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http://dx.doi.org/10.13106/jafeb.2021.vol8.no5.0403

The Relationship Between Debt Literacy and Peer-To-Peer Lending: A Case Study in Indonesia  

HIDAJAT, Taofik (Management Department, STIE Bank BPD Jawa Tengah)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.5, 2021 , pp. 403-411 More about this Journal
Abstract
This paper discusses the relationship between debt literacy, peer-to-peer lending, and over-indebtedness in Indonesia. It is essential because the number of loans on this platform continues to increase, both legal and illegal. Data was collected online in collaboration with commercial market research firms, JajakPendapat.net. Debt literacy and over-indebtedness were measured by self-assessment with questions from Lusardi and Tufano (2009a). Questions for debt literacy are about interest compounding, debt interest, and the application of time value of money in payment options. The question for over-indebtedness is about the amount of debt and the conditions resulting from that debt. By using descriptive methods, it is clear that the majority of respondents, both borrowers and non-peer-to-peer lending borrowers are debt illiterate, and those who have poor debt literacy have huge debt. Overall, only 1.85% of the respondents were debt literate. Those who live on the island of Java have better literacy because they are the center of economic growth in Indonesia. Debt from peer-to-peer (P2P) lending also has the potential to create problems, namely over-indebtedness. P2P lending borrowers also have very poor debt literacy. However, there is no difference in debt literacy between P2P lending borrowers and non-P2P lending borrowers.
Keywords
Debt Literacy; Financial Literacy; Peer-To-Peer Lending; Over-Indebtedness;
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