Chinese-backed FinTech Lending Boom: How did Indonesia Respond?

Peer-to-peer (P2P) online lending has the potential to boost innovation and financial inclusion in emerging markets, yet it can also incur investment and borrower-related risks, such as privacy breaches. Driven by regulation control in China, Chinese investments flocked to Indonesia, causing a rapid expansion of online lending platforms. Similar to what happened in China prior to the regulatory crackdown, the P2P lending boom in Indonesia saw a rise in unethical and illegal business practices. The government responded by creating new regulations and institutions to mitigate risks without stifling the potential for financial inclusion. A proactive approach towards monitoring and regulating emerging high-tech industries should be sought by strengthening links with industry and civil society, and through international cooperation for policy and knowledge sharing

Governing the Gold Rush into Emerging Markets: A Case Study of Indonesia’s Regulatory Responses to the Expansion of Chinese-Backed Online P2P Lending

Peer-to-peer (P2P) lending has the potential to boost financial inclusion in emerging markets. This paper contributes to the literature on fintech governance in emerging Asian markets. It examines the case of the Indonesian government’s approach in regulating the P2P lending sector using both primary interviews and secondary firm-level data. Driven by regulation tightening in China and regulatory gaps in Indonesia, Chinese investments became the largest in this sector contributing, however, to growing risks from illegal business practices. The Indonesian government responded by creating new regulations and institutions, mitigating risks without stifling the potential for financial inclusion. We conclude a proactive approach towards monitoring and regulating emerging high-tech industries should be sought by strengthening links with industry and civil society, and through international cooperation for policy and knowledge sharing