But what does “new normal” means for the debt collection industry and how will it affect the financial market?
The “new normal” is primarily a set of measures that concern not only ordinary citizens, but all spheres of society, which are aimed at achieving the economic balance. And debt collection is one of the most important components of achieving this balance and to health the financial system.

The number of debts is increasing. Although the government took series of measures to support the population and businesses during the pandemic (restructuring, grace period, and cash payments), it is unlikely that there will be any immediate improvement in the context of such a large-scale crisis. The NPL level has already increased to 2.8% in March (it was 2.5% a year earlier) and has a tendency to further growth. At the same time, according to OJK data, Indonesian banks provided 6.35 million debtors with loan restructuring in the amount of IDR695.3 trillion as of June 22, and more than 15 million debtors are waiting for restructuring in the amount of IDR1.37 quadrillion ($96.03 billion).
Supporting customers, financial companies have to make reserves, which affects the amount of liquidity, and therefore slow down their activities. Already, the level of lending has fallen significantly: according to the Bank of Indonesia, the most significant drop in the level of lending was recorded in March, and it is tending to further decline (lending growth in Indonesia slowed to 5.7 percent year-on-year (YoY) in April from 7.9 percent recorded in March).

It is a vicious circle: restructuring and additional lending are necessary to stabilize business, which means that the population will get a job and the ability to pay off loans and repay debts. However, banks can’t dissolve reserves, because the share of bad debts increased, and they remain on the balances of financial organizations.

Where is the way out of this situation?
As the road out of lockdown opens, all businesses are turning their strategic focus to what measures should be taken in the much-changed marketplace, and the demand for debt collection services is growing. With a clear reduction in the number of transfers of debt portfolios under the agency-based services during the quarantine period, the number of NPL portfolios’ purchases has increased.
“I am sure that this trend will continue. On the one hand, financial companies can engage inhouse debt collection – but this is always the allocation of significant resources to ensure a high-quality debt collection process, which is quite difficult in this situation. Or work with trusted partners that can provide ethical debt collection and individual approach, are technological and flexible in decision-making, and observe the data security of both borrowers and clients. Anyway, a competent approach to dealing with debts and debtors is the most correct way to reduce social tension and improve the financial situation, which means stabilizing the country’s economy,” said Wihantoko, the President Director of M.B.A. Consulting Indonesia.

“In some extent, COVID-19 has a positive impact on the development of civilized debt collection market: with the growth of debts, on the one hand, the need for debt collection services increases, and on the other hand, the business becomes more customer – oriented and strives to meet the interests of its clients so more attention is paid to the methods of work with borrowers and debts – the principles of ethical debt collection, attention to the problems of debtors, search for optimal solutions and improving financial literacy of the population,” resumed Mr. Wihantoko.

Sources: Jakarta Post, Bank of Indonesia, OJK