Webinar on “ Understanding People’s Use of Digital Lending in Indonesia”

In this webinar, Dr Johan Irni Rahmayan and Mr Manggi Taruna Habir examine a range of relevant issues related to the use of fintech and financial capability in Indonesia, with focuses on household debt sourced from online loans.

Webinar Series 2020-2021: Financial Transformation, Credit Markets and Household Debt in Southeast Asia

Monday, 15 February 2020 – ISEAS – Yusof Ishak Institute hosted a webinar on “People’s Use of Digital Lending in Indonesia” which was delivered by Dr Irni Rahmayani Johan, assistant professor at Department of Family and Consumer Sciences, IPB University, Indonesia and Mr Manggi Taruna Habir a visiting fellow at ISEAS – Yusof Ishak Institute.

Dr Johan Irni Rahmayan
Dr Johan Irni Rahmayan elaborated on the various sources of loan providers in Indonesia – amongst which, online lending has risen in popularity. With Mr Manggi Taruna Habir as discussant and Dr Nicolas Lainez as moderator of the session. (Credit: ISEAS – Yusof Ishak Institute)

Dr Johan started off her presentation by sharing a brief background of Indonesia. In 2020, as a result of the democratic policies, the economic progress in the region, and the technologically driven culture of today, an exponentially large number of mobile connections, internet users and active social media users has been created. She then elaborated on the various sources of loan providers in Indonesia – amongst which, online lending has risen in popularity. Presently, Indonesia is experiencing its third wave of fintech lending, with the highest rate of loan disbursements and investment deals to date.

Next, she shared some statistics on online lending in Indonesia. There were 16.35 million active borrowers in December 2020, with most of them between the ages of 19 and 34. Moreover, the accumulated number of borrower accounts has been increasing every year. Dr Johan explained that financial lending is attractive to consumers due to the low collaterals involved. She opined that while online lending promotes financial inclusion it also increases the risk of misusing consumer’s data specifically by an illegal provider. Hence, the Fintech Regulatory in Indonesia- Bank of Indonesia and Financial Services Authority (OJK) have advised on several regulations to facilitate safer online lending.

Dr Johan’s study analyses attitudes and behaviour towards online lending. The objective of her research includes identifying characteristics, knowledge, attitude, intention to use, and behaviour towards online lending, as well as analysing the drivers of the intention to use online lending. The study surveyed 520 respondents using convenience sampling and found several characteristics. More than a third of respondents were younger millennials, work in a private company and have a personal income of less than USD$285 per month. Most loans were taken up for credits cards, home ownership and personal consumption needs. Respondents were found to be generally well informed on the benefits of online lending; however, they were still unaware of safety precautions necessary when utilising such services. In addition, there still exists a largely negative attitude/bad perception surrounding the use of online lending. Since the COVID-19 pandemic, there is an overall reduced intent to use these services as well. To conclude, the main drivers for the intent to use money lending were marital status, experience with online lending, gender, religion, number of dependents, occupation, financial knowledge, attitudes and income.

The webinar concluded with the researchers answering several questions posed by the audience. Some of the questions discussed the research methodology used and insights on whether the preference for digital lending is skewed as a result of structural obstacles or financial literacy.

50 participants attended the webinar. (Credit: ISEAS – Yusof Ishak Institute)