The Hidden Dangers of Informal Borrowing in Indonesia

Rising Concerns About Personal Loans from Friends and Family

A recent study by OCBC Financial Fitness Index 2025 has brought to light a concerning trend in Indonesia's financial landscape. The survey reveals that 39% of Indonesians frequently borrow money from friends or family to cover their living expenses. This practice, while seemingly harmless, poses significant risks to personal relationships and financial stability.

The Allure and Risks of Informal Borrowing

Borrowing from acquaintances often appears to be an attractive option due to the absence of interest rates and strict repayment schedules. However, this lack of formal structure can lead to delayed repayments and accumulated debt, ultimately straining social relationships. The survey highlights that the informal nature of these loans can make them more dangerous than formal online lending services, as the absence of clear terms often leads to misunderstandings and tension among parties involved.

Financial Strains and Spending Habits

The OCBC survey also uncovered that 14% of respondents have expenditures that exceed their income, indicating a broader issue of financial management among Indonesian households. This situation not only hampers their ability to save but also leaves them vulnerable to financial shocks. When unexpected expenses arise, individuals with already stretched finances are more likely to resort to borrowing from friends and family, perpetuating a cycle of debt and financial instability.

Implications for Financial Health

The findings underscore the need for better financial education and planning among Indonesians. With a significant portion of the population relying on informal borrowing, there is a clear demand for more robust financial products and services that can provide structured support. Addressing these issues will be crucial in improving the overall financial health of Indonesian households and reducing reliance on potentially harmful informal lending practices.