Strategy to Increase Financial Literacy in Indonesia by Capitalize on Peer to Peer Lending

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.