people to resort to taking illegal loans.
Given their troubling existence, the Financial Services Authority is cooperating with the police to take action against this company, including through the disclosure of the case in Tangerang City.
Building the economy
Nowadays, the need for cash funds to rebuild businesses devastated by the pandemic is the main issue faced by micro, small, and medium enterprises players in Indonesia. Rebuilding a business means building the family's economy in order to meet their daily needs.
Unfortunately, some of them do not think hard and long about getting a loan. Such decision-making process leads to new, more thorny problems.
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This is apparent from the ever-increasing number of people, who eventually report themselves as victims of these illegal loans. These illegal loans have emerged left, right, and centre, as a solution for these business owners, which offers convenience and immediacy in the loan application process. Just by using an ID card and allowing access to a personal cell phone, someone can easily get a loan of up to Rp20 million (US$1,418).
This convenience and speed could not earlier be obtained from banking. Several people do not apply for credit to the bank and opt for borrowing from the questionable companies, as they are looking for swifter disbursement without having to submit many documents.
To address this issue, the four state banks that are members of Himbara (BRI, Mandiri, BNI, and BTN) collaborated to present DigiKU to make it easier for the public to get credit safely.
DigiKU collaborates with the e-commerce industry. It facilitates access for business players, who are already on the platform.
Bank of Indonesia Governor Perry Warjiyo emphasized the importance of supporting digital transformation in an effort to encourage economic growth of MSME players.
Warjiyo expected that DigiKU can further target business actors through online means and make it easier for them to apply for loans with low and affordable credit interest rates, with appropriate terms.
The BI governor also expects DigiKU to integrate with QRIS, so that all business transactions can be recorded digitally. This can later become a credit-scoring parameter so as to assist business actors in applying for credit.
DigiKU targets to reach more MSME players in 2021. From the 2020 target of Rp4.2 trillion (almost US$30 million), Rp2.9 trillion (around US$205.6 million) has been realized and will continue to increase along with the increase in MSME players, who are already on board.
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Chairman of Himbara, Sunarso, stated that cross-industry collaboration, comprising particularly of banking and e-commerce, is deemed necessary, so that capital loans can be facilitated through technology. This sort of collaboration is deemed important to ensure that the public does not fall prey to illegal online loan services.
Thus, business players seeking capital or funding can get it easily. Moreover, business players can have digital business records that will be used as assessment parameters upon applying for loans.
Business players now no longer need to attach documents to get loan services.
Sunarso remarked that the availability of digital banking services will help capitalize MSME players. It could serve as a way out of problems caused by the emergence of illegal loans.
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As is known, with digital technology, people from various regions in Indonesia can easily access funds. However, it is better if the source of funds comes from banks, which are more credible and with a more affordable interest for MSMEs, so that the distribution process is safer.
Illegal loan services are projected to cease to exist in Indonesia with official digital-based financing products from the government coupled with law enforcement on the field.
Currently, there are indeed several growing lending companies, or also called fintech, several of whom are also legal and affiliated with the OJK. Not all fintechs are bad. Some are needed by the community today, especially those not having access to banks.
People choose to borrow from illegal fintechs since the requirements are easy, and the process is fast. Thus, the business and the field they are engaged in can run smoothly.
In future, banks and other financial institutions should make the most of this digital technology. The goal is to offer instant source of funds for people.
As an example, traders, with limited goods so far, have a boosted turnover owing to capital assistance, with easy application access.
Thus, in future, the legal aspects of these loan services must be completed immediately. Verification must be conducted swiftly to check the legality and to ensure that it is safe for the community.
The end goal is to prevent entrepreneurs from getting into problems caused by credit from illegal loans services, especially during the pandemic.
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