Vietnam Streets
The accelerated spread of the global epidemic has had a huge impact on the global economy. The impact on Southeast Asian countries such as Malaysia , Vietnam, and Indonesia are particularly obvious. The medical conditions in this region are average and the population is large. There are 270 million people in Indonesia alone. Currently, more than 4,000 confirmed cases are still growing. The local government has taken strict shutdowns and home measures in response to the epidemic, which has had a serious impact on the local economy that is highly dependent on manufacturing, trade and tourism.
When economic fluctuations are volatile, the financial industry is the first to be affected, including financial platforms and industries such as banks, P2P (match investment and borrowing), cash loans (direct cash lending). Generally, P2P platforms have the cash flow of investors and will require the borrower to provide collateral, which is relatively low. However, cash loan platforms generally raise funds on their own and there is no collateral for the loan, which is very risky. In Southeast Asia during the epidemic, the most serious first overdue period (referring to the fact that the loan was overdue for the first time failed to repay the owed money on time), it has soared from 20% to 90%. The sudden outbreak is exacerbating the reshuffle of the online loan industry in Southeast Asia.
The soaring bad debt rate in Southeast Asia:
Southeast Asian countries have a large population and the financial industry is backward. More than 50% of people do not have bank cards. Most people can only make a living by their wages, have no habit of savings, and like to spend and enjoy. So this is one of the fastest growing regions in the world with online loans, but this is also one of the industries that have been hit hardest by the epidemic, which has triggered a wave of defaults in P2P and cash loans.
Indonesia: data shows that Indonesia currently has a population of nearly 270 million, and blue-collar workers aged 19-27 have more than 70 million. Only 2% of people owning credit cards in the entire country. According to data from the Indonesian Financial Services Authority (Otoritas Jasa Keuangan, OJK), local lenders soared to 5.6 million by the end of 2018. This is just the data of a formal platform, and there are also a large number of illegal lending platforms, and the data is unknown.
Due to the impact of the epidemic, small and medium-sized enterprises have reduced production or stopped production. Indonesian small and medium-sized enterprises have evaluated that the entire industry will reduce production by more than 35%, which will take at least 3 months to basically recover. This will bring about at least 20%-30% of workers unemployed or reduced income, and they are the main group of online loans, which has a direct impact on the local cash loan platform.
communicates with Chinese entrepreneurs in Indonesia's cash loan industry. The default rate in this industry during normal period is about 20%, mainly relying on high interest rates to make up for this loss. However, as the epidemic expands, the default rate is getting higher and higher. "At present, Indonesia's cash loan platform has a first-time overdue rate (referring to the first overdue loans that fail to repay the owed money on time) soared from 20% to 90%. China's cash loan overseas projects will die at least 50%. According to data from Yiou.com, "Now, at least 50 cash loans in Indonesia go bankrupt every month, less than 30% of them can make money." And this is just the beginning, and the epidemic in Indonesia is still expanding. Reynold Wijaya, CEO of
P2P platform Modalku, said in an interview with the media that their main lending targets are SMEs, "We will discuss solutions to SMEs with borrowers for sustainability." One of the measures is to adjust the limits and duration of loan services. By March 2020, Modalku had issued approximately 1.75,506 loans worth 13.49 trillion rupees (total RMB 5.998 billion), with a loan default rate of 1.31% in 2019. Compared with the current bank credit card in Hong Kong, China, the default rate is 0.9%, and the normal level is about 0.5%. Some international financial personnel doubt the authenticity of the Indonesian P2P platform's release of relevant data. "Compared with the situation in Malaysia and Vietnam, the real default data is expected to be 3-5 times that of the announcement, or even more. Some people even estimate that the default rate is more than 20%.
Malaysia: A recent survey conducted in Malaysia found that due to the impact of the epidemic, 33.3% of SMEs had been consumed in March, while 37.8% of SMEs could maintain their maximum until the end of April. Malaysian small and medium-sized enterprises account for 98% of the total number of enterprises. The Malaysian Institute of Economics (MIER) estimates that the number of unemployed people can reach 2.4 million. By the end of March, the unemployment rate of small and medium-sized enterprises reached 20%.Jiang Huaqiang, president of the Small and Medium Enterprises Association, believes that some small and medium-sized enterprises do not even need salary subsidies provided by the government, but choose to lay off employees or go bankrupt.
This is undoubtedly a fatal blow to the online loan industry. In early 2020, Malaysia's P2P industry predicted that the total financing this year may reach RM3 billion (RM3 billion) (RM1.67 billion) . Last year, Malaysia's P2P financing grew to RM521 million (about RMB870 million). But now, it is indeed a different situation. The Edge Financial Daily reported that a company in Malaysia that raised funds through the online lending platform Funding Societyties is on the verge of bankruptcy during the epidemic and cannot be reflected. The platform previously raised more than RM655.65 million (total RMB 1 billion). This may just be the beginning.
Huang Jiameng, head of the Malaysian Fund Association, said that under the epidemic, the repayment period of online loans in various industries has been generally extended. "About 10% of small and medium-sized enterprises are unable to repay when they expire, and request to reschedule their repayment time." The default rate soared to 10%, while the default rate before 2019 remained at around 2%. Financial analyst Kristine Ng believes that "after April, the possibility of delays or even defaults in repayment (borrowers) may further increase." The current default rate of cash loan platform Fundaztic platform is 3.70%. On average, the average loans for a single project are around RM65,000 (total RMB 100,000), but the platform leader said, "There will definitely be more overdues and defaults."
Vietnam: Due to the epidemic, with the lockdown of Hanoi and Ho Chi Minh , most domestic production and economic activities have been paralyzed. In 2020, Vietnam's GDP is expected to drop to 3.3% from 7.0% in 2019. This will be the lowest growth rate since the mid-1980s, with unemployment expected to grow to 5% from 2% in 2019, or even higher. The situation faced by institutions such as
cash loans is very unoptimistic. Before the epidemic, the normal default rate of cash loans in Vietnam was between 15% and 20%. Because the threshold for loans is low and no mortgage or guarantee is required, these loans may not only be overdue, but may also become bad debts. Now that the epidemic has caused a large-scale recession in the local economy, the risk of loan default rates for small and medium-sized enterprises and individuals will obviously increase further. If the economic recession level is low, the default rate and bad debt rate will further increase, and a large-scale economic crisis will not be ruled out. According to industry insiders, the current default rate of cash loans in Vietnam may exceed 50%. The Vietnamese central bank has also begun to strengthen personal consumption credit control at the end of last year to prevent excessive overdraft.
Vietnamese finance is stimulating by economic development, but it also leaves various hidden dangers. In the Vietnamese banking system, the 3% loan default rate is generally regarded as the bottom line of security. However, the rate of bad debt for banks and cash loans in Vietnam is astonishingly high. In the 2019 banking report released in January 2020, Saigon Securities Corporation (SSI) mentioned bad debts in the new credit cycle. In May 2012, the initial bad debt rate was 4.47%. It was later revised to 8.82%. At the time, Fitch Ratings calculated that Vietnam's bad debt rate reached 17%, while Barclays said the actual figure could reach 20%. Data in 2019 showed that the bad debt rate of Vietnamese bank Sacombank reached 10.88%.
The impact of the epidemic on cash loans:
20 epidemic may be a turning point for Southeast Asian cash loans and P2P platforms, and the industry has further differentiated and the reshuffle has intensified. Due to the black swan incident of the epidemic, the cash loan and P2P industries have caused drastic changes.
Investors' run: Due to the spread of true and false news such as the epidemic and the continuous bankruptcy of small and medium-sized enterprises, many investors on P2P platforms have begun to worry that the economic crisis caused by the epidemic will lead to a surge in loan default rate, so they began to ask for withdrawals, or even cash in advance. The run caused by panic has made the P2P platform that was originally in trouble with the operation, and may even accelerate the bankruptcy. So many platforms began to extend the redemption cycle. Indonesian data shows that the payment has been extended from the previous 7 days to within 15 days. At the same time, the platform comforts and communicates with investors and finds ways to delay the run. Only 3.1% of old investors will be willing to continue to invest additionally. And more than 18.1% of people may request early withdrawal.
New investors have decreased: For P2Ps that rely on financing, on the one hand, the decrease in old investors are decreasing, and on the other hand, the speed of new investors' development has been significantly reduced. As the epidemic has caused the people's income to decrease or even lose their income, ordinary people are becoming more and more cautious about investment, holding cash and waiting and watching. Let’s see the further impact of the epidemic on enterprises and lives, and then make a decision. This directly leads to a decline in the number of new investors and a decrease in capital inflows. The overall data in Southeast Asia fell by about 30%-50% year-on-year.
Borrowers soar: Whether it is cash loans or P2P, on the one hand, old borrowers are losing their repayment ability, and the default rate soars. On the other hand, the number of borrowers is increasing, including small and medium-sized companies and individuals that have been hit by the epidemic. Due to traditional financial institutions such as banks and small and medium-sized enterprises, mobile phones that provide personal loans to small and medium-sized enterprises have surged. In Indonesia alone, this data surged by 130% over the same period. However, for the sake of security, the lending platform further increases the requirements for borrowers. "Unless the borrowing company has sufficient and continuous cash flow, the platform will refuse loan applications in industries such as hotels, retail and tourism." Companies that meet this standard are rare now.
P2P and cash loan reshuffle intensified: According to incomplete statistics, during the epidemic, more than 50 cash loans have gone bankrupt or liquidated in Indonesia alone, which is not an illegal underground platform. Many cash loan platforms have irregular operations, lack risk control capabilities, and are free to issue loans, and do not have any reserves. Once a run or cash inflow is limited, it will be almost 100% bankruptcy or liquidation. Some industry insiders analyzed that more than 90% of cash loans in Southeast Asia may be reshuffled. But in the long run, this is a good thing for the industry, and most of the remaining ones are companies with strength or standardized operations. In Southeast Asia's P2P and cash loan industries, it is not ruled out that a small number of unicorn companies will be generated.
Government and platform response measures:
In order to prevent further increase in bad debts caused by default rate, thereby deteriorating the operating conditions of small and medium-sized enterprises and cash loan platforms, and even further deteriorating the financial situation and triggering a large-scale financial crisis, governments of all countries are taking strong measures to respond.
Crack down on illegal loans and collections:
In order to ensure the healthy operation of the online lending industry, the police have begun to increase the crackdown on violent collection incidents that have begun to rise. According to the announcement of the Jakarta Northern Police District, "Five criminal suspects have just been arrested, including three Chinese citizens and two Indonesian locals. A Chinese named Li is responsible for the operation of the company. They are suspected of engaging in illegal cash loans and violent collections. Two criminals have also absconded." Police seized two illegal loan platforms called PT BR and PT VGA in a complex in North Jakarta. However, the two companies were not registered and registered with the Financial Services Administration (OJK) and were suspected of illegal operations.
Jakarta Investment Warning Working Group (SWI) banned a total of 388 illegal lending platforms in February and March 2020. If it is included in January, the total number will exceed 508. These are illegal loan platforms that are not registered with the Financial Services Administration (OJK). The police noticed that "from 2018 to March 2020, the police station has handled 2,406 entities."
formulates emergency response policies:
includes Vietnam, Malaysia and other countries, and are formulating new financial policies based on the current economic situation, including banks, cash loans, P2P and other financial institutions. Malaysia National Bank announced, "Borrowers are allowed to suspend repayment for six months, temporarily providing a respite for small and medium-sized enterprises." Many governments have taken similar emergency measures and recommended temporarily stop repayment to prevent large-scale defaults and bankruptcy of small and medium-sized enterprises, thereby further affecting the country's financial and even social stability. Specific policies refer to “For a legal time, borrowers have the right to suspend, delay or reduce repayments (including principal interest). The suspension order is enforced by the state and government, central banks and other regulatory agencies.”
Government provides economic support:
According to Vietnam People's Daily, preliminary evaluation data from the State Bank shows that as of now, the debt balance of enterprises that cannot repay their debts on schedule due to the impact of the epidemic is approximately 925 trillion VND (total RMB 279.2 billion). At the regular meeting of the Vietnamese government held in March on February, the Vietnamese Prime Minister announced the launch of a low-interest loan plan of 250 trillion VND (total RMB 75.4 billion) and a financial support plan of nearly 30 trillion VND (total RMB 9.1 billion) VND. Implement preferential credit plan and lower the loan interest rate by 0.5-1.5%/year.
National Bank of Malaysia (BNM) allocated RM3.3 billion (total RMB 5.4 billion) is used to support the continuous operation of SMEs, ensure workers' employment, and promote domestic investment. It is expected that in 2020, an support plan of approximately RM200 billion (total RMB 327 billion) will be approved to help small and medium-sized enterprises financing and families overcome difficulties. The Indonesian government has announced an economic stimulus plan of 120 trillion (total RMB 54 billion) to support the country's economic growth.
In the process of issuing these funds and loans to small enterprises, including banks and P2P, cash loans and other financial institutions, will play a role. Due to the big data and flexibility of the online lending platform, "relatively with banks, we are more conducive to targeting loans and shorter cycles to small and medium-sized enterprises." ”
Author: A Xiong, Thunder Old Bird, an Internet finance entrepreneur, has gone overseas to start a business in the past two years, welcome to follow.
