If you are considering peer-to-peer lending as an investment alternative for your money, one of the first few things you look into before testing the water is probably the risks of this relatively new asset class. With all the benefits that P2P lending investment has to offer, you can’t help but wonder, is it really as good as it sounds? What is the catch here?
Of course there are other factors to consider when choosing to invest in peer-to-peer lending. But if you have only been dipping your toes into P2P investment, it is understandable if your main focus is on the question, “will I lose my money?”
Is your money at risk?
If you keep your money in a savings account in one of the bigger banks in the country, your money is covered by the Deposit Insurance Corporation (LPS), which currently compensates you up to Rp 2 billion. But there is no special institution that protects your money against loss when it’s invested in peer-to-peer lending.
So what happens if a borrower defaults on a loan that you have invested on? On most platforms, that simply means you lose your money.
But what if you can still get your money back?
The good news is, there is a P2P lending platform in Indonesia that provides a guarantee on any of your initial investment. This 100% protection to your money is offered by Mekar (PT Sampoerna Wirausaha) on every investment made through the platform, Mekar.id.
Mekar partners with big savings and loan cooperatives with operations in many regions in the country. These cooperatives are Mekar’s lending partners that interact with the borrowers on a daily basis. They know the ins-and-outs of lending to small business owners — some of whom are listed as borrowers in Mekar, and the close relationship between these cooperatives and the borrowers have helped in curbing cases of non-performing loans. As a result, Mekar’s lending partners have an NPL rate of less than 2%.
With such a low NPL rate, the lending partners have no reservations about providing a guarantee for all investments made through Mekar. The guarantee is for 100% of the amount of money you are investing on any small business loan through Mekar, also called the loan principal. There is no guarantee on the returns and that is a small risk that comes with investing in P2P lending in Mekar, or any other platform for that matter. But in Mekar, your initial investment is fully secured.
Some of the other platforms out there talk about having a reserve, but they do not go as far as providing a guarantee for your investment. In Mekar, you will have guarantee. If you decide to put your money in P2P lending, make sure you choose your platform carefully. Mekar has a great plan in place for you in the rare event that something goes wrong. At the end of the day, it is nice not having to worry about your investments.