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Indonesia: Auto financing to drive recovery of multifinance sector in 2021: APPI
The Indonesian Financing Firms Association (APPI) predicts the multifinance sector will begin to recover by next year, driven by automotive financing, with consumers expected to prioritize health and safety in the post-pandemic era.
APPI chairman Suwandi Wiratno said on June 16 that automotive financing – the largest market of all financing types in the country – would see an upward trend in the near future as people would choose to travel by private vehicles for health and safety reasons.
“After this pandemic, people will be more cautious about taking public transportation and will prefer to use private vehicles. This happened in Wuhan, China, where many people went to car dealers after the lockdown policy was eased, and this trend may happen in other places,” said Suwandi, who is also the president director of multifinance firm PT Chandra Sakti Utama Leasing, referring to the ground zero of the COVID-19 pandemic.
Financial institutions have been affected by the ongoing COVID-19 pandemic, as physical distancing restrictions impact business activities, resulting in sluggish loan demand while increasing the risk of bad loans. The multifinance sector has also been hit by a steep drop in automotive sales during the pandemic, which account for around 70 percent of the country’s financing portfolio.
Data from the Indonesian Automotive Manufacturers Association (Gaikindo) showed that domestic car sales plummeted more than 95 percent year-on-year (yoy) to only 3,551 units in May, a continuation of the downward trend seen since March.
The multifinance industry will only see 1 percent growth this year, lower than the association’s original growth projection of 4 percent at the beginning of this year, APPI stated.
With consumers hard hit by the pandemic, multifinance companies have approved a proposal to restructure 3 million loans, with Rp 90 trillion (US$6.3 billion) in debt restructured as of June 8, APPI data show.
President director of Adira Dinamika Multi Finance Stanley Atmadja also expected the safety concerns of consumers to translate into increased use of private vehicles in the future.
“We have started to see significant demand for both new and used motorcycles and cars in recent days. This must be seen as an opportunity, as there is a market out there for the financing industry,” said Stanley on Tuesday.
He added that going forward, the multifinance sector would need to change to match consumer preferences for making purchases and applying for leases online.
“We are currently preparing to launch our digital program which will be our new way of marketing. We are currently developing apps, which can be reliably used by customers in the future to make purchases and apply for leases through our online channel,” Stanley said.
Another multifinance company, Mandiri Tunas Finance has upgraded its mobile app MTF Go to provide a better service in processing financing during the pandemic.
Mandiri Tunas Finance director Harjanto Tjitohardjojo said MTF Go offered various features, including financing proposal submissions, credit simulation and product information, among other features.
“There is also a catalog of various automotive products from commercial vehicles to passenger vehicles, and customers can also see credit and installment simulations for the products on the app,” he said on June 16.
Source: https://www.thejakartapost.com/news/2020/06/22/auto-financing-to-drive-recovery-of-multifinance-sector-in-2021-appi.html