Risks and consumer protection in online lending platforms in Indonesia

• Nov 8, 2023
• 1 min

The rise of digital financial services has led to growing concerns around consumer protection. Predatory lending, fraudulent service providers, coercive recovery methods, and overindebtedness have been some of the adverse outcomes of the massive growth in digital credit. Women often bear the brunt of irresponsible digital lending. MSC in collaboration with University of Indonesia conducted a first-of-its-kind study to understand the risks faced by women in the online lending ecosystem. The study’s insights were shared with policymakers and regulators to strengthen consumer protection protocols in digital lending, particularly for women.

A notable development in Indonesia in recent years has been the rapid growth of FinTech lending, especially for microenterprises. While the number of female borrowers has increased, instances where women fall prey to predatory lending practices by FinTech lenders have risen. MSC, in collaboration with the University of Indonesia, conducted a study to examine the risks faced by women in the online lending ecosystem. The research involved in-depth interviews with female victims who had experienced harassment from both legal and illegal digital credit providers. The research team also conducted interviews with representatives from the Indonesian Joint Funding Fintech Association (AFPI), the Indonesian Sharia FinTech Association (AFSI), and key stakeholders from the Financial Services Authority (OJK), the Task Force Investment Alert (SWI), Kominfo, KPPPA, and the Cyber Crime Unit-Polda Metro Jaya. These interviews intended to gather perspectives from business actors (FinTech association representatives) and policymakers. The study provided valuable insights into the challenges and harassment faced by women at every stage of accessing loans from digital lenders, from sourcing to defaults. Additionally, the report presented recommendations to strengthen the regulatory and policy framework to protect female consumers and enhance responsible digital credit practices.