What Determine Loan Rate and Default Status in Financial Technology Online Direct Lending? Evidence from Indonesia

Wimboh Santoso, Irwan Trinugroho and Tastaftiyan Risfandy

Emerging Markets Finance and Trade, 2020, vol. 56, issue 2, 351-369

Abstract: Using a large-scale dataset from three leading online peer-to-peer (P2P) lending platforms in Indonesia from 2014 to 2018, we investigate the determinants of platform interest rate and borrowers’ default status. Our result shows that loan and borrowers’ specific factors are significantly associated with the loan rate and loan default, although the relation could differ from one platform to another. Our empirical result shows that platforms focused on very small loan for microbusiness increase their interest rate after the introduction of formal regulation. It could be because of the increase of the borrowers requiring a very small amount of loan relatively much more than the number of lenders. The shortfall of supply then drives the increase in loan rate. Some policy implications are discussed.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:56:y:2020:i:2:p:351-369

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DOI: 10.1080/1540496X.2019.1605595

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