CASE: FINTECH LENDING OPENS UP OPPORTUNITIES FOR SMALL MEDIUM-ENTERPRISES

The Indonesian Financial Services Authority (OJK) has just released a regulation on financial technology (fintech) lending, which stipulates rules in the provision of lending services based on information technology. This fintech-based lending will not only play an essential role in supporting the financial inclusion program that the government has recently promoted but will also become an essential alternative for unbankable individuals and micro, small, and medium enterprises (MSMEs) to access funds to start and develop their businesses. According to the World Bank, only 36 percent of Indonesians have access to banking services and merely 13 percent borrow from formal financial institutions. At the same time, there are almost 60 million MSMEs, which provide over 100 million jobs in the country. Most of them cannot get the financing they need to expand. Conventional micro-credit and the government-subsidized micro-lending scheme micro-credit program (KUR) have not been able to boost young entrepreneurs and MSMEs on a massive scale. Despite the government's guarantee, banks are still reluctant to lend to these potential borrowers, mainly due to administrative issues.

Further reading:https://www.thejakartapost.com/academia/2017/01/18/fintech-lending-opens-up-opportunities-for-smes.html

QUESTIONS:

- Using walk-through analysis, please explain how the innovation works to achieve its goal and create social impact, and support your argumentation with the proper preferences.