Fintech P2P Lending Terms You Should Understand

Advances in technology have given birth to many conveniences for all of us. One of the fruits of technological advances when fintech (financial technology) is various new financial product innovations, one of which is Peer-to-Peer (P2P).

Currently, P2P has become one of the most popular instruments in the community. Simply put, P2P is a fintech platform that facilitates interaction between two parties, namely between the Funder and the Beneficiary.

What are funders? What is a beneficiary? To know it all, we must understand the various terms in the P2P Platform. So that if later you are interested in participating in funding through the P2P platform, you will not be confused anymore!

Terms of Peer-to-Peer (P2P) Fintech Lending

• Funder

Funder is a party that provides funding. You could say, the Funder here acts as a party willing to fund business actors who need financing, in the hope of getting a reward by the agreement.

In Conventional P2P, funders will get funding interest, while in Sharia P2P, Funders will get a ratio (profit sharing).

• Beneficiary

On the other hand, the Beneficiary or Funding Recipient is a party who needs additional business funds and proposes financing to the funder. Usually, the beneficiary is the owner of a business or business, whether large or small.

• TKB90

TKB 90 is a term used to measure the success rate of a fintech in facilitating repayment, calculated from 90 days from maturity.

The higher the TKB 90 of a fintech platform, the lower the risk of default on that platform. On the other hand, if a platform has a low TKB of 90, then the platform has a higher risk of default.

• Default

Default is the risk that the funds that have been distributed cannot be repaid by the beneficiary. Under OJK regulations, funding whose repayment is stuck for more than 90 days is considered a default.

In P2P lending, the default measure of a business is also known as TKW 90, or non-performing loan (NPL).

• Return on Investment (ROI)

In P2P, ROI is the result of the investment (funding) earned by the Funder. ROI can also be considered as a return on funding which is calculated based on the distribution of the income generated by the amount of invested capital.

In conventional P2P, the return is in the form of interest from the funding provided by the Funder. Whereas in Sharia P2P, profit-sharing is usually used, which is taken from the percentage of profits obtained by businesses/projects that have been funded (according to the agreement at the beginning).

• Funding Tenor

The tenor is thperiodme for the beneficiary to repay the funding. This period is usually determined at the beginning of the agreement along with the return, it can be 1 month, 3 months, 6 months, or up to a year, according to the agreement.

• Fact SheeA factct Sheet is a document that explains the various required information related to the funding product to be funded by the Funder.

Usually, the Fact Sheet contains the financial condition of the beneficiary company, the line of business being carried out, the level of risk, potential return/yield, and so on.

• Liquidity

Liquidity is a term commonly used for various assets that are easily converted into cash. The level of liquidity can also be taken into consideration whether a company's finances are good or not. However, too much liquidity is also not good.

• Yield

Yield, also known as the Internal Rate of Return (IRR) is a measure used to calculate profit from investment opportunities, taking into account the movement of money from the initial funding until the money is returned to the Funder. The higher the IRR of an instrument, the higher the return that can be obtained.