Indonesians show negative attitudes towards online lending: study, ASEAN Business - THE BUSINESS TIMES

Indonesians show negative attitudes towards online lending: study

Wednesday, February 17, 2021 - 15:43
3 -min read
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AS many as six in 10 Indonesians are wary of online lending, citing unethical practices by lenders including humiliating, cursing and threatening borrowers, collection of loans before maturity and harassing the borrower's contacts to get the borrower to repay the loan.

Based on a study of 520 respondents, only 7 per cent had a positive attitude towards online lending. About a third (33 per cent) held a neutral attitude and 60 per cent exhibited a negative attitude.

Some 81 per cent of the respondents indicated they had had a low intention to use online lending, while a mere 5 per cent reported to have a high intention to use it in the future.

Irni Rahmayani Johan, an assistant professor at IPB University's Department of Family and Consumer Sciences, presented her findings on Monday, in a webinar jointly organised by the Yusof Ishak Institute, Centre for Banking and Finance Law and National University of Singapore's Faculty of Law.

Statistics released by Indonesia's Financial Services Authority, Otoritas Jasa Keuangan (OJK), revealed that there were 16.4 million active borrowers in December 2020, with 67 per cent of the borrowers aged 19 to 34 years old, making it a big market for younger borrowers.

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In the study, 11 per cent of 520 respondents are active borrowers from online lending companies. Of this, 50 per cent are aged 21 to 29 years old, while 33 per cent are aged 30 to 39 years old. The rest are 40 and above.

Online lending may attract the younger crowd due to the benefits and convenience it offers, said Prof Irni.

Visiting fellow at ISEAS-Yusof Ishak Institute, Manggi Taruna Habir said that online lending has its own benefits, like promoting social inclusion.

"Segments of society which have difficult access to banking have easier access to online lendings. Banks usually check credit history before giving a loan, but this is less of an issue with online lending which makes it more flexible," he said.

"When people have a need, they find ways to access money easily and quickly. But when things don't turn out as expected and repayment delays cause loan outstandings to balloon with high interest rates, they realise it's too late."

He added that the risk exists due to a lack of awareness in determining whether the site is licensed or registered before borrowing from these platforms, and that people should avoid borrowing from illegal fintech platforms that could misuse customers' data and infringe on their privacy.

"Enforcement is always an issue and it is never easy, especially now with Covid. The risks need to be socialised so people know where the risks are. We always want to avoid unregistered online lending sites," he said.

As at December 2020, OJK had recorded 149 registered and licensed digital lending companies, and found the existence of 126 illegal fintech lending companies.

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