The Impact of COVID-19 on FinTech Lending in Indonesia: Evidence From Interrupted Time Series Analysis

TL;DR

This study analyzes how COVID-19 impacted FinTech lending in Indonesia, revealing negative effects on lending levels and success rates, but positive effects on default rates, suggesting a need for increased FinTech promotion post-pandemic.

Contribution

It provides empirical evidence on COVID-19's effects on Indonesian FinTech lending using interrupted time series analysis, highlighting policy implications for financial inclusion.

Findings

COVID-19 reduced FinTech lending levels in Indonesia.

Success loan settlement rates declined during COVID-19.

Loan default rates increased significantly during COVID-19.

Abstract

This study measures the impact of COVID-19 outbreaks on financial technology (FinTech) lending in Indonesia. Using monthly FinTech data published by Financial Services Authority (OJK) over the period 2018M02-2021M04, the article examines the impact of COVID-19 started on March 2020 on FinTech by adopting an interrupted time series (ITS) experiment. The estimation shows that the COVID-19 outbreaks negatively affect changes in FinTech lending level in Indonesia, but the changes in the trend are positive. Moreover, the COVID-19 has been found to have a negative and statistically significant effect on the 90-day success loan settlement rate level. However, COVID-19 has positive and statistically significant effects on the 90-day default rate of loan repayment level. These estimation results recommend that the financial services authority of Indonesia should intensively promote various innovative financial technology (FinTech) lending post-COVID-19 to increase digital financial inclusion by providing peer to peer lending (P2P) to unbanked populations.