In snuffing out P2P loan fire, Indonesia puts financial inclusion in peril

Illegal lending platforms have pushed some borrowers in Indonesia to the brink. The regulator just ordered a crackdown, but the new rules will impact legal players the most. Instead of protecting borrowers, it could end up strangling the industry

The rise of lending marketplaces in Indonesia came hand-in-hand with predatory lending and unethical debt collection practices. Criticism is gaining momentum

Much of the blame is directed at illegal platforms. Indonesia’s Financial Services Authority (OJK) shut down 4,874 illegal apps since 2018, but new ones keep appearing

It also pushed P2P lending association AFPI to cut the maximum daily interest rate its members can charge in half. They had only seven days to comply

While most players want a healthier ecosystem, not all agree with the OJK’s top-down approach—they feel this will only push more borrowers towards illegal platforms

Evi saw the ad on Facebook. Quick, instant loans without collateral. No fuss, all online. “It got me curious, and so I clicked,” the 40-year-old homemaker said. She applied for an IDR 1 million (US$70) loan to help a friend, she claimed. The money was transferred to her account, but not in full—only IDR 700,000—as the remaining 30% went to the platform as fees. It was due in seven days.

With interest, she owed IDR 1.2 million (US$83) to the platform. But because she didn’t have the money, she applied for new loans from two other platforms. “We were digging holes to cover another hole,” she said.

AUTHOR

Yunindita Prasidya

Based in Indonesia, Dita is passionate about tracking the country’s growing digital economy. Her coverage is sector-agnostic—she has written about e-commerce, edtech, fintech, venture capital, and publicly-listed companies, as well as stories on careers and workplaces. She was previously a business journalist covering banking and the stock market at The Jakarta Post, Indonesia’s leading English daily.

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