Melati runs a small tailoring business in a bustling street market of Jakarta, and dreams of scaling her operations. She needs to invest in her business to grow, but is stymied by the many barriers to accessing credit that women face in Indonesia. Due to her lack of formal ownership of assets that can be used as collateral, thin credit history, and irregular cash flow, she struggles to secure loans from microfinance institutions (MFIs) or traditional banks, which usually have stringent requirements. As a response to these systemic barriers, digital lending platforms known as peer-to-peer (P2P) lenders have rapidly expanded in Indonesia.
Indonesia’s financial sector regulator, Otoritas Jasa Keuangan (OJK), has played a key role in the evolution of the sector by developing a regulatory framework that seeks to balance innovation and growth with potential risks to consumers and the broader economy. The most recent regulation, OJK Regulation No. 40, was issued in December 2024. OJK regulations were not designed with a mandate to improve women’s financial inclusion in particular; however, they have had an outsized effect on women given their reliance on such lending. While challenges remain, these platforms are helping to address the credit gap faced by women and are emerging as pivotal players in Indonesia’s financial sector.
Digital lending provides opportunities for excluded women entrepreneurs
P2P lending platforms are opening the doors for women previously locked out of the financial system due to the need for physical collateral. They do so by using transaction histories, behavioral patterns, and other non-collateral data to assess creditworthiness, allowing women entrepreneurs—many of whom lack formal ownership of assets and run informal businesses—to secure funding.
P2P lending platforms are a form of digital lending that facilitates borrowing and lending between individuals or small businesses and individual or group lenders via an online platform, eliminating the need for intermediaries such as formal financial institutions. However, in Indonesia, rather than entirely bypassing banks, P2P lenders are becoming an on-ramp to formal finance using a “channeling partnership.”
This collaborative model takes the approach of cooperation instead of competition, wherein P2P platforms enable banks to reach new market segments, meet prudential portfolio requirements, and gain familiarity with digital technologies. On the other hand, banks provide P2P platforms with their stability, capital accessibility, and credibility. The model is gaining traction and creating pathways for women entrepreneurs to transition from informal borrowing to more structured financial products as they build their credit histories.
In fact, the model has exploded in Indonesia, with the volume of P2P lending surging by 50% over the past two years, with an average year-on-year increase of 39%. As of May 2024, P2P platforms disbursed one-third of their loans to micro, small, and medium-sized enterprises (MSMEs) and are aiming to increase this share to 50-70% by 2028.
One such platform, Amartha, an Indonesian microfinance fintech platform exclusively serving women, has disbursed more than IDR 17 trillion of funds (approximately USD 1.1 billion) from mostly urban lenders to 2.2 million women ultra-micro entrepreneurs across more than 73,618 villages in Java, Sulawesi, Sumatra, Kalimantan, Bali, and Nusa Tenggara between 2016 and 2023. This unprecedented growth highlights the role of local digital innovators (including P2P platforms) in extending credit to underserved populations, especially women, for whom the benefits are transformative.
Licensing can enhance long-term stability and oversight of platforms serving women
To ensure the long-term stability of the P2P lending sector and enable continued credit provision, the OJK (Indonesian Financial Services Authority) requires P2P lending platforms to obtain proper licensing and adhere to specific capital requirements. These capital thresholds help prevent liquidity crises and ensure that only financially sound platforms operate in the market. This is a significant move, especially after the revocation of licenses from some high-profile platforms that did not meet minimum equity requirements and the shutdown of unlicensed players in the industry. Governance requirements also play a crucial role, as licensed P2P lenders must implement risk management frameworks, internal controls, and fair lending practices. By regulating provider licensing, Indonesia is ensuring a diverse range of providers can exist while maintaining accountability in the sector.
Consumer protection ensures women are served responsibly
Along with other formal financial service providers (FSPs), which are prevented from engaging in customer abuse, P2P lending platforms must put their client outcomes first. The OJK has introduced measures to improve transparency and prevent data misuse. Platforms are required to clearly disclose loan terms, fees, and interest rates, ensuring that borrowers fully understand their obligations. Additionally, regulations address concerns related to data privacy, safeguarding borrowers' personal information from potential abuse.
Due to gender norms regarding household roles and differential access to personal and professional networks, women often have limited access to formal financial literacy resources and may be more vulnerable to risks from digital financial services. Research also shows that younger generations have lower financial literacy levels than their parents, despite having significantly higher exposure to complex financial products. Given that around 60% of P2P borrowers are 19 to 34 years old and 50% are female, the government and OJK have invested heavily in financial literacy efforts. This ramped up following the launch of the National Strategy on Indonesian Financial Literacy (SNLKI) 2021 – 2025, which includes a priority target for women. The evidence suggests that it is paying off, especially for Indonesian women – the current women’s financial literacy rate is slightly higher than men’s at 67%.
Reporting and monitoring outcomes are crucial to enabling market linkages for women
By mandating reporting, financial sector authorities can use data to better assess the market’s size and performance, facilitating informed policy decisions to promote women’s financial inclusion. P2P platforms must submit detailed financial reports to the OJK, promoting transparency and enabling effective monitoring of the sector. The gender-disaggregated data the OJK collects and its reporting requirements could ultimately create pathways for borrowers to transition into other formal financial services, as women entrepreneurs who successfully repay P2P loans could build credit histories and eventually qualify for larger credit lines from banks or other formal institutions. Such data sharing would ensure that P2P lending does not remain a siloed service but instead acts as an entry point for greater financial inclusion.
Thoughtful regulation supports women’s financial inclusion
While Indonesia’s regulatory approach was not explicitly designed with a gender lens, by bringing a provider crucial to women’s inclusion into the formal sector, it has proven to be gender-inclusive and helped sustainably bridge financial access gaps for women. Going forward, intentionally embedding gender considerations into Indonesia’s P2P and other fintech regulations and guidance should unlock new finance pathways for women entrepreneurs like Melati to access the finance they need to grow and thrive.
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