TKB90: Definition and Difference from TKW90
There are many financial definitions that need to be understood in investing. One of them is the 90% Success Rate, also known as TKB90. Since April 2019, the Financial Services Authority (OJK) as the regulator of the fintech industry in Indonesia has required all fintech peer-to-peer (P2P) service providers under OJK supervision to disclose the TKB90 percentage. For those who are often involved in peer-to-peer lending (P2P Lending), this term is certainly not unfamiliar. When you open a P2P Lending fintech platform site, you usually see the TKB90 and TKW90 written clearly in the top right or left corner of the website. These two terms are actually very important for lenders to understand. That is why, before starting to invest in P2P Lending, every lender must understand the terms TKB90 and TKW90. What is TKB90, and how does it differ from TKW90?
Definition of TKB90
vTKB90 is a measure of the Success Rate (TKB) of a P2P Lending fintech entity on the 90th day. This means that if TKB90 is written with a percentage of 100%, then the repayment of all loans by borrowers has been successfully repaid within 90 days from the due date. TKB90 is measured by subtracting 100% from the TKW90 value. The TKB90 value is useful for indicating the success rate of borrowers in repaying funds, so lenders can predict or understand the level of profit obtained when financing borrowers' loans on that fintech platform. TKB90 is the success rate of P2P Lending providers in facilitating loan repayment obligations within a 90-day period from the due date, where the TKB90 day is calculated from 100% minus the TKW90 value.
TKB90 = 100% - TKW90
Definition of TKW90
TKW90 is the default or negligence rate in settling obligations over 90 days from the due date. TKW90 is calculated by dividing outstanding defaults over 90 days by the total outstanding, multiplied by 100%.
TKW90 = (Outstanding defaults > 90 days / Total Outstanding) x 100%
Factors Affecting TKB90
What factors affect the TKB90 rate? According to the Indonesian Joint Financing Fintech Association (AFPI), TKB90 performance will be optimal through advanced credit scoring processes, employees capable of dealing with loan recipients, and strategies in selecting segments that will receive financing. In the credit world itself, this is known as the 5Cs: character, capacity, capital, collateral, and conditions. The better the condition of these factors, from the character of the loan recipient, the capacity to repay the loan, the capital held as the basis for financing, the collateral held, to related conditions such as demand or demand conditions in the industry, the greater the likelihood of successful payment on the 90th day after the due date.
OJK statistical data on the development of fintech lending or online lending in July 2020 recorded a 90-Day Success Rate (TKB90) of 92.01% for this industry, down 5.06% from the previous year. TKB90 is used to indicate the success rate of fintech in facilitating the settlement process of borrower payment obligations to lender customers within a 90-day period from the due date. If a fintech has a TKB90 of 100%, it means that all borrower loans through its platform have been successfully settled. The higher the TKB90 percentage, the better the performance of the fintech.
The formula for calculating TKB90 is 100% minus the percentage of default rates of borrower customers over 90 days from the due date, while the default rate percentage is outstanding loans over 90 days compared to total outstanding loans. Thus, if TKB90 is 92.01%, then the default or default rate of this sector is 7.99%. This appears higher than the non-performing loan (NPL) of banks, which is only 3.2% for the same month. However, these two are not comparable or apple-to-apple comparisons because the types of credits distributed by fintech lending are different from banking, which is a combination of consumer loans and corporate loans.
The Importance of TKB90
The TKB90 percentage is one of the numbers that must be known by potential financiers who will place their funds. This data is important if potential financiers want to measure the risk of placing their funds. From the perspective of P2P fintech providers themselves, the TKB90 value is important to be disclosed because it is one of the transparency principles required in Article 29 letter a of OJK Regulation number 77/POJK.01/2016 regarding Information Technology-Based Lending and Borrowing Services. This transparency is also one of the values of Islamic economics that must be upheld by fintech providers. With the obligation to disclose TKB90, fintech providers will be responsible for maintaining the optimal performance of TKB90 by continuously monitoring the quality of MSMEs that can receive financing.
P2P fintech providers are required to disclose TKB90 rather than TKW90 because essentially, as providers, P2P fintech companies do not distribute their own loan funds or financing at all. P2P fintech providers are a platform, marketplace, or intermediary that connects financiers with recipients of financing. The essence is the funder or financier who has provided financing. Therefore, the information that needs to be disclosed is the success rate of payment by the recipient of the financing to inform potential financiers about their chances of getting back their financing, along with the corresponding returns within the expected timeframe. With a TKB90 of 100%, there will be a greater chance of getting back the financing along with the returns within the specified period.
In the fund disbursement process, creditors certainly need to carry out verification and credit scoring processes before disbursing loans to minimize defaults. Some creditors in the financial technology field use Brick to connect with user data. Let's learn how Brick's solution for financing companies can help creditors in their business operations. With Brick, the document collection process will be easier, thus providing safer lending services. ***