Due to Paylater, Young People in Indonesia Face Difficulty in Owning Homes

Young Indonesian (pic: Shutterstock)

Young people in Indonesia are often said to have difficulty or are unable to own a house. This issue has even garnered attention from the government. The high number of young people who cannot apply for housing loans (KPR) is attributed to their financial tendencies towards paylater or buy now, pay later (BNPL) schemes.

Many of them find themselves unable to apply for housing loans, known as Kredit Pemilikan Rumah (KPR), due to their inclination towards financial practices such as paylater or buy now, pay later (BNPL). This financial trend has raised questions and prompted scrutiny, as it has the potential to hinder the dreams of homeownership for countless young people.

These concerns have been highlighted by Friderica Widyasari Dewi, the Executive Head of Financial Services Business Players, Education, and Consumer Protection at the Financial Services Authority (OJK).

Ms. Dewi, commonly referred to as Kiki, also brought to light the frustration of many banks regarding this situation, stating, “Many young people who should be applying for their first home loan cannot do so because they have debts on paylater, sometimes amounting to Rp300,000 or Rp400,000.” This statement underscores the real financial hurdles faced by these aspiring homeowners.

One concerning consequence of this financial behavior is its detrimental impact on their credit scores. This issue arises because data from paylater transactions is now included in the Financial Information Service System (SLIK) maintained by the OJK.

Furthermore, even if these young individuals aspire to clear their paylater debts, they often find themselves in a protracted repayment process. Hence, Kiki offers a word of caution to the younger generation, advising them to exercise prudence and careful financial planning when opting for paylater options.

Kiki’s warning is particularly significant in light of recent statistics from the OJK. These figures reveal a substantial growth in paylater business facility contracts, with an increase of 18.18 million contracts or 33.25 percent recorded in May 2023 alone.

Comparatively, by May 2022, there were already 54.70 million BNPL contracts, a number that surged to an astonishing 72.88 million contracts by May 2023. These statistics highlight the popularity and widespread usage of such financial schemes among young Indonesians.

Ogi Prastomiyono, the Executive Head of Insurance, Guarantee, and Pension Fund Supervision at OJK, has attributed this rising popularity of paylater to its straightforward and speedy financing approval process.

He emphasizes that the allure of enticing paylater promotions plays a substantial role in attracting the attention of the public, making these financial schemes even more appealing.

On a broader scale, the Ministry of Public Works and Public Housing (PUPR) has been closely monitoring the housing situation in Indonesia. According to their records, a staggering 81 million millennials in the country are still grappling with the challenge of homeownership.

Simultaneously, the backlog of available housing units stands at a concerning 12.75 million, emphasizing the pressing need for viable solutions to bridge this housing gap and provide opportunities for the younger generation to secure their own homes