Unethical practices peer-to-peer lending in Indonesia
| DOI | https://doi.org/10.1108/JFC-02-2019-0028 |
| Pages | 274-282 |
| Published date | 15 January 2020 |
| Date | 15 January 2020 |
| Author | Taofik Hidajat |
| Subject Matter | Financial risk/company failure,Accounting & Finance |
Unethical practices peer-to-peer
lending in Indonesia
Taofik Hidajat
School of Economics of Bank BPD Central Java, Semarang, Indonesia and
Faculty of Economics and Business, Padjadjaran University, Bandung, Indonesia
Abstract
Purpose –This paper aims to highlight the existence of illegal peer-to-peer (P2P) lending in Indonesia,
unethical practicesof P2P lending operators to borrowers, regulatoryweaknesses and offer recommendations
to reduce unethicalpractices.
Design/methodology/approach –This paper is a general discussion through desk research using
secondarydata from journal papers, research reports, books and papers online.
Findings –There are regulatory weaknesses in regulating illegal P2P lending. There are no strict legal
sanctionsfor P2P lending operators who act unethicallyto borrowers.
Originality/value –This paper discusses the unethicalactions of P2P lending operators and the inability
of regulationsto take legal action against illegal P2P operators.
Keywords Indonesia, Crowdfunding, Fintech, Peer-to-peer lending
Paper type Viewpoint
1. Introduction
The development of financial technology (fintech), especially peer-to-peer (P2P) lending,
shows significant progressin Indonesia. There are many positivebenefits from the presence
of P2P lending. However, the large number of borrowers who are victims because of not
paying loans, and the weak regulation that regulates online loans shows that there are
problems that are also interestingto discuss.
The KPMG (2018) report entitled The Pulseof Fintech 2018 states that Southeast Asia is
a target of fintech growth and global expansion. Many fintech companies –especially
fintech from China –see SoutheastAsia as a huge market. Some large Chinese companiesdo
invest globally in many countries.The majority of banks in China have also begun to focus
on digital and have led to the rapid growth of fintech oriented businesses. They invest in
many fields including big data, blockchain and artificial intelligence. This phenomenon is
not surprising because China has a phenomenal growth in digital financial services (Zhou
et al.,2018)with the largest number of P2P lending in the world (Stern et al., 2017).
Indonesia is a part of Southeast Asia that has low financial literacy and inclusion. The
National Financial Literacy and Inclusion Survey from Otoritas Jasa Keuangan (2018) show that
the level of financial literacy is 29.7 per cent and the level of financial inclusion is 67.7 per cent.
Higher levels of financial inclusion indicate that people use financial services without being
based on sufficient financial knowledge. In the survey, it was found that public literacy and
inclusion about banking still dominated compared to other financial services.
In the problem of financial inclusion, fintech is present to bridge community problems
that are not affordable to financial services (Salampasis and Mention, 2018). Fintech
provides opportunities to improve the quality of human life by increasing transparency,
reducing costs, reducing the role of intermediaries and making financial information more
accessible (Zavolokinaet al.,2016).
JFC
27,1
274
Journalof Financial Crime
Vol.27 No. 1, 2020
pp. 274-282
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-02-2019-0028
The current issue and full text archive of this journal is available on Emerald Insight at:
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