Indonesia's Finance Sector Responds to Sumatra Floods

Proactive Measures from APPI and AFPI

In response to the recent severe flooding in Sumatra, particularly affecting North Sumatra, West Sumatra, and Aceh, Indonesia's financial sector is taking decisive action. The Indonesian Finance Companies Association (APPI) and the Indonesian Peer-to-Peer Lending Fintech Association (AFPI) have outlined measures to address potential bad loans in the affected regions.

Existing Standard Operating Procedures

APPI Chairman Suwandi Wiratno emphasized that natural disasters are not new to Indonesia, and as such, each finance company has developed its own standard operating procedures (SOPs) to handle such situations. These SOPs include provisions for debtors whose collateral has been lost or damaged due to the floods. Suwandi explained that companies will review individual cases based on their agreements and available insurance coverage.

Data Collection and Immediate Response

Before taking specific actions, finance companies will conduct thorough data collection to assess the situation on the ground. However, for regions still in the disaster recovery phase, such as Sumatra, this process will not be rushed. Suwandi highlighted that APPI is also involved in efforts to collect funds and support for the affected areas, demonstrating the industry's commitment to both financial mitigation and social responsibility.

Flexibility in Risk Mitigation

Suwandi stressed that there is no one-size-fits-all approach to mitigating bad debts. Each finance company will assess its debtors' conditions individually, considering factors such as the extent of damage and the specific circumstances of each case. This flexible approach allows for more effective and compassionate handling of debt restructuring or rescheduling.

AFPI's Task Force and Restructuring Plans

Meanwhile, AFPI is taking proactive steps by forming a task force team dedicated to researching the disaster-affected areas. This team will assess the potential increase in non-performing loans (NPL) and work with online lending platforms to discuss possible mitigation strategies, including rescheduling programs for borrowers affected by the floods. AFPI has urged borrowers to communicate their current situation to their lending platforms to facilitate these efforts.

Government and Industry Coordination

The National Disaster Management Agency (BNPB) reported that the floods have caused significant human suffering, with 174 deaths, 79 missing, and 12 injured across the affected provinces. The government is working to restore communication infrastructure and provide relief, including allocating 28 Starlink units and 33 generators, as well as setting up public kitchens.

Conclusion

The coordinated response from APPI, AFPI, and government agencies demonstrates a comprehensive approach to addressing both the immediate humanitarian needs and the potential long-term financial impacts of the Sumatra floods. By leveraging existing SOPs, forming task forces, and planning for potential restructuring, Indonesia's finance sector is showing resilience and adaptability in the face of natural disasters.