Browse > Article
http://dx.doi.org/10.13106/jafeb.2021.vol8.no2.0981

The Determinants of Potential Failure of Islamic Peer-to-Peer Lending: Perceptions of Stakeholders in Indonesia  

MUHAMMAD, Rifqi (Department of Accounting, Faculty of Business and Economics, Universitas Islam Indonesia)
FAKHRUNNAS, Faaza (Department of Accounting, Faculty of Business and Economics, Universitas Islam Indonesia)
HANUN, Amalia Khairina (Department of Accounting, Faculty of Business and Economics, Universitas Islam Indonesia)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.2, 2021 , pp. 981-992 More about this Journal
Abstract
This study identifies the determinants of potential failure of Islamic Peer-to-Peer (P2P) lending in Indonesia, and the mediating effect of Islamic ethics on reducing the potential for failure of Islamic P2P lending. This study uses primary data retrieved through questionnaires from the perspective of 152 stakeholders in Islamic P2P lending. Using a structural equation model (SEM), the study found that indebtedness, financing size, and governance have positive and significant relationships with the potential failure of Islamic P2P lending. This study provides evidence that the customer's internal conditions and the governance structure applied can increase the potential failure of Islamic P2P lending. Further, Islamic ethics is evidently able to partially reduce the potential failure of Islamic P2P lending by lessening risk management exposure, but it fails to address failure through Ponzi scheme exposure. As an implication, this study suggest that Islamic P2P lending must implement Islamic ethics more comprehensively by optimizing the advisory and supervisory role of the shariah board within their overall boards of directors also in their operational activities. Finally, it also adds to the existing knowledge on financial technology literature, particularly on the determinants of potential failure of financial technology from the perspective of stakeholders.
Keywords
Financial Technology; Islamic Finance Industry; Potential Failure; P2P Lending;
Citations & Related Records
연도 인용수 순위
  • Reference
1 Alam, M. K., Mustafa, H., Uddin, M. S., Islam, M. J., Mohua, M. J., & Hassan, M. F. (2020). Problems of shariah governance framework and different bodies: An empirical investigation of Islamic Banks in Bangladesh. Journal of Asian Finance, Economics and Business, 7(3), 265-276. https://doi.org/10.13106/jafeb.2020.vol7.no3.265   DOI
2 Alam, M. K., Tabash, M. I., Thakur, O. A., Sahabuddin, M., Hosen, S., & Hassan, M. F. (2020). A central shariah regulatory authority for the Islamic banks in Bangladesh: Legalization or formation. Journal of Asian Finance, Economics and Business, 7(1), 91-100. https://doi.org/10.13106/jafeb.2020.vol7.no1.91   DOI
3 Ali, A. J., & Al-Aali, A. (2015). Marketing and ethics: What Islamic ethics have contributed and the challenges ahead. Journal of Business Ethics, 129(4), 833-845. doi:10.1007/s10551-014-2131-x   DOI
4 Abuznaid, S. A. (2009). Business ethics in Islam: The glaring gap in practice. International Journal of Islamic and Middle Eastern Finance and Management, 2(4), 278-288. doi:10.1108/17538390911006340   DOI
5 Ahmed, H. (2011). Defining ethics in Islamic finance: Looking beyond legality. Proceeeding of 8th International Conference on Islamic Economics and Finance (pp. 1-10). Doha, Qatar: IRTI.
6 Al-Rahahleh, N., Bhatti, M.I, & Misman, F.N. (2019). Developments in risk management in Islamic finance: A review. Journal of Risk and Financial Management, 12(1), 37. doi:10.3390/jrfm12010037   DOI
7 Anwar, S., & Mikami, Y. (2011). Comparing accuracy performance of ANN, MLR, and GARCH model in predicting time deposit return of Islamic bank. International Journal of Trade, Economics and Finance, 2(1), 44-51. doi:10.7763/ijtef.2011.v2.77   DOI
8 Ascarya (2016). Measuring the Islamicity of Islamic banks in Indonesia and other countries based on shariah. Proceedings of the 11th International Conference on Islamic Economics and Finance (pp. 1-38). Kuala Lumpur, Malaysia: IRTI.
9 Azma, N., Aisyah, S., Izzah, N., & Rahman, M. (2018). The Development of Islamic banking and financial institution in United Kingdom. The East Asian Journal of Business Management, 8(2), 5-13. https://doi.org/10.13106/eajbm.2018.vol8.no2.5   DOI
10 Baber, H., & Zaruova, C. (2018). Religion and banking: A study of Islamic finance in India. Journal of Industrial Distribution and Business, 9(6), 7-13. https://doi.org/10.13106/ijidb.2018.vol9.no6.7.   DOI
11 Bakar, N. A., & Rosbi, S. (2018). Robust framework diagnostics of blockchain for bitcoin transaction system: A technical analysis from Islamic financial technology (i-FinTech) perspective. International Journal of Business and Management, 2(3), 22-29. doi:10.26666/rmp.ijbm.2018.3.4   DOI
12 Ban, J., & Lee, H. (2020). The role of empathy in crowdfunding channel platform. Journal of Distribution Science, 18(10), 15-23.   DOI
13 Barasinska, N., & Schafer, D. (2014). Is crowdfunding different? Evidence on the relation between gender and funding success from a German peer-to-peer lending platform. German Economic Review, 15(4), 436-452. https://doi.org/10.1111/geer.12052   DOI
14 Suryono, R. R., Purwandari, B., & Budi, I. (2019). Peer to peer (P2P) lending problems and potential solutions: A systematic literature review. Procedia Computer Science, 161, 204-214. doi:10.1016/j.procs.2019.11.116   DOI
15 Todorof, M. (2018). Shariah-compliant FinTech in the banking industry. ERA Forum, 19(1), 1-17. doi:10.1007/s12027-018-0505-8   DOI
16 Yusgiantoro, I. (2018). What determine loan rate and default status in financial technology online direct lending? Evidence from Indonesia. OJK Working Paper, Otoritas Jasa Keuangan.
17 Usman, H. (2015). Comparison of the Importance of Banks' Attributes between Islamic and Conventional Banks' Customers. The East Asian Journal of Business Management, 5(2), 5-13. https://doi.org/10.13106/eajbm.2014.vol5.no2.5.   DOI
18 Werner, R. A. (2014). Can banks individually create money out of nothing? The theories and the empirical evidence. International Review of Financial Analysis, 36(C), 1-19. doi:10.1016/j.irfa.2014.07.015   DOI
19 Wiryanto, W. (2018). The comparison of Unescap's characteristics of good governance and Islamic characteristics. Hasanuddin Economics and Business Review, 2(2), 123-141. doi: http://dx.doi.org/10.26487/hebr.v2i2.1545   DOI
20 Marcelino-Sadaba, S., Perez-Ezcurdia, A., Echeverria, A. M., & Villanueva, P. (2014). Project risk management methodology for small firms. International Journal of Project Management, 32(2), 327-340. doi:10.1016/j.ijproman.2013.05.009   DOI
21 Meutia, I. (2017). Empirical research on rate of return, interest rate and mudharabah deposit. International Journal of Accounting Research, 5(1), 1-5. doi:10.4172/2472-114x.1000141   DOI
22 Milne, A., & Parboteeah, P. (2016). The business models and economics of peer-to-peer lending. SSRN Electronic Journal.
23 Minerva, R., Asaba, C.P.S., Aiba, D.P.K., & Hirano, M. (2016). The potential of fintech industry to support the growth of SMEs in Indonesia. Waseda, Japan: Master's thesis, Waseda University.
24 Rahmi, M., Azma, N., Obad, F. M., Zaim, M., Rahman, & Mahfuzur. (2020). Perceptions of Islamic banking products: Evidence from Malaysia. Journal of Business Economics and Environmental Studies, 10(3), 35-42. https://doi.org/10.13106/jbees.2020.vol10.no3.35   DOI
25 Mokhtar, E. S., & Mellett, H. (2013). Competition, corporate governance, ownership structure and risk reporting. Managerial Auditing Journal, 28(9), 838-865. doi:10.1108/MAJ-11-2012-0776   DOI
26 Mufarih, M., Jayadi, R., & Sugandi, Y. (2020). Factors influencing customers to use digital banking application in Yogyakarta, Indonesia. Journal of Asian Finance, Economics and Business, 7(10), 897-907. https://doi.org/10.13106/jafeb.2020.vol7.no10.897   DOI
27 Nguyen, D. D., Dinh, H. C., & Nguyen, D.V. (2020). Promotion of fintech application for the modernization of banking-finance system in Vietnam. Journal of Asian Finance, Economics and Business, 7(6), 127-131. https://doi.org/10.13106/JAFEB.2020.VOL7.NO6.127   DOI
28 Rice, G. (1999). Islamic ethics and the implications for business. Journal of Business Ethics, 18(4), 345-358. doi:10.1023/A:1005711414306   DOI
29 Sakti, M. R. P., Syahid, A., Tareq, M. A., & Mohd Mahdzir, A. (2016). Shari'ah issues, challenges, and prospects for Islamic derivatives: A qualitative study. Qualitative Research in Financial Markets, 8(2), 168-190. doi.:10.1108/QRFM-06-2015-0024   DOI
30 Scardovi, C. (2017). Digital Transformation in Financial Services. London, UK: Springer International Publishing.
31 Scholtens, B., & Wensveen, D.V. (2000). A critique on the theory of financial intermediation. Journal of Banking and Finance, 24(8), 1243-1251. doi:10.1016/S0378-4266(99)00085-0   DOI
32 He, M.-G., Kim, H.-K., & Lee, J.-H. (2019). Influence on the use intention of Alipay payment service by Chinese Tourists visiting Korea. Journal of Industrial Distribution and Business, 10(11), 7-13. https://doi.org/10.13106/ijidb.2019.vol10.no11.7   DOI
33 Serrano-Cinca, C., Gutierrez-Nieto, B., & López-Palacios, L. (2015). Determinants of default in P2P lending. PLoS One, 10(10), 1-22. doi:10.1371/journal.pone.0139427   DOI
34 Sholihin, M., Pike, R., Mangena, M., & Li, J. (2011). Goal-setting participation and goal commitment: Examining the mediating roles of procedural fairness and interpersonal trust in a UK financial services organisation. The British Accounting Review, 43(2), 135-146. doi:10.1016/j.bar.2011.02.003   DOI
35 Hasnan, B. (2019). A framework for crowdfunding platforms to match services between funders and fundraisers. Journal of Industrial Distribution and Business, 10(4), 25-31. https://doi.org/10.13106/ijidb.2019.vol10.no4.25.   DOI
36 He, Q., &Li, X. (2020). The Failures of peer-to-peer lending platform finance and politics. SSRN Electronic Journal.
37 Hooda, A., & Ankur, A. (2018). Acceptance of social media as a marketing tool: A quantitative study. The East Asian Journal of Business Management, 8(3), 5-12. https://doi.org/10.13106/eajbm.2018.vol8.no3.5   DOI
38 Huang, C., Wang, Y., Wu, T., & Wang, P. (2013). An empirical analysis of the antecedents and performance consequences of using the Moodle platform. International Journal of doi:10.7763/IJIET.2013.V3.267   DOI
39 Indonesian Financial Service Authority. (2020). Statistik Fintek. Retrieved July 29, 2019, from https://www.ojk.go.id/id/kanal/iknb/data-dan-statistik/fintech/default.aspx
40 Iqbal, M. (2013). Islamic finance: An attractive new way of financial intermediation. International Journal of Banking and Finance, 10(2), 1-24.
41 Jimenez, G., & Saurina, J. (2002). Loan characteristics and credit risk. Bank of Spain Working Papers.
42 Kim, D. (2020). Sexism and ageism in a P2P lending market: Evidence from Korea. Journal of Asian Finance, Economics and Business, 7(6), 537-550. https://doi.org/10.13106/JAFEB.2020.VOL7.NO6.537   DOI
43 Kim Lien, N. T., Doan, T. R. T., & Bui, T. N. (2020). Fintech and banking: Evidence from Vietnam. Journal of Asian Finance, Economics and Business, 7(9), 419-426. https://doi.org/10.13106/JAFEB.2020.VOL7.NO9.419   DOI
44 Lenz, R. (2016). Peer-to-peer lending: Opportunities and risks. European Journal of Risk Regulation, 7(4), 688-700. doi:10.1017/S1867299X00010126   DOI
45 L'Huillier, B. M. (2014). What does "corporate governance" actually mean? Corporate Governance, 14(3), 300-319. doi:10.1108/CG-10-2012-0073   DOI
46 Lin, X., Li, X., & Zheng, Z. (2017). Evaluating borrower's default risk in peer-to-peer lending: Evidence from a lending platform in China. Applied Economics, 49(35), 3538-3545. doi:10.1080/00036846.2016.1262526   DOI
47 Liu, D., Brass, D. J., Lu, Y., & Chen, D. (2015). Friendship in online peer-to-peer lending: Pipes, prisms, and relational herding. MIS Quarterly, 39(3), 729-742.   DOI
48 Liu, Q., Zou, L., Yang, X., & Tang, J. (2019). Survival or die: A survival analysis on peer-to-peer lending platforms in China. Accounting and Finance, 59(S2), 2105-2131. doi:10.1111/acfi.12513   DOI
49 Louhan Academy Report. (2019). Digital Technology and Inclusive Growth. doi: 10.13140/RG.2.2.21431.68001   DOI
50 Maksum, M. (2015). Economics ethics in the fatwa of Islamic economics. Al-Ulum, 15(1), 107-134.   DOI
51 Dietrich, A., & Wernli, R. (2016). What drives the interest rates in the P2P consumer lending market? Empirical evidence from Switzerland. SSRN Electronic Journal. doi:10.2139/ssrn.2767455   DOI
52 Bartoletti, M., Carta, S., Cimoli, T., & Saia, R. (2020). Dissecting ponzi schemes on Ethereum: Identification, analysis, and impact. Future Generation Computer Systems, 102, 259-277. doi:10.1016/j.future.2019.08.014   DOI
53 Chuen, D. L. K., & Teo, E. G. . (2015). Emergence of FinTech and the LASIC principles. The Journal of Financial Perspective, 3(3), 24-37.
54 Deason, S., Rajgopal, S., & Waymire, G. B. (2015). Who gets swindled in Ponzi schemes?. SSRN Electronic Journal. doi:10.2139/ssrn.2586490   DOI
55 Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39-50.   DOI
56 Drissi, S., & Angade, K. (2019). Islamic financial intermediation the emergence of a new model. European Journal of Islamic Finance, 12, 1-7. doi:10.13135/2421-2172/2880   DOI
57 Faiq, S. (2014). Trading in Islam: Shariah rules and contemporary applications in Islamic financial transactions. Journal of Emerging Economies and Islamic Research, 2(2), 1-26.   DOI
58 Feenstra, D. W., & Wang, H. (2000). Economic and accounting rates of return. Research report 00E42, University of Groningen, Research Institute System, Organization and Management.
59 Frost, J., Gambacorta, L., Huang, Y., Shin, H. S., & Zbinden, P. (2020). BigTech and the changing structure of financial intermediation. BIS Working Papers 779, Bank of International Settlements.
60 Gomber, P., Kauffman, R. J., Parker, C., & Weber, B. W. (2018). On the fintech revolution: Interpreting the forces of innovation, disruption, and transformation in financial services. Journal of Management Information Systems, 35(1), 220-265. doi:10.1080/07421222.2018.1440766   DOI
61 Hair, J.F., Hult, G.T.M., Ringle, C.M., & Sarstedt, M. (2017). A primer on Partial Least Squares Structural Equation Modeling (PLS-SEM), Thousand Oaks, CA: Sage Publications.
62 Hair, J. F., Risher, J. J., & Ringle, C. M. (2018). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2-24. doi:10.1108/EBR-11-2018-0203   DOI