Indonesia’s digital lending sector has experienced rapid expansion in recent years, driven by efforts to bridge the country’s significant credit gap estimated at US$234 billion by the World Bank’s International Finance Corporation for the micro, small and medium-sized enterprise (MSME) segment alone.

But despite the industry’s rapid growth, the sector faces challenges, including fraudulent platforms, high default rates, and aggressive debt collection practices.

In 2024, outstanding online loans from fintech P2P lending companies reached IDR 77.02 trillion (US$4.7 billion), up 29.14% year-on-year (YoY) from IDR 59.64 trillion (US$3.6 billion), according to OJK. This growth significantly outpaces traditional bank credit, which grew about 6.9%, highlighting P2P lending’s appeal as an alternative financing source.

A key source of credit

Peer-to-peer (P2P) lending platforms connect borrowers directly with individual or institutional lenders through digital platforms, eliminating the need for traditional bank intermediaries. These providers often use technology to assess creditworthiness beyond traditional credit scores, enabling access for underserved individuals and small businesses with no credit history or collateral.

As at May 2024, P2P platforms disbursed about one-third of their loans to MSMEs, according to Mr Agusman, chief executive of supervision at Indonesia’s Financial Services Authority (OJK). Individuals made up the bulk of borrowers. OJK aims to increase the component of MSMEs to between 50% cent and 70% by 2028.

Challenges remain in P2P Lending in Indonesia

Despite the success of P2P lending in Indonesia, the industry continues to face significant challenges, including the proliferation of unlicensed lenders.

As of August 2024, OJK had blocked 8,271 illegal platforms as part of intensified efforts to protect consumers and restore trust in the sector. These platforms are a concern because they often engage in exploitative practices, including unethical debt collection involving intimidation and violence, as well as privacy violations.

High interest rates are also a major issue, with some P2P lenders charging up to 40% per month, compared to traditional bank lending rates of 7-8% per year.

Even among licensed providers, regulatory compliance remains inconsistent, with several demonstrating financial instability or failure to meet required standards. In May 2024, OJK revoked the operating license of major P2P lender Tani Fund for failing to meet minimum equity requirements and ignoring supervisory directives.

Similarly, in October 2024, Investree lost its license for similar reasons, alongside persistent financial and operational issues. Further controversy followed when former CEO Adrian Asharyanto Gunadi was accused of misappropriating company funds and using Investree to secure loans for personal business interests.

The industry also face allegations of anti-competitive behavior. Between 2020 and 2023, the Indonesian Competition Commission (KPPU) accused 97 online lenders of colluding to fix interest rates through the Indonesian Joint Funding Fintech Association (AFPI).

New P2P lending regulations in Indonesia

In response, OJK has introduced new regulations aimed at strengthening oversight and restoring trust. The most recent regulation tightens governance, expands allowable legal entities, and adjusts ownership and capital requirements. It also introduces stricter risk management protocols and encourages innovation through partnerships.

Key regulatory updates include requiring that P2P lending platforms have a minimum paid-up capital of IDR 25 billion (US$1.5 million) at the time of establishment.

Funding has also been capped. For example, for consumptive and productive funding, the maximum limit of each borrower has been set to IDR 2 billion (US$123,000). However, specifically for productive funding, that limit can be increased to IDR 5 billion (US$308,000) per borrower provided that the P2P lender has no more than 5% of non-performing funding in the prior six month period, and has not had any sanction in the form of limitation of business activities or suspension of business activities.

Indonesia’s P2P lending industry

Indonesia currently has 97 licensed P2P lending companies, with players including Modalku, Amartha, KoinWorks, Kredit Pintar, and Alami commanding significant market share.

Modalku is a leading fintech platform specializing in business lending. It operates as part of the regional fintech group Funding Societies, connecting MSMEs with individual and institutional lenders.

As of November 2024, the group has disbursed a total of IDR 65 trillion across Indonesia, Singapore, Malaysia, Thailand and Vietnam. In Indonesia alone, Modalku disbursed funding of more than IDR 625 billion (US$38.5 million) in 2024.

Kredit Pintar is another prominent fintech lender in Indonesia. Founded in 2017, Kredit Pintar offers unsecured personal loans ranging from IDR 600,000 to IDR 50 million, with flexible repayment terms of up to 12 months and disbursement within 24 hours. The platform uses artificial intelligence (AI), optical character recognition (OCR), and big data analytics to assess credit risk, prevent fraud, and ensure user data security.

Since its inception, Kredit Pintar has disbursed IDR 54.8 trillion in loans, serving approximately 8.8 million borrowers.

Another key P2P lender in Indonesia is Amartha. Founded in 2010, Amartha is a leading microfinance technology platform focusing on grassroots economic development. It operates using a cooperative group lending model and aims to build a comprehensive microfinance ecosystem that includes capital loans, risk segmentation and payment services.

As of June 2025, Amartha had disbursed working capital loans of IDR 35 trillion to more than 3.3 million MSMEs in Indonesia.

Featured image: Edited by Fintech News Singapore, based on image by aquila54 and funtap via Freepik