Why Indonesia’s education loan sector is struggling to make the grade

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Hello reader,

I still owe a hefty outstanding student loan balance that feels like it never gets smaller, but in many ways, I’m lucky.

For one, tuition fees tripled in the UK the year after I started university, so I escaped an even heftier bill for my English literature degree.

Secondly, I got my loan from the Student Loans Company, which is run by the government, so the interest rates are low and the firm hasn’t sent debt collectors after me. It would be much different if I had a private loan, as is common in the US, for example.

Indonesia’s government looks like it will soon get into the student loan game, which spells trouble for eduloan startups. In fact, such companies are facing a bleak future for a number of reasons, as today’s featured story explores.

Today we look at:

• Why Indonesian eduloan firms are endangered
• Apple eyeing a generative AI deal with Meta for iPhones
• Other newsy highlights such as a big payday for Malaysia’s Paywatch, and ByteDance and US chip designer Broadcom reportedly working together on designing an advanced AI processor.

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School’s out

Image credit: Timmy Loen

Times are tough for Indonesia’s peer-to-peer lending startups that focus on the education sector.

Many such firms have pivoted their businesses or ceased operations, and the three players fully concentrated on eduloans all failed to turn a profit last year.

• The books aren’t balanced: Edufund, DanaBagus, and Danacita focus on eduloans and all were loss-making in 2023 as they struggled to increase their revenues by enough to cover expenses. Danacita performed the best as its revenue climbed to US$893,763 in 2023, up 87% from 2022. However, this figure was dwarfed by its operating expenses of more than US$1.4 million, which doesn’t even include the firm’s sales and marketing expenses.
• Numbers game: Part of the problem for eduloan players is the small number of borrowers using their services. Edufund only has 8,857 active borrowers, while the number for Danacita is 13,754 active borrowers as of June 2024. In comparison, P2P lenders that target the business sector typically serve more borrowers – Modalku, which has disbursed loans to more than 70,000 people, is an example.
• Education regulation woes: Some have argued that eduloan platforms are in violation of Indonesian law by working with universities. The country’s Law No. 12 of 2012 on Higher Education includes a provision that says educational loans provided through universities aren’t supposed to charge interest. Worse still for the platforms, the Indonesian government is planning to start providing its own student loans, which could kill off the market for good.

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

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