Bandung, IndonesiaSentinel.com — Indonesia’s Financial Services Authority (OJK) revealed that nearly 40% of online loans (pinjol) bad credit comes from Generation Z and Millennials, specifically individuals aged 19 to 34. Agusman, the Executive Head of Supervisory for Financing Institutions, Venture Capital Companies, Microfinance Institutions, and other financial service providers at OJK, made the announcement.
“The share of TWP90 for Gen Z and Millennials aged 19-34 is 37.17%,” Agusman stated during a press conference following OJK’s monthly board meeting in August 2024 on Friday, September 6, 2024.
TWP90 refers to loans that have remained unpaid for more than 90 days past their due date.
To address this issue, Agusman mentioned several mitigation measures, the most recent are requiring online lending platforms, also known as peer-to-peer (P2P) lending providers, to implement consumer warnings.
“We have updated our guidelines, requiring P2P lending providers to issue warning statements to consumers on the main page of their websites and apps. The warning reads: ‘Be cautious, this transaction carries high risks, you could suffer losses or lose money if you fail to repay your loan. Consider carefully before proceeding,'” Agusman explained.
Minister Bahlil Lahadia Eyes China for Major Oil and Gas Partnerships
This initiative aims to increase awareness among potential borrowers about the risks in using online loan or lending services.
As of the end of July 2024, the outstanding balance of online loans grew by 23.97% year-on-year, reaching IDR 69.39 trillion. This growth is slower than month, with a 26.73% year-on-year increase in June.
Meanwhile, Agusman reported a decrease in TWP90 in July compared to the one earlier. “The TWP90 rate was stay at 2.53% as of June 2024, compared to 2.79% in June,” he noted.
Generation Z and Millenials are Vurnerable to Online Loans
Generation Z and Millennials are increasingly vulnerable to falling into the trap of illegal online loans (pinjol), according to Dr. Friderica Widyasari Dewi, the Executive Head of Consumer Education, Protection, and Financial Service Business Conduct Supervision at Indonesia’s Financial Services Authority (OJK).
“Many young people fall into the trap of online loans because they take on debt for consumptive needs and unwise expenses,” said Friderica Widyasari. She made this statement on Thursday, June 6, during a pre-recorded video message for the Bisnis Indonesia Goes to Campus (BGTC) 2024 event at UGM’s Faculty of Economics and Business.
She noted that these generations are financially at risk due to a lifestyle that prioritizes spending on leisure and often following trends rather than saving or investing. While also there is “Fear of Missing Out” (FOMO) mentality that often drives individuals to be more consumptive and feel left behind if they do not follow the latest trends.
This highlights the urgent need for improved financial education among the younger population to prevent further entanglement in online loans (pinjol).
(Raidi/Agung)
