Tackling the Challenges of Financial Inclusion and Illegal Lending in Indonesia ; ISEAS Perspective ; Issue 2022 No. 5

Several issues make financial inclusion challenging in Indonesia. The pandemic has adversely affected people’s income, often leaving them unable to cover their basic daily needs. Since many are in need of quick access to cash, there has been an uptick in instant financing solutions (Fu and Mishra, 2020; Najaf, 2020). Whilst these can provide the necessary funds with relative ease and flexibility via immediate loans offer, the repayment terms are often very steep. Another issue is that, many do not stop to consider the legality of the lenders (Sitepu, 2020). This means that they are often unaware that they are engaging with unlicensed moneylenders or other such entities, who charge very high interest rates, and insist on dubious procedural terms. As a result, borrowers are often trapped into taking on an ever-increasing financial burden, which can lead to family problems, and even to divorce (Rizki, 2021). This essay examines this phenomenon, and other challenges encountered in achieving greater financial inclusion in Indonesia.