Financial Literacy Key – Editorial


Editorial Board (The Jakarta Post)

Jakarta ●
Fri, October 22, 2021

financial inclusion, literacy, repression, loan sharking, digital, crime, OJK, rural bank, police
To free

The country’s leaders have declared war on illegals pinjaman online (online loan applications), or pinjol, that would have plunged borrowers – many of whom have no access to financial services – into financial disaster.

President Joko “Jokowi” Widodo himself ordered the Financial Services Authority (OJK) and the Ministry of Communications and Information to stop issuing new licenses to pinjol the operators.

According to Communications and Information Minister Johnny G Plate, 107 legal fintech lenders operate under the auspices of the OJK and they have a turnover of around 260 trillion rupees ($18.39 billion).

The ministry closed 4,874 pinjol apps since 2018, with 1,856 apps closed in 2021 alone.

Meanwhile, the Coordinating Minister for Political, Legal and Security Affairs, Mahfud MD briefed the borrowers on pinjol stop repaying their loans because they were not legally valid. He said debtors could seek police protection if digital loan sharks unleash their well-known tactics of verbal abuse and threats.

Compounded by police crackdown on illegal fintech operations in West Jakarta, North Jakarta, Tangerang in Banten and Yogyakarta, the government is showing its determination to crack down on digital loan sharks.

Jokowi has even ordered public banks to increase their unsecured lending to up to Rs 100 million for micro, small and medium enterprises (SMEs) from a previous limit of Rs 50 million as part of efforts to combat corruption. marauding digital loan sharks.

The reality is that most pinjol borrowers are people who need money quickly for any reason, from family or medical emergencies to simple consumption and lifestyle pursuits. The promise of low interest rates and easy access to money lured unsuspecting borrowers into the traps of loan sharks.

Even if you pay your installments on time, loan sharks cut off a good chunk of the “administrative fee” before slapping you with interest rates as high as 0.8% per day or 24% per month.

Clearly, borrowers have access to the digital world but are not taking advantage of more secure options, such as loans offered by traditional and legal digital banks. People’s vulnerability to digital loan sharks has brought financial illiteracy into the spotlight. A 2018 OJK study found that the country’s financial literacy rate was 38.03%, while the financial inclusion rate was 76.19%.

the pinjol saga proves that such disruptive technology – a favorite Jokowi catchphrase – can be a double-edged sword. On the one hand, it helps many MSMEs to reach their customers, especially during the COVID-19 pandemic; on the other hand, many have fallen prey to cybercrime.

Besides educating the public to improve digital literacy, stricter law enforcement is mandatory to protect financially naive borrowers from pinjol apps. Now that everyone can access a pinjol indicates that it is possible for banks and other financial institutions to expand their services.

Indonesia has a range of institutions that provide financial assistance to the public, such as savings and credit cooperatives, as well as rural banks (RPBs). Bringing them into the digital world would provide more people with easy access to microloans while increasing their financial inclusion and literacy.


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