Indonesia's P2P Lending Industry Faces Rising Default Risks

Increasing NPL Concerns in Consumer Lending

Indonesia's peer-to-peer lending industry is on the cusp of significant challenges in 2026 as the 90-day non-performing loan (TWP90) ratio continues to rise. According to Heru Sutadi, Executive Director of Indonesia ICT Institute, the surge in TWP90 is primarily attributed to high interest burdens and increasing mental stress among borrowers, particularly in the dominant consumer lending segment.

Key Challenges and Recommendations

1. Deteriorating Loan Quality: The quality of lending has worsened due to the vulnerability of MSMEs and intense competition from unregulated online lending platforms.
2. Regulatory Imperatives: Authorities need to address fundamental issues such as poor borrower data quality to prevent industry collapse due to rising defaults.
3. Strategic Recommendations:
   • Implement rigorous credit assessment practices
   • Focus on productive sectors like MSMEs
   • Employ dynamic risk mitigation measures including insurance

Technological Innovation and Risk Management

The implementation of artificial intelligence (AI) and advanced credit scoring using alternative data sources such as social media and digital transactions is seen as a strategic innovation. However, experts warn that without proper regulation, this could lead to data privacy issues or algorithmic bias resulting in borrower discrimination.

Growth Drivers for 2026

1. MSME Financing: Focus on MSME lending is identified as a primary growth driver
2. Regulatory Strengthening: Enhanced regulatory framework is crucial for sustainable growth
3. Risk Mitigation: Effective management of illegal lending practices and global economic uncertainty is essential for industry expansion