Indonesia's Finance Industry Faces Perfect Storm: Extortion and Illegal Sales Practices

Growth Expectations Plummet

Indonesia's finance industry is bracing for a challenging 2025, with growth projections slumping to a mere 1%, significantly below the anticipated 8-10% target. The Indonesian Financing Companies Association (APPI) has sounded the alarm, identifying two major factors disrupting the ecosystem: extortion by debt collectors and the proliferation of STNK-only vehicle sales.

The Extortion Conundrum

APPI Chairman Suwandi Wiratno highlighted that the industry is facing unprecedented challenges. When debt collectors repossess vehicles, finance companies are often blamed, despite the debtors' failure to meet their payment obligations. Wiratno emphasized that the repossession process is crucial as the industry's funding structure heavily relies on bond issuance and bank loans, which account for 70-80% of their financing.

STNK-Only Vehicle Sales: A Growing Concern

The industry is also grappling with the rampant practice of selling vehicles with only the Surat Tanda Nomor Kendaraan (STNK) and without the Buku Pemilik Kendaraan Bermotor (BPKB). This practice, widely advertised on social media platforms like Facebook, TikTok, and Instagram, has become a significant concern. Wiratno noted that the prevalence of such illegal transactions indicates a worrying disregard for the law among the public.

Industry Exposure and Potential Consequences

The finance industry's exposure is substantial, with on-balance-sheet financing exceeding Rp500 trillion and total industry exposure, including off-balance-sheet items, estimated at Rp1.800 trillion. Without government intervention, APPI warns that finance companies will become more cautious in their lending practices. This could lead to higher down payment requirements, potentially as high as 30-40%, and stricter approval processes, with approvals potentially dropping from 8 out of 10 applications to only 4 or 5.

Call for Government Intervention

APPI has already reached out to the Ministry of Communication and Digital (Komdigi) and the Indonesian National Police's Traffic Corps (Korlantas Polri) to address these issues. The association is also collaborating with other industry stakeholders, such as Gaikindo and AISI, to push for government action. Wiratno stressed that without decisive measures to curb these practices, the finance industry's growth and stability could be further jeopardized.