IGrow’s sprouting credit issues disquiet P2P investors

IGrow is among a growing number of online lending companies in Indonesia’s agricultural industry that are experiencing bad credit issues – a sign that Indonesia’s years-long crackdown on the peer-to-peer (P2P) lending industry is far from over.

The P2P lender’s TKB90 – its payment success rate on the 90th day – has been steadily declining since March 2022.

As of January 2023, iGrow’s TKB90 has dipped further to 72%, according to its website.

As an agriculture financing startup, iGrow connects lenders with farmers or farming groups who need access to capital. To date, the company has pooled together more than 340 billion rupiah (US$22.6 million) from 7,000 lenders and disbursed the funds to over 10,000 recipients.

For investors, their returns depend on the harvest yield, which is in turn conditional on the type of crop and size of land. Investors receive money only after each harvest is sold, which means it could take years before they receive a return. There’s also a chance that harvests might fail.

IGrow’s decreasing TKB90 rate has affected many lenders on the platform as they face potential delays in receiving their investment returns. Meanwhile, insurance provided by the company that is supposed to protect investors in the event of a loan default has not worked the way it should have, some have claimed.

Concerns about returns, investor protection

The company offers a return margin of 12% to 18% for each project, which is relatively comparable with other players.

In recent months, a group comprising iGrow investors on Telegram has been buzzing with conversations among lenders. A frequent complaint is the late return of investment funds, the insurance that does not fully protect their interests, and management, which lenders claim isn’t being transparent. The number of members in the group continues to grow, reaching over 1,200 today.

Andy (not his real name) is among the lenders whose investments have not yet been returned in full. He has lost a total of 20.7 million rupiah (US$1,380) to date.

Andy, who has lent money to at least four agricultural project funds at iGrow, says the status of these projects range from “still ongoing,” “past due but funds have not been returned,” “transferred to third parties,” and “unclear.”

“I became a lender for several projects that failed to pay annually without margin. Then, the projects were transferred to third parties that were not regulated by OJK (the local fintech regulator) to maintain their TKB90,” Andy told Tech in Asia Indonesia.

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According to data compiled by lenders in the Telegram group, only 24 out of 151 agricultural projects were completed between 2018 and 2022, implying a completion rate of 15.9%.

IGrow’s clarifications