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Almost half of Indonesian SMEs could ditch traditional lenders in 2022

Indonesia – In the middle of businesses taking their recovery from the after-effects of the pandemic, almost half of Indonesian small businesses, or 44%, plan to consider alternative and non-traditional lenders moving forward, this is according to a new report commissioned by analytics software company FICO

This percentage reflects the Indonesian SMEs that expressed interest in trying new borrowing products in 2022 with 45%. APAC-wide, SMEs are citing dissatisfaction with their main banks. The report found that 62-70% of APAC SMEs are less than satisfied with their main bank’s level of support in response to the COVID-19 outbreak.

The report noted that the insights indicate early signs that traditional banks in Indonesia are at risk of losing SME business to non-traditional competitors.

The top drivers for Indonesian SMEs in choosing a funding provider are competitive interest rates (49%), ease and speed of application process (39%), and the ability to gain the lending options or credit line suited to their needs (33%). 

“The pandemic put a sudden, massive burden on SMEs, globally, and they didn’t think banks did enough to help them,” said Aashish Sharma, senior director of decision management solutions in Asia Pacific for FICO

“Indonesia’s SMEs have made it clear that they require financial support in 2022 but are less optimistic about getting it from their main banks. This is a potentially worrying trend for traditional banks, considering there are over 62 million SMEs in Indonesia, which is one for every five Indonesians,” Sharma added.

The report noted that banks need to understand what’s causing SMEs to consider alternative funding sources. SMEs across APAC pointed to frustrations with the typical funding process of traditional banks and identified room for improvement in specific areas which is led by access to credit (70%), followed by financial assistance (69%), and information and guidance (68%). Meanwhile, businesses in the region also said traditional banks must improve with regards to transparency in decisions and processes (68%) and speed of response (64%).