Indonesia’s eduloan startups face bleak future amid losses, regulatory threats

Peer-to-peer lending startups focused on the education sector in Indonesia are facing tough challenges and struggling to achieve profitability. Those who remain solely focused on the sector are unlikely to survive.

Some players have decided to either close down their operations or pivot to other businesses. For example, Koinworks stopped its student loan service KoinPintar, while Pintek and Cicil have shifted their focus to supply chain financing.

Currently, three players remain fully focused on this sector: Edufund, DanaBagus, and Danacita. But none managed to turn a profit in 2023.

Indeed, things seem to have worsened recently.

P2P lending platforms typically collaborate with universities in the country to promote their products to students. This practice has sparked controversy, with critics alleging that this encourages students to incur debt.

The Indonesian government is also planning to provide its own student loans, calling into question the prospects of private-sector players.

Will those that remain be able achieve profitability – and even survive – in the future?

Revenue woes

The three eduloan platforms incurred losses due to the difficulties they have faced in significantly increasing their revenue in order to cover expenses.

Of the three, Danacita had the best performance. The company recorded an increase of about 800% from 2021 to 2022, then 87% from 2022 to 2023.

However, Danacita’s revenue figures are far lower than its expenses, and also much lower than the revenue that can be earned by P2P lending to the businesses sector. Koinworks, for example, logged US$15 million in net revenue for 2022 by offering loans to MSMEs.

For Danacita, Edufund, and DanaBagus, general and administrative expenses alone exceeded their revenue. Danacita’s, for instance, reached US$1.4 million.

These expenses don’t even account for sales and marketing, which is usually a major expense, especially for a relatively young and undeveloped sector.

One reason for the low levels of revenue generated by these eduloan startups is the small number of borrowers. Edufund only has 8,857 active borrowers, while Danacita has 13,754 active borrowers as of June 2024.

An uncertain future

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