Student Loan Financing in Indonesia

Basics

2017

@diporamli

@danadidik

Bang Toyib memiliki kartu kredit dgn bunga 1% /per bulan

Bang Toyib menggunakan $100. Berapa pengembalian

setelah 1 tahun:

a) $ 112.00

b) $ 112.12

c) $ 112.68

d) $ 112.75

e) Informasi kurang

Loans are the gatekeepers to some of our biggest goals

They help cover large purchases that people generally can’t afford upfront

Loan THE BASICS

Rp 1,000,000

PokokJumlah dana

yang dipinjam

4.99% APR 24 bulan

Bunga Tenor

Rp 1,000,000

Pokok

4.99% APR 24 bulan

BungaJumlah yang dibebankan

ke peminjam untukpenggunaan uang

(seringkali ditunjukan sebagai APR. APR termasuk semua biaya

pinjaman seperti fee)

Tenor

Rp 1,000,000

Pokok

4.99% APR 24 bulan

Bunga TenorJangka waktupinjaman atauperiode untuk

pelunasan

LOANS

MORTGAGES

SMALL BUSINESS LOANS

AUTO-LOANS

PERSONAL LOANS

STUDENT LOANS

PAYDAY LOANS

Pokok Bunga Tenor(laba bagi-hasil)

Loans can either be secured or unsecured

depending on whether or not they're

protected by collateral

Secured Loan

Requires collateral

Tends to have lowerinterest

Usually longer term

No collateral

Tends to have higherinterest

Usually short term

Unsecured Loan

Collateral-Risk relationship

House Auto No Collateral

Fixed Rate

Stays the same

Tends to be higher interest

Changes over time and is based on index

Tends to lower interest

Variable Rate

Understand risk levels

Government

Of Indonesia

Large

Corporation

Mid

Corporation

Small

Businesses

Personal

LoanCredit

Card

BI cutting rate to strengthen lending growth

No company has the same risk

So does people…

Pilot Nurse College student

Where is student loan risk?

Government

Of Indonesia

Large

Corporation

Mid

Corporation

Small

Businesses

Personal

LoanCredit

Card

From a banking perspective,

students and/or education is

very high risk

FUNDING

HIGHER EDUCATION

only 10% of

Indonesian workforce obtained higher education

Facts

Education is a right

But, college education is a privilege

Education is expensive – everywhere and to

everyone

Options is not as limited as you think

“Of the barriers to

higher education in

Indonesia, financial

barriers are believed

to be the greatest”

- USAID

How Important Education is to You?

Options for financing college

Bank loan

Savings / Investments

Scholarships / Grants

Friends & family

Student loan

73% borrow

friends, family, or LOAN SHARKS

for education

With the Indonesian government provides very limited financial support and lack of involvements by financial institutions, students are left stranded without options

Student Loan The basics

a type of loan designed to help students pay for

post-secondary education and the associated

fees, such as tuition, books and supplies, and

living expenses.

- investopedia

1. Proceed HigherEd Purposes

2. Tenor

3. Terms

1. Proceed HigherEd Purposes

2. Tenor Long term

3. Terms

1. Proceed HigherEd Purposes

2. Tenor Long term

3. Terms “Friendly”

Despite the controversy, U.S. student loan have longer tenor compared to other banking products

Student Loan LENDING STRUCTURES

Public sector student loan programs dominate some markets, which constrain innovation or sustainability

Student loan debt has hit $1.2 trillion in US

Higher education in U.K has been increasing since 1998

The financial mechanisms for student lending in developed country are clearly not providing models that emerging economies should emulate.

Emerging market landscape

Credit bureaus are nascent or nonexistent, and

Lenders struggle to assess borrower credit-worthiness;

Student finance requires a culture open to loan-taking;

Student loan are “push” product in many developing countries

Source of Fund

Return

Determining Factor

Repayment Structure

Government involvement

Loan Recipient

70 lending models globally

Student loans by Indonesian banks

“This education will

really elevate my

family”

Tumpal Sihombing, Marine Mechanical Engineer

HIS FATHER’S INCOME!

Loan = US$ 350

Before graduation = 3 months

Graduate with employment

income increase

3x

Our thesis: HIGHER education IS LIFE CHANGINGEducation is more income-generating than small-micro business

0%

5%

10%

15%

20%

25%

30%

0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0xIncrease in Wages after Graduation

Perc

enti

le o

f St

ud

ents

Source: Vittana, Global student loan case study

funding education

StudentsSPONSORSDonation / Corporate CSR

Scholarship

Social Investment

repayment through % of salary

Higher Education

Campaign PageEach student has its own landing campaign page

WHO ARE THEY?

7,000+ students applied

Parents sign as Co-Signor

Student Applies

Psychometric Test

Campus and Friends reference

VideoInterview

45 days to crowdfund

End of 45 daysEducation Funded!

100% raised

incomplete

refund

Data verification

10 – 30% from salary

DURING SCHOOL< 18 months

AFTER

GRADUATION30 months

0% interest

Repayment terms that do not burden students

WE INVEST IN YOUR EDUCATION

Conclusions

Student loans are risky by nature

Student loans in emerging market “better” than developed market

Student loans are unique market-to-market – no shoes fit all

ONLY BORROW WHAT YOU NEED

The more you borrow and the longer the

term, the higher the interest rate will be

Questions?

@diporamli

@danadidik