Chinese-backed FinTech Lending Boom: How did Indonesia Respond?
HKUST IEMS Thought Leadership Brief No. 67
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Peer-to-peer (P2P) online lending has the potential to boost innovation and financial inclusion in emerging markets, yet it can also incur investment and borrower-related risks, such as privacy breaches.
Driven by regulation control in China, Chinese investments flocked to Indonesia, causing a rapid expansion of online lending platforms.
Similar to what happened in China prior to the regulatory crackdown, the P2P lending boom in Indonesia saw a rise in unethical and illegal business practices. The government responded by creating new regulations and institutions to mitigate risks without stifling the potential for financial inclusion.
A proactive approach towards monitoring and regulating emerging high-tech industries should be sought by strengthening links with industry and civil society, and through international cooperation for policy and knowledge sharing.
About the Authors
Angela Tritto is an Adjunct Assistant Professor at the Division of Public Policy and a Postdoctoral Fellow jointly appointed by the Institute of Emerging Market Studies and by the Division of Social Science. More>>
Yujia He is an assistant professor at the Patterson School of Diplomacy and International Commerce, University of Kentucky. Previously she was a Postdoctoral Fellow at Hong Kong University of Science and Technology jointly affiliated with the Institute for Emerging Market Studies (IEMS) and the Jockey Club Institute for Advanced Study. More>>
Victoria Amanda Junaedi is an undergrad research assistant at the Institute of Emerging Market Studies, the Hong Kong University of Science and Technology, studying Economics and Finance. More>>
References
OJK (2017). Press Release: OJK Issues Regulation on IT-Based Lending Services. https://www.ojk.go.id/en/berita-dan-kegiatan/siaran-pers/Pages/Press-Release-OJK-Issues-Regulation-on-It-Based-Lending-Services.aspx.
Pratama A.H. (2021) Tokopedia’s P2P lending arm, 9 others get license from Indonesia’s OJK. Tech in Asia https://www.techinasia.com/tokopedias-p2p-lending-arm-9-others-getl-license-indonesias-ojk
Potkin F, Zhang S, Diela T (2018) RPT-A call to the boss: Indonesia contends with aggressive Chinese online lenders. Reuters https://www.reuters.com/article/china-p2p-indonesia-idUSL4N1WA1H0.
Sugandi, E. A. (2021). The COVID-19 Pandemic and Indonesia’s Fintech Markets. Asian Development Bank Institute. https://www.adb.org/publications/covid-19-pandemic-indonesia-fintech-markets
Sunarso, S. (2022). How one bank is digitalizing financial inclusion in Indonesia, World Economic Forum, 23 May, https://www.weforum.org/agenda/2022/05/digitalization-financial-inclusion-in-indonesia/
Tsai K (2017) Fintech and financial inclusion in China. HKUST IEMS Thought Leadership Brief https://iems.ust.hk/tlb20.
Wall Street Journal (2020) China Hails Victory in Crackdown on Peer-to-Peer Lending. https://www.wsj.com/articles/china-hails-victory-in-crackdown-on-peer-to-peer-lending-11607515547
Yuniar RW (2019) Indonesia’s online P2P loan sharks are driving people to suicide. South China Morning Post https://www.scmp.com/print/week-asia/economics/article/2188185/indonesias-online-p2p-loan-sharks-are-driving-people-suicide
Yuniarni S (2019) Consumers face harassment by Fintech debt collectors due to weak data protection. Jakarta Globe https://jakartaglobe.id/context/consumers-face-harassment-by-Fintech-debt-collectors-due-to-weak-data-protection
Full article: Tritto, A., He, Y. & Junaedi, V.A. Governing the gold rush into emerging markets: a case study of Indonesia’s regulatory responses to the expansion of Chinese-backed online P2P lending. Financ Innov 6, 51 (2020). https://doi.org/10.1186/s40854-020-00202-4
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