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With the banks’ growing role, is P2P still peer-to-peer?
Industry insiders say the increasing role of institutions marks a natural progression for peer-to-peer (P2P) lending, but analysts point to possible liquidity risks.
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Bank-owned skyscrapers are pictured from Gelora Bung Karno Stadium in Senayan, South Jakarta, on Aug. 27, 2021. (AFP/Bay Ismoyo)
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ver the past two years, retail investors' position in peer-to-peer (P2P) lending platforms in Indonesia has been sidelined by that of banks. Some industry players argue that is the natural next step as fintech firms cannot solely depend on individual lenders after reaching a certain scale.
However, analysts have expressed concern that the trend could detract P2P lenders from their initial mission to actualize financial inclusion in the country.
According to data from the Financial Services Authority (OJK), retail investors were still one of the biggest sources of funds for P2P lending platforms in January 2021, accounting for around 26 percent of total loans facilitated by P2P lenders in Indonesia, on par with local and foreign nonfinancial institutions.
As of February this year, however, the individual investors’ share of P2P lenders’ loans has diminished to 13 percent. Local banks, meanwhile, have become the top source of P2P loans as their contribution rose from less than 11 percent to almost 44 percent.
The contribution of other types of investors dropped from around 64 percent to 43 percent.
Bhima Yudhistira, director of Center of Economic and Law Studies (Celios), said there were several causes behind this trend, such as an “overflow” of third-party funds at banks and their efforts to channel loans to segments that are usually out of their reach or too costly to serve.
