Indonesia Bad Loan Swells Over US$100 Million

A June 2023 Report from Otorista Jasa Keuangan (OJK), Indonesia’s financial services authority, revealed that the country’s online lenders have collectively accumulated 1.73 trillion rupiah (US$112.7 million) in non-performing loans as of that month. These refer to loans that are overdue for more than 90 days.

The amount marked a 54.9% jump year on year. It also outpaced the growth of total outstanding loans disbursed by the country’s fintech lending platforms, which increased 18.9% year on year.

An additional 3.45 trillion rupiah (US$224.8 million) of loans are 30 to 90 days overdue. 
Together, the bad loans total 5.18 trillion rupiah (US$337.5 million). They also make up 9.8% of the 52.7 trillion rupiah (US$3.4 billion) in total outstanding loans.

Individual borrowers contribute 77.8% to the total non-performing loans, with corporate borrowers making up the rest. The 19-to-34 age group is the most problematic, with 2.68 trillion rupiah (US$174.7 million) in bad loans or approximately 52% of the total. Borrowers aged 35 to 54 years follow suit, with overdue payments reaching 1.71 trillion rupiah (US$111.5 million) or 33% of the total problematic loans.

The aggregate ratio of delinquency over 90 days for fintech lending platforms stood at 3.29% as of June 2023 – an increase compared to the same period last year. In June 2022, the aggregate TWP90 for such platforms was 2.35%.

Currently, there are 102 online lenders that are registered and authorized under OJK.

That said, Indonesia’s fintech lending providers began recording net profits in January 2023. As of June, the lenders have collectively achieved 450.7 billion rupiah (US$29.4 million) in net profits.

Indonesia Regulating Fintech Interest rate

Indonesia will in stages lower the maximum interest rates charged by financial technology (fintech) firms in the microfinance sector, amid complaints that overly high rates have been hurting borrowers, the country's financial regulator said.

Starting next year, fintech firms can only charge a maximum of 0.3% interest per day for a loan intended for consumption which will fall to 0.1% in 2026, the country's Financial Services Authority (OJK) said. Currently the maximum is 0.4% interest per day.

If the interest rates is not properly regulated, then the ones who suffer most are the consumers. Fintech lending has soared in Indonesia especially after the coronavirus pandemic, but it has been tainted by many illegal firms in the market and reports of borrowers unable to pay their loans.

The rates will be much lower if loans are for productive purposes. They will be capped at 0.1% per day starting January 2024 and less than that in 2026 as the government wants to shift the majority of loans from consumption to business activities, especially for micro, small and medium enterprises.

The authority wants 50% to 70% of loans provided by fintech firms channelled to productive activities by 2028, compared to below 40%. The regulation on interest rates is part of the authority's plan to develop the fintech sector from 2023-2028.

Japan Insurer Anti-competitive Activity

Japan ordered four major non-life insurance companies to improve business practices in connection with anti-competitive activity that aimed to keep premiums high. The order was issued to Aioi Nissay Dowa Insurance, Sompo Japan Insurance, Tokio Marine & Nichido and Mitsui Sumitomo Insurance.

The four had been asked to report to the regulator on whether they engaged in prior consultations with each other when preparing contracts for clients. The four insurers said they take the government order seriously and will work to restore trust.

The four insurers engaged widely in activities that were incompatible with the spirit of Japan’s antitrust law.

Embracing Change With Simple Steps

By accepting and embracing uncertainty, leaders can gain clarity, increase innovation and ensure sustainable growth for their firms. Navigating uncertainty has become one of the top leadership skills in today's management.

These three strategies can help you turn unprecedented times into unprecedented actions.

1. Rethink Change - To stand up to uncertainty, you must start reframing it as an opportunity. Rapidly multiplying unknowns increases the pressure to rebuild and reimagine their businesses. Though the journey from uncertainty to clarity is formidable, addressing challenges with a lens of opportunity leads to more and better innovation.

When facing uncertainty, focus on the opportunities and ask yourself and your teams: What's your path to highest impact? In other words, what's the one thing you can do that would have the greatest impact on whoever you serve? That simple question will kickstart clarity and focus.

2. Make It Simple - A focus on simplicity can help. Simplicity is about focusing on the right things rather than doing things right. It's about focusing on the fundamentals, such as customer needs, and simple but powerful questions, such as "what do they need?" that help you get to the core of a problem and ensure you're solving the right one. "Keep it simple" means focusing on the strongest growth opportunities and having the courage to get rid of efforts that don't move the needle.

What are your top five priorities? Are they closely connected to your core strategy? If not, start again. Once you land on your top five, communicate them to your team frequently — and more often than you think you need to (e.g. at every all-hands, at team meetings, 1:1 sessions and more). This crystal clarity will reduce overwhelm for your team and allow them to pour their talents and energy into higher-impact work.

3. Keep It Gritty - Activating creativity and ingenuity and relying on existing resources rather than waiting for additional resources to get started. It's natural to feel overwhelmed during times of constant change and, in turn, gravitate to our comfort zones. But uncertainty is here to stay, and when you practice reframing it as an opportunity and find success through the application of the strategies above, you'll feel confident about how to navigate what's next — in business and beyond.

Sumitomo Acquired Singlife

In one of the largest insurance deals in the region, Japanese insurer Sumitomo Life Insurance is offering to fully acquire local insurer Singapore Life Holdings (Singlife), valuing it at $4.6 billion. Under the deal, Sumitomo Life will buy asset manager TPG’s 35 per cent stake in Singlife for $1.6 billion. It will also offer to acquire the shares of minority investors.

The move would mean Singlife becomes a wholly owned subsidiary of Osaka-based Sumitomo Life. It is part of the Japanese insurer’s strategy in South-east Asia.

Singlife said the transactions are expected to be completed in the first quarter of 2024 and are subject to regulatory approvals in Japan and Singapore. Sumitomo Life, which had first invested in Singlife in 2019, sees Singapore as a key part of its South-east Asia strategy and expects the deal to strengthen the earnings of its international business portfolio.

The home-grown insurer added that Sumitomo Life is fully supportive of its plans and its longer-term aspirations to grow in both Singapore and the broader region. The firm has grown from a small insurtech start-up to become a key player in Singapore’s insurance and financial services industry.

Singlife, founded in 2014, is one of the top six insurers in Singapore based on total assets of $14.4 billion as at Dec 31, 2022. The deal comes after the Japanese insurer in November increased its stake in Singlife to 27 per cent from 23.2 per cent by buying $180 million of new shares.

In September, Sumitomo Life agreed to nuy the 25.9% stake in Singlife held by British-based Aviva for $900 million. Singlife partnered TPG and Sumitomo to buy a majority stake in Aviva’s Singapore business in 2020 for about $2.7 billion. The acquisition of Aviva made Singlife the sole insurance provider for Singapore’s Ministry of Defence, Ministry of Home Affairs and Public Officers Group Insurance Scheme.

Korea Credit Loans Rising Delinquency Rate

With interest rates remaining high, the financial soundness of three internet-only banks ― K bank, KakaoBank and Toss Bank ― has begun to deteriorate, as their delinquency rates continue to soar to highs. The fact that the banks provide a larger proportion of their credit loans to medium- and low-credit borrowers is even more concerning.

Rising Average Delinquency rate - The average delinquency rate for credit loans at the three banks stood at 1.2 percent. Delinquency rate refers to the percentage of loans within a bank's entire loan portfolio of which payments are delinquent.

The three mobile-based lenders' credit loan delinquency rates have been rising sharply since June of last year. Prior to then, the figure was maintained at roughly 0.3 percent during 2021. But it rose to 0.42 percent in late June 2022, and spiked up to 1.04 percent in June this year. The figure rose further to 1.2 percent at the end of August.

The figure is an all-time high for the three internet-only banks, and it has more than doubled in just a year. Considering traditional banks' average delinquency rate on household loans, excluding more stable mortgage loans, was 0.62 percent, as of the end of June, the three mobile banks' credit loan delinquency rates remain at a high level.

Major Banks - By banks, Toss Bank ranked at the top with the highest average delinquency rate of 1.58 percent, followed by K bank at 1.57 percent and KakaoBank at 0.77 percent. Toss Bank explained that the current level of delinquency rate is within its forecast model, adding it has prepared ample reserves as an allowance for bad debts.

Toss Bank also highlighted that it provides the largest proportion of loans to medium- and low-credit borrowers among all local banks in Korea. As of June, medium- and low-credit borrowers account for 38.5 percent of loans provided by Toss Bank, compared to 24 percent at K bank and 27 percent at KakaoBank.

While Toss Bank provides the largest percentage of the loans, K bank's delinquency rate in this specific group of borrowers was the highest at 4.13 percent. An official at K bank explained that the rise of the delinquency rate is partially attributed to last year's surge in credit loan balances, and the bank is closely controlling the figure.

Toss Bank and KakaoBank followed, posting delinquency rates of 3.4 percent and 1.68 percent, respectively, among medium- and low-credit borrowers. Putting them together, the three banks' average delinquency rate in their loans to medium- and low-credit borrowers stood at 2.46 percent at the end of June, 2.9 times higher than a year earlier when it was 0.84 percent.

Toshiba Ends 74 Years History

Toshiba - once a poster boy for Japan's dominance in electronics - known as Japan Inc - the company has delisted, ending a 74-year history with Tokyo's stock exchange. 

The Rots Started - It all started in 2015 when accounting malpractices across multiple divisions came to light, with many of them involving top management. For seven years, Toshiba had overstated its profit by $1.59bn (£1.25bn).

In 2020, Toshiba found further accounting irregularities. There were also allegations related to corporate governance and the way in which shareholder decisions were made.

An investigation in 2021 found that Toshiba had colluded with Japan's trade ministry - which saw Toshiba as a strategic asset - to suppress the interests of foreign investors. At the time, experts said this made foreign investors uncertain about investing in Japanese stocks, making it not just a Toshiba problem, but an issue for Japan's entire stock market.

Westinghouse Electric - In late 2016, Toshiba said it would take charge of several billion dollars related to the construction of a nuclear power plant that US unit Westinghouse Electric had bought a year earlier. Three months later, Westinghouse filed for bankruptcy leaving Toshiba facing a collapse of its nuclear business and more than $6bn in liabilities.

Defensive Management - It sold off a slew of businesses including mobile phones, medical systems and white goods. Then it was forced to put its chip unit Toshiba Memory up for sale - a deal that was delayed for several months over a dispute with one of its partners.

At a time when companies were investing heavily in the future of technology and innovation, Toshiba was having to sell off a prized asset to raise cash. Toshiba managed to secure a $5.4bn cash injection at the end of 2017 from overseas investors, helping it to avoid a forced delisting. But that meant activist shareholders had more say in the direction of the company. 
That lead to protracted battles that paralyzed the maker of batteries, chips and nuclear and defense equipment.

After a great deal of back and forth over whether the company should split up into smaller companies, Toshiba set up a committee to explore whether it could be taken private. In June 2022, Toshiba received eight buyout proposals. Earlier this year, the company confirmed it would be taken over by a group of Japanese investors led by state-backed Japan Investment Corp (JIC) for $14bn.

JIP does have a track record in carving out businesses from big manufacturers including Sony's laptop division and Olympus's camera unit. After acquiring Sony's Vaio laptop business in 2014, it helped the company achieve record sales this last year. But Toshiba is a much bigger company and the stakes are high: Toshiba employs around 106,000 people and some of its operations are seen as critical to national security.

Agent Misappropriated Insurance Premium

Facing financial difficulties, a Prudential insurance agent decided to misappropriate more than S$117,000 (RM546,799) of his client’s money that was meant for insurance premiums to help pay for his home renovation, groceries, car instalment repayments and his daily expenses.

Gng Hoon Hong, 48, was sentenced today to 20 months’ jail after he pleaded guilty to three charges for committing criminal breach of trust. Three other similar charges were taken into consideration during sentencing.

Deputy Public Prosecutor told the court that sometime in 2000, Tung Lei Lei and her husband began buying insurance from Prudential Assurance Company through Gng. Whenever the insurance premium payments were due, Gng would inform Tung who would then transfer the funds to him to make payment to Prudential.

However, starting from 2012, Gng did not transfer all the sums received and had instead misappropriated some of it for his own use. On August 16, 2018, Gng approached Tung to borrow S$10,000 which he purportedly claimed was for an animal shelter.

Policy Lapsed Premium Payment - Suspecting that Gng might be facing financial difficulties, Tung decided to make an enquiry with Prudential and discovered that three of her insurance policies had lapsed owing to no payment made. She confronted Gng a few days later and he showed her a printout from Prudential’s website which indicated that one of the insurance policies was purportedly in force. This printout was, in fact, forged by Gng and amended to reflect that the policy was in force.

The court heard that at the time of the confrontation, Gng did not tell Tung the truth about the lapsed policies and claimed that he was attempting to come up with money to repay her. Tung had also already obtained online access with Prudential for her insurance policies and discovered that her policies had indeed lapsed.

Investigations revealed that, in total, Gng had misappropriated S$117,160.94 over 32 occasions that spanned approximately 6.5 years. After the discovery of Gng’s actions, he made a repayment of S$15,252 to Tung. No further repayment has been made since.

Gng later claimed that he had misappropriated the money due to financial difficulties and used the money to pay for his renovation, groceries, car instalment repayments and his daily expenses.

LIC - Top 4 World Largest Insurer

State-owned Life Insurance Corporation of India (LIC) has become the fourth largest insurer in the world, ahead of US-based MetLife and Prudential Financial Inc. The LIC is only behind Germany's Allianz SE, China's China Life Insurance (CLI), and Japan's Nippon Life Insurance, according to a new ranking by capital market company S&P Global.

The state-run insurer, which got listed in May 2022, has $503.07 billion in reserves, while Allianz has $750.20 billion, CLI has $616.90 billion, and Nippon has $536.80. Allianz SE, CLI, and Nippon Life Insurance Co are the three largest life insurance companies in the world, according to the ranking.

S&P Global recently came out with a list of the world's 50 largest life insurers. In the list, Asia accounts for 17 spots on the list of top global life insurers, making it the region with the second-highest number.

China and Japan share the top spot in Asia with five companies headquartered there. Mumbai-headquartered LIC ranked at the fourth position in the ranking published on November 29.

The Indian insurance behemoth reported Rs 7,925 crore profit in the second quarter of FY 2023-34. While LIC continues to dominate the insurance market, its premium income fell quite significantly in the second quarter, affecting its profit. The company posted a net profit of Rs 15,952 crore in the year-ago period.

The insurer's net premium income dropped 19 per cent to Rs 1.07 lakh crore in Q2FY24 as against Rs 1.32 lakh crore in Q2FY23. However, the first-year premium for the reporting quarter increased to Rs 9,988 crore, as against Rs 9,125 crore in the year-ago period.

LIC said its latest quarterly numbers were not comparable with the year-ago quarter as it had changed its accounting policy in September last year regarding the transfer of the amount (net of tax) of the accretion on the available solvency margin from non-participating policyholder’s account to shareholder’s account.

Top 5 Issues On Claim

Life insurance policies are often crucial for providing financial security to loved ones, but claimants often encounter challenges. Top five issues faced during the claims process:

Policy Disputes: Misunderstandings regarding policy terms can lead to disputes. These may arise from ambiguities in the policy or conflicts between multiple claimants, especially in cases of divorce or recent beneficiary changes. Often, when multiple people make a claim to the same policy, the life insurance company may file an interpleader lawsuit against all claimants.

Claim Delays: Administrative errors or incomplete documentation can significantly delay the processing of claims. Ensuring accurate and complete submission of required forms and documents is essential.

Claim Denials: Insurers may deny claims if they believe the circumstances of the policyholder's death do not align with the policy's terms. For instance, if the death occurs due to an excluded cause, the company may refuse to pay the benefit. They could also deny a claim based on a material misrepresentation if the insured failed to disclose a required item.

Beneficiary Issues: Problems can arise if the designated beneficiaries are not updated or clearly identified, leading to confusion and potential legal disputes. Sometimes there is no beneficiary listed, and the insured's Estate may be entitled to the money.

Lack of Understanding of Policy Types: Many claimants are not fully aware of the differences between term and whole life insurance policies, or accidental policies, which can lead to misconceptions about the benefits they are entitled to.