The Impact of Debt Literacy on Over-Indebtedness of Buy Now Pay Later (BNPL) Users in West Java

Astrie Krisnawati () and Dzikra Malika Rabbani Sam
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Astrie Krisnawati: Telkom University, Faculty of Economics and Business
Dzikra Malika Rabbani Sam: Telkom University, Faculty of Economics and Business

A chapter in Proceedings of the International Conference on Sustainable Collaboration in Business, Technology, Information, and Innovation (SCBTII 2024), 2024, pp 203-213 from Springer

Abstract: Abstract This paper examines the impact of debt literacy on the over-indebtedness of Buy Now Pay Later (BNPL) users in West Java. BNPL is widely used in Indonesia as a short-term loan option, with West Java having the highest number of users. BNPL services have a high non-performing loan (NPL) level, exceeding the threshold set by Otoritas Jasa Keuangan (OJK), Indonesia’s financial services authority. It indicates a need to consider the NPL level of BNPL services. One major cause of high NPL is over-indebtedness and financial knowledge as a determining factor of over-indebtedness. Therefore, debt literacy is one of the financial knowledge components assessed to fit the context of BNPL services. The questionnaire was distributed to 400 BNPL users in West Java. Data analysis using multinomial logistic regression assessed the impact of debt literacy on over-indebtedness. Findings reveal that BNPL users have low debt literacy levels. Additionally, the study indicates that higher debt literacy reduces the probability of over-indebtedness. It suggests that the government and financial services authorities should promote programs to increase financial literacy with a specific focus on debt literacy to enhance financial welfare and reduce the high-level NPL.

Keywords: Debt Literacy; Multinomial Logistic Regression; Over-indebtedness; Pay Later (search for similar items in EconPapers)
Date: 2024
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DOI: 10.2991/978-94-6463-558-4_12

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