Strategy to Increase Financial Literacy in Indonesia by Capitalize on Peer to Peer Lending
Muhammad Ahnaf Abid1*, Raden Aswin Rahadi1
School of Business and Management, Bandung Institute of Technology, Bandung, Indonesia
*Corresponding Author: Muhammad_ahnaf@sbm-itb.ac.id Accepted: 15 September 2022 | Published: 1 October 2022
DOI:https://doi.org/10.55057/ajrbm.2022.4.3.42
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Abstract: Indonesia's financial literacy index does not match the financial inclusion index, which means that more people have access to financial products and services than people with the skills to make sound financial decisions. These people who do not have enough knowledge to make sound financial decisions can impact the individual and the whole economy for the worse. Therefore, the financial literacy index has to match the financial inclusion index.
Currently, the financial literacy index of Indonesia is 38%, and the financial inclusion index is 76%. P2P lending could potentially become tools to increase financial literacy because, in Indonesia, a significant segment does not have access to credit. This research used the framework of OECD/INFE (2018) to measure the financial literacy score of P2P users, qualitative descriptive analysis to analyze the user's reason for using and hurdles in using P2P lending, and the preference for the strategy to increase financial literacy. This research uses linear regression analysis to determine the relationship between the usage of P2P lending and financial literacy. The result shows that the usage of P2P lending has a positive impact on financial literacy scores and index. The main hurdles and challenges in using P2P lending are the inability to pay back the principal, risk in using P2p, and trust in data security. Finally, the recommended strategies to increase financial literacy are online learning videos, financial education curricula, financial education websites, offline events, social media education, exploratorily learning, and offline learning.
Keywords: financial literacy, peer to peer lending, financial literacy strategy
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1. Introduction
Financial literacy becomes more critical when the uncertainty of the economy is present, and the variability of a financial product increases. In a global crisis, policymakers even show more profound concern regarding the typical lack of financial literacy around the world (Annamaria Lusardi et al., 2014).
Financial literacy is a skill to generate sound financial-decision and achieve financial well- being in terms of the individual; it is a blend of awareness, knowledge, skill, attitude, and behavior(OECD, 2011). Financial knowledge, attitude, and behavior is the core component of financial literacy and the critical factor in measuring financial literacy in prominent survey frameworks such as OECD. Financial knowledge enables people to analyze the news financial landscape, assess financial products and services, and construct financial decisions based on information; financial behavior covers a range of positive and negative behaviors such as
saving, paying bills on time, thoughtful purchasing, and more.; financial attitude influences the decision of whether or not to act or respond (OECD. 2017).
The importance of financial literacy is critical for individuals and collectives. Well-informed and well-educated individuals tend to make better decisions on financial matters for the sake of their well-being and the community to empower economic development (Hogarth, (2022).
Individuals who do not have enough knowledge to make sound financial decisions can impact the individual and the whole economy (Lusardi et al., 2010). Financial literacy is forever essential in every life cycle of a human being. For example, In pre-retirement, financial literacy is found to impact behavior towards credit cards (Allgood and Walstad 2013). The retirement stages are highly associated with more excellent retirement plans and wealth accumulation (Hasting. 2020). Financial literacy helps individuals achieve their financial goals and contribute to the economy.
Increased financial literacy means more people can determine and utilize financial products and services, ultimately leading to increased financial well-being (Jeanne, 2006). Financial literacy has to match financial inclusion; as Greenspan (2001) said, to catch up with the expansion of financial products and services, the consumer has to be financially literate to help them self-manage financial products and services.
Based on OJK, in 2019, The national financial literacy index (38.03%) is significantly lower than the financial inclusion index (76.19%). The occurrence is against what Greenspan (2001) said: financial literacy has to match financial inclusion. The occurrence can cause a problem because it means that out of 76.19% of Indonesian that has access to financial product and services, only 38.03% has the sufficient ability to make sounds financial decision. The other 38.16% is yet to be financially literate.
P2P lending companies can significantly increase financial literacy in Indonesia and increase financial inclusion. On the demand side, more than 70% of middle to lower-income individuals and MSMEs do not have access to credit. In contrast, on the supply side, Indonesia has a low percentage of loan disbursements to GDP (17%) as one of the essential components to boost economic growth is the utilization of credit to increase spending and accelerate production capability, which indicates that there is still an unutilized financing capacity (PwC. 2019).
There is an opportunity to finance the financial needs of middle to lower-income individuals and SMEs with unutilized financing capacity through peer-to-peer lending companies. Along the way, as its customer base grows, the P2P lending company will have to educate Indonesian people about financial literacy to conduct business responsibly on the platform.
There are only a few studies regarding strategies to increase financial literacy, especially in the context of Indonesia and with specific tools such as peer-to-peer lending companies. By synthesizing the literature study and collecting and analyzing data, the research aims to generate the best strategy to increase financial literacy in Indonesia by capitalizing on peer-to- peer lending and identifying the impact of P2P lending adoption on financial literacy and hurdles in using P2P lending in Indonesia.
2. Literature Review
Financial literacy
Financial literacy is the fusion of awareness, knowledge, skill, behavior, and attitude to conduct proper financial decision-making; the end goal is to attain financial well-being (OECD, 2011).
Therefore, the definition is aligned with the definition proposed in several journal articles, such as Dewi et.al (2020), which stated the definition of financial literacy as a single process of making financial decisions based on perceived financial knowledge.
According to Firli (2017), there are five variables influencing financial literacy which are personal sociodemographic characteristics , financial knowledge, financial behavior, financial attitude, and financial training (Firli, 2017)
Financial literacy framework
OECD/INFE(2016) published financial literacy outcomes that are important and relevant to improving daily financial well-being. To become financially literate, an individual must have several core financial literacy competencies. Combining those core competencies, based on an individual’s preference, local and economic factors can sustain and enhance their financial well-being. These core competencies cover:
a. Awareness, knowledge, and understanding
Financial knowledge is a part of financial literacy that enable individuals to compare financial product and services to generate well-informed financial decisions (OECD, 2020).
b. Skills and behaviour
According to OECD measuring financial literacy methodology(2011), financial behavior accounts for the most influence compared to knowledge and attitude. The reason is that behavior and action are essential in creating a favorable financial situation and welfare (OECD, 2020). Three essential behaviors are saving money, planning, making thoughtful purchases, and tracking cash flow (OECD, 2020).
c. Confidence, motivation, and attitudes
A combination of knowledge and behavior will not generate financial well-being without a financial attitude because attitude influences the decision to act (OECD, 2020).
The impact of financial literacy
Financial literacy is highly important and beneficial for individuals and the economy. The Higher level the financial literacy of an individual, the more rational financial decision-making they conduct (Dewi., 2020). Not only in decision-making, but financial literacy can also increase economic opportunities that enable individuals to overcome their inability to take full advantage of technological advances and product innovation (Greenspan, 2002). Financial literacy literatures has one common message: better financial decision-making positively impacts individuals by increasing their financial well-being.
OJK's (2016) statement regarding the significant benefits of financial literacy is aligned with the published journal. OJK sees the benefits of financial literacy in the relationship between the financial industry and the consumer. For financial industry companies, an increase in financial literacy will increase the usage of financial products and services, automatically increasing the financial industry company's sustainability (OJK, 2016). For the consumer, an increase in financial literacy means that consumer capability to choose the financial product according to needs and capability is improving; it will ultimately lead to better financial well- being (OJK, 2016). Therefore, as Lusardi et.al, (2001) have concluded in their journal, financial literacy is highly important for individuals and the economy of the current and future generations.
The opposite of financial literacy is financial illiteracy. This problem is quite common in Indonesia due to a significantly different gap between financial literacy and financial inclusion in 2019. Financial illiteracy is a common problem, making it highly challenging for ordinary consumer and their colleagues to cope and participate in an ever more complex economic environment (Lusardi et.al, 2011). Financial illiteracy is non only threatens individual financial well-being but also the stability of the global financial system (Lusardi et.al, 2011). Based on a national survey of financial literacy of OJK, 2013, Indonesian tend to have insufficient financial knowledge and are incapable of conducting financial decision-making (OJK, 2016).
The urgency to utilize p2p lending in Indonesia
Indonesia has a 17% percentage of loan disburse to GDP, which is considered low compared to developed countries such as the USA (78%), Japan (57%), Korea (94%), and other developed countries; it indicates that Indonesia's financing capacity is not yet fully utilized (PwC,2019).
Individual and MSMEs in the lower and middle expenditure per capita segments have significant roles in Indonesia's economy as they account for the majority of the population.
They account for 186 out of 188 million working-age individuals and 63 million businesses out of 63 million businesses in Indonesia (BPS, 2018). 71% percent of individuals in working- age middle to lower expenditure currently do not have access to credit, and 74% of business does not have access to credit (PwC,2019). Most Indonesian financial product usage is concentrated in conventional banking services (OJK, 2016).
P2P lending could be and is a current answer to increase the low loan disbursement and high percentage of the population whom does not have access to credit. The user of P2P lending is widespread in many different demographic groups. For farmers, P2P lending may help them expand their land ownership and obtain farmer training; for businesswomen, P2P lending may enable them to acquire working capital to kickstart their business; for students, P2P may enable them to pay for their tuition and help them obtain their degree (PwC,2019).
The impact of P2P lending in Indonesia
Indonesia’s loan disbursement is projected to increase significantly with a CAGR of 214% in 2019 and more than Rp 200 trillion in loan disbursement in 2020. Even though this is not fully achieved due to pandemics, the critical takeaway is that Indonesia has the momentum and capability to excel in its loan disbursement. PwC noted that one of the critical drivers of the significant increase in loan disbursement is the increasing use of fintech (P2P) lending, collaboration with other digital platforms, and acceptance from various customer segments.
In terms of impact, P2P lending has contributed Rp19.4 trillion of estimated additional credit access to SMEs, 12.4% cumulative contribution to individual credit access, andRp 45 and Rp35 trillion gross value added, respectively, in the productive and consumptive loan (PwC,2019).
Financial Literacy Strategy in other countries
Many countries has started financial literacy programs. For example in Australia, the financial literacy foundation/institution in Australia is ASIC, and they have several programs to increase Australian literacy, such as financial information delivered online (FIDO), MoneySmart, MoneySmart Week, Mortgage health campaign, etc. (Worthington et.al, 2013). Below are the explanation and research on several countries financial literacy strategy :
Table 1: National Financial Literacy Strategy in Various Countries, Source: Lucic, 2017
Financial Literacy Institution
National Financial Literacy Strategy
Australia Australian Securities and
Investments Commission (ASIC)
ASIC provides financial education programs that cover four main areas, including savings, spending, investing, and donations Australia implements financial education as part of an established national curriculum. Each of Australia's eight states is responsible for implementing financial education. Financial literacy is taught by students aged 5 to 17 years, from elementary school to grade 2 in high school, which can be learned through compulsory subjects such as mathematics, economics, business, and English.
Students from involved schools showed significantly higher levels of financial literacy than students from uninvolved schools.
Through personal and professional support, the MoneySmart ASIC teaching program provides educators with curriculum-aligned teaching tools to successfully apply financial education to their classrooms.
Therefore, a special module on financial health for teachers has been developed. Financial education training directly impacts teachers' ability to use available teaching tools and resources to transfer knowledge. Teacher training can also indirectly increase effectiveness.
the United States
Financial Literacy and Education Commission (FLEC)
To promote financial literacy, improve national financial welfare, and improve financial education outcomes.
Through partnerships between federal, state, local, and not-for- profit associations, strategies will be pursued to implement, identify, advance, and deploy financial education programs that are effective in infrastructure improvement.
FLEC has developed the My Money Five website to summarize the key areas of financial knowledge, to support financial decision- making, and the Building Blocks website to help youth achieve financial literacy, to help parents and teachers understand how young adults know financial norms and skills, and their financial decision making.
Financial literacy is emphasized from an early age to young adults as a national strategy so they can participate in a complex financial environment.
United Kingdom
Money Advice Service (MAS)
Money Advice Service (MAS) is a government-funded program in the form of free financial services. It focuses on improving financial decision-making and money management, overcoming financial difficulties among young adults and evaluating the financial education strategy implemented in 2014.
Children can easily acquire new knowledge, form attitudes, and adopt habits, so it is important to emphasize financial education programs at their age.
In the UK, financial education is included in the curriculum, it is
incorporated into the curriculum as part of Mathematics, Citizenship Personal, Social, Health and Economics for students aged 5 to 18
In training, classroom lessons, group work, learning materials, games, websites and applications, the Intervention aims to develop financial capabilities and strengthen life skills such as employability, entrepreneurship, and self-reliance among young adults.
Its contents include budgeting, planning, spending and savings decisions, wants and needs, and understanding financial products and concepts.
Financial Literacy Strategy in Indonesia
The most current (2022) financial literacy in Indonesia are:
Table 3: Financial Literacy Program in Indonesia, Source : OJK, 2021
Program Detail
Financial education infrastructure
strengthening
To develop financial education infrastructure through a life cycle approach, OJK developed financial literacy book in series based on each human life cycle stage.
OJK developed a learning management system (LMS) to enable integrated learning and training as the centre to learn, train, and manage knowledge in financial literacy topics. The LMS consists of three-level:
basic, intermediate, and advanced and each level has nine models. The topic of the model varies, such as introduction about OJK, illegal fintech, financial planning, baking, stock market, insurance, leasing, pension, financial technology, etc
Digitalisasi Edukasi Keuangan
Financial education digitalization
OJK sustainably implements financial education activity through digital media. The media used are minisite and social media to complement offline financial education activity. Also, OJK is partnering with influencers to promote the program to increase financial literacy through social media.
Financial education community and massive education
OJK socialized and educated financial topics community, such as peasants, fishermen, housewives/moms, SMEs, students, employees, college students, professionals, disability, retirees, and people in 3T to increase the financial inclusion; OJK also held massive financial education program through a cultural exhibition, financial expo, and booth in several occasions.
Financial education
to support
government program
To support government programs such as basic needs assistant (BPNT), OJK is enhancing the education and socialization of BNPT to the governmental area, supporting agent, and Bank as the intermediaries, as well as the officer in the particular area
Financial education increase syariah and
stock market
financial literacy
Based on the OJK survey, the financial literacy index on Syariah and stock is low. Therefore, OJK held several programs such as :
● Gebyar Safari Ramadhan
● Islamic Banking (IB) Vaganza which consists of a series of educative activities
● Investment galery in college to promote investment in the stock market
● Seris of financial literacy webinar focusing on stock and money market topic
Developing HR infrastructure
through training of trainers (TOT)
OJK has a training of trainers (ToT) program that is held yearly. ToT is to educate teachers of all levels, from kindergarten to university, about financial literacy. ToT is also implemented in the religious groups in Indonesia.
3. Methodology
Data collection
Firstly, secondary data is used to lay the foundation for the research. Secondary data is data that other researchers collect for different research purposes (Hox and Boejie, 2005).
Secondary data is also needed to enrich the information to support the research. This study will collect data through journeys, surveys, new regulations or strategies, and other relevant publications.
The researcher originally collects primary data for a specific research purpose (Hox and Boejie, 2005). The primary data is collected through questionnaires distributed to people living in Indonesia and using a P2P lending platform. The dichotomy of the respondents is divided into two groups: those living in Java and outside Java; people who live in Java have better financial literacy because they are the center of Indonesia's economic growth (Hidajat,2020).
Furthermore, 21 out of 34 provinces in Indonesia in Indonesia has financial literacy index below the national average, and most of them are outside Java.
The questionnaire is about the reasons for people using P2P lending and their knowledge about P2P lending, the financial literacy level of individuals who use p2p lending, the challenge faced by people to use P2P lending, and the most suitable approach for financial education.
Sample size
According to Israel (1992), the researcher needs to distribute the questionnaires to at least 100 respondents each of both who lived in Java and outside the Java group of more than 100,000 population and the researcher uses ±7% error. The total number of respondents is 200. This method of sampling size is chosen because the sample size is suitable for the time and budget constraints of this research.
Data analysis method
Descriptive statistics are used to summarize data in an organized manner by describing the relationship between variables in a sample or population. Calculating descriptive statistics represents a vital first step when conducting research and should always occur before making inferential statistical comparisons (Kaur et.al, 2018). The descriptive statistics is utilized to
analyze the demographic data of the respondents and the most suitable strategies based on the respondents recommendation.
Qualitative description research objective is to provide insightful description of the experience depicted in easy to understood language (sullivan-Bolyai et al. 2005). The qualitative descriptive analysis is used to analyze the reason to use P2P lending, hurdles and challenges faced by P2P user, and strategy/method preference in increasing financial literacy.
Linear regression analysis is used to predict the value of a variable based on the value of another variable (IBM). The variable to predict is called dependent variable and the variable used to predict the other variable’s value is called the independent variable. In this research, linear regression analysis is used to analysis the relationship between the usage of P2P lending as main choice for lending provider and financial literacy score.
According to OECD measuring financial literacy methodology(2011), financial behaviour accounts for the most influence compared to knowledge and attitude. The reason is that behaviour and action are important in creating a favourable financial situation and welfare (OECD, 2020). The appendix 4 is explaining to measure the financial literacy score by calculating the score of financial knowledge, attitude, and behavior.
4. Data Analysis and Discussion
Respondent’s P2P lending knowledge
The average correct answer to the questions regarding P2P lending is 56.75%. The implication is that out of 100 people that use lending, only 57 have sufficient knowledge of P2P lending and its process.
Table 4: Respondent's Average Knowledge Level on P2P Lending
Q1 Q2 Q3 AVG
65.37% 26.34% 78.54% 56.75%
Financial literacy of P2P lending user
The financial literacy index of P2P lending users is 47%. The financial literacy index is obtained from the number of respondents categorized as well literate; this method is also used by OJK in its consultation paper about the framework to increase financial literacy and inclusion in Indonesia (2016). The critical factor for analyzing the financial literacy score are knowledge, ability, and experience in:
1) Planning and managing finances
2) Choosing and using financial product and services 3) Financial behaviour and attitude
4) Financial knowledge
Of 205% of respondents, 47% are categorized as well literate, and 53% are categorized as less literate. The minimum requirement for a respondent to be included in the well-literate category is that their score has to be 47 or more. The detailed calculation of the minimum score is in table 4.4.
Table 5: Financial Literacy Index Categorization Method
Total Score Total score/2 Round up
93 46.5 47
Figure 1: Respondent based on Financial Literacy Index (well and less literate)
The average financial literacy score is 47.61, below the standard to be categorized as well literate. The standard score for well literate is answering 47/93 or 50.53% of the question correctly. The standard deviation of the score of financial literacy is 11.192, and the variance is 125.25.
Figure 2: Histogram of Respondent's Financial Literacy Score
The impact of P2P lending on the rate of financial literacy in Indonesia
Figure 3: Comparison between National and P2P User's Financial Literacy Index
P2P lending has a positive impact on the financial literacy index. The result shows that P2P user has a 47% financial literacy index, which is higher by 9% than Indonesia’s national financial literacy index. The analysis also shows that the usage of P2P lending as the main choice explains 13% of the financial literacy score of the P2P user. In addition, the result shows that the financial literacy index of people who use P2P as the main choice is better than those who do not use P2P as the main choice as lending providers. These three results suggest that the adoption of P2P lending has an impact on the financial literacy index, and the impact is more of a positive impact.
The results are against some existing literature. Hidajat (2020) stated that borrowers in P2P lending have very poor financial literacy, especially regarding the mechanism of credit card loans. In this study, most of the P2P user is categorized as well literate, which happens because the demographic of P2P lending users in Indonesia is different. According to AFTECH (2020), only 22% of P2P users have an income below Rp5.000.000, while the middle class in Indonesia is someone who has an income between Rp1.200.000 and Rp6.000.000. Therefore the financial literacy of P2P users is expected to be better than what Hidajat (2020) stated. This statement is supported by Firli (2017), who that stated income is one of the variables influencing financial literacy. Lusardi et.al, (2011) added that the enhancement of financial literacy needs to be focused on lower income and least educated because they have poorer financial literacy.
Hurdles and challenges of P2P lending implementation in Indonesia
The hurdles and challenges of P2P lending in Indonesia are divided into three categories: loan components, risk, and technicalities. In loan components, the result shows that the main problems are unable paying back the loan and interest, debt collector threat, loan and tenor limit, and high-interest rate (borrower perspective). In addition, the result shows that the main problems are a data security risk, trust issues from lender to borrower, a non-collateral system, and inflexible time to withdraw investment. In technicalities, the result shows that the main problems are a requirement to use P2P for individual and SME internet access and knowledge limitation regarding P2P lending. Of the three categories, loan components, risk, and technicalities are the order from the most common to the least common problems in P2P users.
This research also provides results regarding user reasons for using P2P lending. The result shows that the reasons users use peer-to-peer lending are time/duration to get a loan in P2P, non-collateral system, other factors, easiness to use and get a loan, and trust in the P2P platform of its importance score. The respondents explained that the other factor included the financial situation of the user, return rate for the lender, referral, service quality, and user curiosity about P2P lending.
The result is that half support and half contradict what Rosavina et.al, (2019) said: loan process, interest rates, loan cost, loan amount, and loan flexibility influence user intention to use P2P lending. Ichwan et.al, (2019) adds that, for the lender, a millennial’s intention to invest in P2P lending is positively correlated and strongly influenced by perceived ease of use, perceived knowledge, and perceived trust variables; thus increase in knowledge regarding P2P lending platform will increase the perceived ease of use and trust in the P2P lending platform. The reason to use indicates that the loan process and ease of use influence user intention to use P2P lending, which aligns with what Rosavina et.al, (2019) and Icwan et.al, (2019) has been said.
However, they contradict results in hurdles and challenges where the respondents stated that interest rate, loan cost, loan limit, trust in P2P platform and borrower, and knowledge limitation are problems they encounter when using P2P lending platform. The result might be different due to the demographic between the P2P respondents in this research and existing research.
Also, this research has limitations related to its respondent demographic.
Strategy and Method Preference
The strategy and method preferences showcase the respondent's opinion on the most suitable and effective strategy and method to increase their financial literacy. The base strategy and method choices are based on the national strategy to increase financial literacy in Indonesia by OJK (2021). This part is analyzed to answer the third research question.
The data collected from 205 respondents shows that the financial education book series got an average of 3.49 scores, the offline event of the bazaar and the financial-related event got an average of 3.51 scores, the financial education curriculum got an average of 3.84 scores, online learning video gets an average 3.92 scores, financial education website get an average 3.68 scores, and respondents program recommendation get an average 4.03 scores.
Figure 5. Respondent's Strategy and Method Preferences for Financial Literacy
The respondent's program recommendation gets an average of 4.03 scores. Makes it ranked first in the strategy and method preferences. The recommendation is divided into four categories which are online, offline, hybrid, and specific methods, that are based on the descriptive qualitative analysis. The elaboration of the respondent's recommendations are :
Table 5: The Strategies Description
Strategy Definition / Description
social media education practice in using social media to enhance the knowledge regarding particular topics by utilizing social media content online advertisement advertisement in online media, including social media ads
and influencers
video learning Education content in the form of video about financial literacy
trend-based content Content that utilize the rise of something happening (trend) as its main aspect
formal education curriculum
Embedding financial literacy in the formal national curriculum
reading material Financial literacy education material in the form of readable online or offline form
direct discussion Face-to-face discussion between the financial literacy campaigner and audience
mass socialization Teaching and appeal big audiences
exploratory learning Learn experience via exploring surroundings, reality, and lived and virtual experiences with tutorials and support from colleagues (IGI, 2022)
heuristic approach method of teaching by discovering something by themself and learning it on their own rather than telling things to student (Cambridge, 2022)
friendly approach Friend like approach, not too lecturing and more discussion family-based approach Educating the audiences by educating the other family
member first
long-term program Education program that aim to produce longer term result attractive approach Program that are using an appeal for each segments routine approach Program that held routinely
easy to learn approach Provide levelling system in the program and also easy to understand words
early age approach Educating the younger audience
holistic approach Scope of learning that cover all aspect of financial realistic / problem-
based approach
Teaching a practical material that are based day to day problem
learn about budgeting Include material about budgeting digital finance material Include material about digital finance
Suitable strategy to increase financial literacy by capitalizing on P2P lending
The result shows that respondents/user recommendations, online learning videos, financial education curriculum, financial education website, the offline event of the bazaar, and financial-related events are suitable for P2P lending users. Only the financial education book series strategy is categorized as not suitable. The respondent’s program/strategy recommendations are
● online strategies with the webinar, social media education, and video learning as the main strategies;
● offline strategies with direct discussion, financial education curriculum, and seminar as the main strategies;
● hybrid strategies with exploratory learning and mass socialization as the primary strategy;
and
● specific/particular method with attractive and easy-to-learn approaches as the main strategies.
The result is aligned with what Indonesia has done (OJK, 2021) except for the financial education book series. Other countries have also implemented some of these strategies.
According to Lucic (2017), Australia is using an educator training program, financial education curriculum, and financial literacy website as its financial literacy strategy; The United States implemented financial literacy website and early approach to financial education as its financial literacy strategy; the United Kingdom implemented exploratory learning, financial education curriculum, and early age approach of financial literacy as its financial literacy strategy; the Republic of Croatia is utilizing financial education website, exploratory learning, reading materials, and routine offline event as its financial literacy strategy. The problem with Indonesia is to tap into different demographic segments, and a large number of Indonesians in implementing financial literacy strategy; as OJK (2021) said, the financial literacy strategy of Indonesia is still only concentrated in Java and only taps into a few audiences.
5. Conclusion
Theoretical implication
The research found three meaningful findings following the research questions and aims. The findings are as below:
● The adoption of P2P lending has a positive impact on financial literacy. The research finds that the financial literacy index in P2P users is higher than Indonesia's national financial literacy index. Moreover, the linear regression result also indicates a relationship between financial literacy and the usage of P2P as the main choice for lending providers.
● P2P has not yet peaked in terms of its impact on P2P lending because of the hurdles and challenges faced by the P2P lending user. The user faced hurdles in the P2P loan component (including the inability to pay for interest and principal of the loan), risk as borrower and lender, and technicalities in using the P2P lending platform.
● The most suitable strategy for P2P lending users in Indonesia are online education via webinars and social media, offline education through direct discussion and seminar, hybrid education by implementing exploratory learning and mas socialization, implementing specific methods such as easy to approach and attractive approach, online learning video, financial education curriculum, financial education website, and offline event of the bazaar and related financial event. On the other hand, the financial education book series strategy is unsuitable for the user.
Practical implication
The practical implication of this research is that P2P lending can become one of the tools to be capitalized to increase Indonesia's financial literacy. This is because the P2P lending user has a better financial literacy index than the national level. Moreover, the market segment of P2P lending is widespread and is more likely to capture the low-end market, especially the market that does not have access to credit. Therefore, this provides opportunity for P2P lending and the government to educate the market segment of P2P lending by utilizing the government financial literacy strategy because the research shows that the Indonesian government financial literacy strategy is most suitable for the P2P lending user to increase their financial literacy level.
Managerial implication
For P2P lending companies, the research provides insights about hurdles and challenges the user of P2P face and ways to increase the financial literacy of the user by capitalizing on the suitable strategies mentioned in chapter 4. P2P lending companies can adjust to solve the hurdles and challenges the user faces. The first adjustment is highly related to the third research aim: to increase financial literacy and the user's knowledge through a financial literacy program. Secondly, P2P can utilize digital technology to decrease the risk in P2P lending by implementing digital credit scoring on the borrower. Thirdly, P2P can customize credit assessment models and utilize behavioral data to identify typical attributes for interest charges.
For the government, the financial service authority (OJK) can collaborate with P2P lending companies to implement financial literacy strategy in Indonesia. OJK can improve the existing strategy as most of its already suitable for P2P users and develop new strategies to increase financial literacy further. The collaboration between the government and the P2P lending companies will benefit both parties because the citizen has a double role as a citizen of Indonesia and as a user of P2P lending.
Implementation and recommendation
The most effective implementation of this research can be done through the collaboration between the government, specifically the financial service authority, and P2P lending company. The reason is because this research has added one more proof that the usage of P2P lending is positively affecting financial literacy. The previous existing literature also shows that increased financial literacy positively influences the bottom line of P2P lending. The collaboration can be done through P2P sales and communication channel education and initiation of team consist of member of P2P lending companies and financial service authority (OJK) to implement the recommended strategies in this research.
The strategy is divided into direct and continuous. Direct strategy means the strategy program is conducted live and face to face to the audience. Continuous strategy means the strategy is not conducted face to face and accessible anytime and anywhere as long as the user have an internet access. The main theme of the strategy is financial literacy and utilization of P2P lending. The sub topic are various financial product and service, how to make sound financial decision, and P2P lending 101 (introduction and knowledge to use P2P lending). The target of the strategy are office worker, high school and university students, and hamlet (Rukun Warga).
The direct strategy consist of seminar, webinar, mass socialization, and exploratory learning.
Seminar and mass socialization is conducted mainly in Java and Bali in the early year of implementation because most of the consumer of P2P lending is based in Java and Bali.
Webinar is highly recommended to touch on the user outside Java because the implementation if time and cost efficient. Exploratory learning is embedded in the other three programs in the form of live and hands on financial planning process.
The continuous strategy consists of video learning, direct discussion, and social media education. The video learning and direct discussion is conducted through website that created by financial service authority to increase financial literacy, covering the main theme and subtopic. Direct discussion is conducted through live chat feature in the website. Social media education is implemented in Instagram and Tiktok as two of the most used social media right now. The social media content will also adopt the main theme, with addition of entertainment content to increase awareness and interest.
The strategy will decrease the user problem of unable to payback interest and principal, sceptical about P2P lending, complicated requirement, and low financial literacy. The
implementation of the strategy is going to increase the top line of P2P lending, national financial literacy of Indonesia, and user financial well-being.
Limitation and future research
This research still has a limitation; therefore, further research with more respondents and broader demographic aspects is needed to fully understand and comprehend the impact of P2P on financial literacy, hurdles, and challenges in using P2P. Suitable strategies to increase financial literacy because most of the aspects in demographic except education are insignificant based on the linear regression analysis. Adding questions in the questionnaire about the income level of the P2P user also might help in enhancing the insights. Research about the financial literacy on P2P users may also analyze the financial literacy of P2P users to compare the financial literacy score because the latest financial literacy survey in Indonesia was conducted in 2019, while this research will be conducted in 2022; that way, the comparison will be more accurate.
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