Two years following the enactment of Financial Service Authority (Otoritas Jasa Keuangan/"OJK) Regulation No. 77/POJK.01/2016 of 2016 (POJK 77/2016), Peer-to-Peer Lending (P2P Lending) has grown popular in Indonesia. Based on data from OJK per Oct. 2018, a total of 15,990,143,141,355 rupiah has been distributed to the borrowers in P2P Lending. It has grown 432.5% from Jan. 2018 until Oct. 2018. Until Dec. 2018, the number of P2P Lending Platform which has been registered and supervised by OJK has reached 88 companies, one of them has been given a license.

Borrower in P2P Lending is mostly a micro, small and medium entrepreneur which is not bankable, while lender is mostly a retail investor who invest in a small amount and expecting a high return due to the high rate of interest. The non-performing loan ratio in P2P Lending stood at 1.89 percent per Oct. 2018, which is still considered low by OJK. P2P Lending offers a faster process from loan application until the loan disbursement compared to conventional loan method.

The rapid growth of P2P Lending industry surely contributes to the improvement of financial inclusion of Indonesian society. The understanding or financial literacy towards P2P Lending shall also be improved simultaneously. To help in having better understanding of the concept of P2P Lending in Indonesia, elaboration of P2P Lending based on POJK 77/2016 sets out below.


Basically, P2P Lending is the practice of lending money through online platform that matches lenders with borrowers. P2P Lending Platform (Lending Platform) is a financial service provider who operates an online platform (usually a website or application) that match lenders with borrowers. The maximum amount of loan for each borrower in P2P Lending is limited to 2 billion rupiah.


Users are borrower and lender. Borrower is an individual or legal entity which is originated and domiciled in Indonesia, while lender may be originated and domiciled from Indonesia and/or outside Indonesia.


Agreements in P2P Lending are made in electronic documents and executed by electronic signature. There are two agreements in P2P Lending, which are: (i) agreement between the Lending Platform and the Lender (Funding Agreement); and (ii) agreement between the Lender and the Borrower (Loan Agreement). Usually, lender must sign the Funding Agreement at the end of registration process. Funding Agreement also includes the power of attorney from the lender to the Lending Platform to sign the Loan Agreement on behalf of the lender. The Loan Agreement will be signed once the loan is successfully funded or the loan offering period ends.


The Lending Platform will assess the loan application submitted by the borrower to determine the rating and/or interest rate of the borrower. If the application is approved, the loan will be offered at the Lending Platform for a certain time period. The Lending Platform must attempt to arrange crowdfunding (more than one lender) in funding the loan of the borrower.

The Lender will choose the loan from the loan offer displayed at the Lending Platform. After choosing, the Lender will transfer his/her fund from his/her bank account through virtual account in the name of lender to be forwarded to the escrow account of Lending Platform. The Lending Platform will then disbursed the fund from its escrow account into the borrower's account after the Loan Agreement is signed.

At the end of maturity, the borrower will transfer the repayment amount from his/her bank account to the escrow account of Lending Platform to be forwarded to the lender's virtual account and then paid to the lender's bank account.


In practice, borrower often disagrees with the rating and/or interest rate given to them by the Lending Platform. It may cause delay or even cancellation in signing of the Loan Agreement. If that occurs, the fund transferred by the lender to the escrow account will be left hanging in the escrow account without any clear time limitation. The Lending Platform will have to keep the borrower's fund for longer than it allowed. It is necessary to create binding terms between the Lending Platform and the borrower regarding the loan assessment result.


P2P Lending has become a popular alternative means of investment for investors as well as to raise working capital for entrepreneur. However, there are still matters that are not adequately regulated by OJK. OJK as the regulator, must keep up with the fast development of P2P Lending industry in order to provide a secure legal grounds and also to avoid further loss for both lender and borrower.