OJK States that Gen Z and Millennials Are Still Trapped in Online Loans, They Refuse to Pay!

Online Debt Transactions Reach Rp 10.35 Trillion, Residents of DKI Jakarta Favor Online Loans (photo: towfiqu barbhuiya - Unsplash)
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The Financial Services Authority (OJK) in Indonesia has sounded an alarm regarding the increasing prevalence of online loans, commonly referred to as ‘pinjol‘ within the country, among the nation’s younger generation. These youthful demographics are increasingly resorting to digital borrowing to finance their lifestyles.

However, paradoxically, Generation Z and millennials are also emerging as the largest contributors to the growing burden of non-performing loans within the realm of financial technology companies.

Delving into the statistics, within the age bracket of 19-34 years, these demographics are accountable for non-performing loans amounting to an astonishing Rp763 billion, which translates to roughly 47 percent of the total.

Sarjito, the Deputy Commissioner responsible for Supervising the Behavior of Financial Business Actors and Consumer Protection at OJK, conveyed his insights on this matter during the 2023 Financial Literacy Festival, a prominent event hosted by Bisnis Indonesia and held at Nusa Cendana University in Kupang, East Nusa Tenggara, on Monday, August 28, 2023.

He pointedly remarked, “Generation Z and others, they derive enjoyment from borrowing, but exhibit reluctance when it comes to repayment.”

In tandem with the looming specter of high non-performing loans, Sarjito also underscored the disconcerting reality that a substantial segment of Indonesia’s populace finds itself ensnared in illegal investments and the perilous web of illicit online lending platforms.

The ramifications of these precarious financial ventures have culminated in staggering losses for the affected populace, with estimates hovering around an astounding Rp139.03 trillion.

To address these challenges, Sarjito emphasized the tireless efforts of OJK to shutter illicit investment and online lending portals. In a bid to bolster these endeavors, OJK has forged strategic collaborations with tech giants like Google and Meta to bolster information filtration measures.

Additionally, OJK has partnered with the Ministry of Communication and Information Technology (Kominfo) for the purpose of blocking illicit websites and has engaged the cooperation of law enforcement agencies. Sarjito, however, remains candid about the enduring challenges, acknowledging the rapid resurgence of online lending platforms.

He consequently underscores the pivotal role that public awareness plays in mitigating these issues, stating, “Among all these things, one thing that is most important is that we should also be able to control ourselves.”

Concurrently, Friderica Widyasari Dewi, the Executive Head of Financial Business Actors, Education, and Consumer Protection at OJK, has previously underscored several factors contributing to the proliferation of illicit online loan and investment applications.

She attributes this troubling trend to the ease with which these applications can establish their infrastructure overseas.

Moreover, a significant number of individuals have become reliant on online loans, enticed by the allure of quick riches through online gambling.

The prevalence of the Fear of Missing Out (FOMO) phenomenon among young people, where they seek to avoid missing out on events or information, further compounds the issue.

This culture of FOMO exerts considerable influence on the consumption habits of young individuals who are keen to stay abreast of emerging trends. Furthermore, Kiki highlights that the level of financial literacy among the Indonesian population remains alarmingly low.

“Financial literacy currently hovers around the 49.6 percent mark, while digital literacy scores a mere 3.5 on a scale of 1 to 5. People have access to digital resources, yet many struggle to discern between factual and misleading information,” Kiki emphasizes during a Dialogue Forum conducted on the Kemkominfo TV YouTube channel on Monday, August 21, 2023.