The Indonesian Peer-to-Peer (P2P) lending industry is facing significant challenges due to the recent regulatory measures that limit interest rates. The Asosiasi Fintech Pendanaan Bersama Indonesia (AFPI) expressed concerns over the effects of this gradual reduction on loan rates, which could potentially harm the sector’s performance. AFPI Secretary General Ronald Andi Kasim stated that the restrictions on loan interest rates are making it increasingly difficult for platforms to service high-risk borrowers.

"We are seeing a reduction in loan volume," Ronald explained, adding that the new regulations make it impossible to offer loans to certain segments of the population that are considered high-risk. "For example, borrowers who may have previously qualified for 1% daily interest rates can no longer be served," he noted during a press conference on May 14, 2025.

Impact of Lower Loan Interest Rates on P2P Lending Platforms and Borrowers

As the industry grapples with these changes, there is a growing mismatch between the expectations of lenders and the profile of borrowers. Although many borrowers use P2P lending services out of urgency and may not be as sensitive to interest rates, the drastic drop in rates—such as the reduction to 0.3%—has begun to impact the business significantly.

Kasim emphasized, "We are capped at 0.3% interest, while illegal lenders are still charging 1%. The difference is substantial, and it affects us." He further highlighted that the regulation, in fact, harms the legitimate businesses within the industry. AFPI refutes any allegations of a cartel controlling interest rates, with Kasim asserting, "If we were regulating rates, it would be detrimental to us. We would rather have no regulation at all, allowing us to serve more people."

AFPI Denies Allegations of Collusion in Interest Rate Setting

The Indonesia’s Competition Commission (KPPU) has initiated an investigation into 97 P2P lending platforms under AFPI for allegedly collaborating to set daily interest rate caps. These platforms are suspected of having set an initial 0.8% daily interest rate and then lowering it to 0.4% per day in 2021.

KPPU Chairman M. Fanshurullah Asa pointed out that such coordinated actions could limit competition and harm consumers. "We found evidence of coordinated interest rate setting among industry players between 2020 and 2023, which could stifle competition and hurt consumers," he said.

Fintech Industry’s Resilience Despite Regulatory Challenges

Despite the regulatory hurdles, Indonesia’s P2P lending sector showed impressive performance in 2024. The industry achieved a significant financial turnaround, recording a net profit of IDR 1.65 trillion, a 245% increase compared to the previous year’s IDR 478.15 billion. Equity also grew by 46% year-on-year, reaching IDR 3.46 trillion.

However, further regulatory changes are expected to continue shaping the industry’s future. Starting January 2025, the interest rates for consumer loans with terms of up to six months will be capped at 0.3% per day. Loans longer than six months will face even stricter limits, as will micro and ultra-micro loans.

PHOTO: FREEPIK

This article was created with AI assistance.