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How peer-to-peer loans are helping SMEs during the pandemic – TechTalks

In the face of the pandemic, small and medium-sized businesses are going through a difficult period. With the help of peer-to-peer loans, these companies may soon be turning a corner.

By Luke Fitzpatrick

In recent years, small and medium-sized enterprises (SMEs) have reported declining sales and distribution problems, among a series of other problems. With small businesses contributing over 60% of GDP, the implications are dire.

However, SMEs have recently received a lifeline in the form of peer-to-peer (P2P) lending platforms. Recent research has indicated that companies on P2P lending platforms have seen a significant increase in revenue, helping the economy significantly.

P2P Loan Research

A study of the University of Indonesia revealed encouraging results for SMEs and the economy in general. By engaging in new means of financing, companies show considerable levels of improvement, thereby reducing the pressure on individuals and the economy in general.

The borrowers of the P2P Investree lending platform, which is mainly made up of SMEs, saw their income increase significantly. This increase in income then enabled SMEs to develop their operations.

According to the study by the university’s Center for Demography at the School of Economics and Business, the average increase in income was between 20 and 50 percent. In addition, the manufacturing to services and construction sectors benefit from the increase.

Invest in P2P lending platforms

P2P platforms also benefit those looking to borrow money and those looking to invest their hard-earned money in a worthy cause, potentially paving the way for a change in the way companies choose to finance their operations.

Research indicates that 44% of entrepreneurs in Investree had also been able to employ more people since borrowing from the P2P platform. Leading to a positive impact on SMEs, while supporting financial inclusion.

P2P lending platforms are able to help borrowers provide short-term loans that allow SMEs to grow their business. This, in turn, will eventually qualify them to take out larger bank loans. According to research, 37% of millennials borrow money to consolidate debt and represents a market of 173 billion dollars.

With the Ministry of Co-operatives and Small and Medium Enterprises reporting that around 37,000 SMEs reported declining sales and distribution problems, the growth of P2P lending platforms could not have been better.

The numbers behind P2P loans

In the best-case scenario, let alone in the midst of a global pandemic, the benefits and cash is everything for SMEs. With the help of P2P lending platforms, online sellers have been able to increase their income.

Online sellers who have borrowed from the P2P lending platform could increase their income from the initial average of Rp 807 million (US $ 57,046) to Rp 3.5 billion. This issue comes from Survey data based on 261 interviews with P2P lenders in Java.

Although this data was obtained between December 2019 and January 2020, the pandemic did not completely nullify these figures. In fact, the co-founder and CEO of Investree said the company was still seeing a 90-day loan return of 99.95% in June.

The future of P2P lending

The global pandemic has delayed lending in some ways as retail lenders declined during the partial foreclosure period as borrowing money was not a priority. As the pandemic has prompted some reassessment, Investree will move forward with its first Series C funding worth $ 23.5 million, along with a plan to expand its market to Thailand and the Philippines.

Going digital by selling on e-commerce can save SMEs, especially during a pandemic where the economy is in recession. In addition, fintech loans can help by supporting the financing of SMEs.

The viability of P2P loans

At a time when the economy is booming, SMEs are looking for all viable options to keep their businesses afloat. One way to keep paying bills and staff is to get involved with P2P lending platforms.

While the pandemic has had some effect on P2P lenders, this form of funding is not slowing down significantly. In light of the research suggesting that P2P loans help SMEs earn more, it’s not hard to see why this form of lending is seen as a lifeline.

About the Author

Luke Fitzpatrick

Luke Fitzpatrick has been featured in Forbes, Yahoo News and Influencive. He is also a guest lecturer at the University of Sydney, teaching intercultural management and the pre-MBA program.