Jokowi Concerned that Many People Are Trapped in Illegal Loans

President Joko Widodo said the wave of digitalization in various sectors was moving faster due to the COVID-19 pandemic. This is evidenced by the proliferation of innovations in banking technology, insurance, and other digital-based financial transactions. Unfortunately, this development is not in line with the increase in financial literacy so that many are entangled in illegal online loans (loans).

“But at the same time I also obtained information that many frauds and financial crimes had occurred. I heard that the lower class were deceived and ensnared in high interest rates by online loans that were pressured in various ways to repay their loans,” said Jokowi at the 2021 OJK Virtual Innovation Day event, at the State Palace, Jakarta, Monday (11/10).

Therefore, he said, the rapid development of digitalization must be guarded and at the same time facilitated so that it can grow healthy for the community’s economy. According to him, if this is handled appropriately and quickly, Indonesia has the potential to become a digital giant after China and India and can bring Indonesia to become the 7th largest economy in the world by 2030.

He said the momentum of this digitalization wave must be addressed by building a strong and sustainable digital financial ecosystem. This digital financial ecosystem, he said, must be responsible for mitigating the risk of possible legal and social problems to prevent losses and increase protection for the community.

President Jokowi spoke with a number of stakeholders in the financial services sector from within and outside the country.  (Setpres Bureau)

President Jokowi spoke with a number of stakeholders in the financial services sector from within and outside the country. (Setpres Bureau)

The former governor of DKI Jakarta also emphasized that financing financial technology (fintech) must be encouraged for productive activities that can build easy access for people who are not covered by banking services, as well as help MSME players to do more digital transactions which he believes will make the MSMEs move up a grade.

The President also reminded the Financial Services Authority (OJK) to accelerate financial literacy and digital literacy that are not centered on the island of Java alone. According to him, this will accelerate the transformation of digital finance to all corners of the country.

“Therefore I ask the entire financial services industry to carry out financial literacy and digital literacy programs starting from the village, starting from the periphery, not only so that people can take advantage of services from the financial industry, but also to facilitate their entrepreneurship with low risk,” he explained.

The President hopes that a strong and sustainable digital financial ecosystem will continue to be maintained, so that it can accelerate the movement of an inclusive national economy and contribute more to economic recovery due to the COVID-19 pandemic.

“The commitment of partisanship and hard work, ladies and gentlemen, is eagerly awaited by economic actors, especially small economic actors, especially micro, small and medium enterprises to immediately rise from the impact of the COVID-19 pandemic and be facilitated to take advantage of new opportunities that have emerged,” he concluded.

OJK Committed to Mitigating Digital Transformation Risk

On the same occasion, Chairman of the Board of Commissioners of the Financial Services Authority (OJK) Wimboh Santoso stated that his party was strongly committed and took a pro-active stance in mitigating cyber risks that might arise from digital transformation in the financial sector.

Chairman of DK OJK Wimboh Santoso revealed that his party is committed to increasing public financial literacy in line with the incessant digital transformation in the financial services sector.  (Setpres RI)

Chairman of DK OJK Wimboh Santoso revealed that his party is committed to increasing public financial literacy in line with the incessant digital transformation in the financial services sector. (Setpres RI)

“The focus is how cyber security must be improved and also how the protection of personal data is also a concern for us who work together with all stakeholders so that the public can be protected in relation to these various risks, “said Wimboh.

In order to improve digital financial literacy for all levels of society, his party also collaborates with several other parties such as the Asian Development Bank (ADB). This collaboration is expected to overcome the challenges of understanding gaps and increase public awareness of the various digital financial products and services offered.

“The OJK’s real efforts in overcoming this gap are through collaboration with the Asian Development Bank (ADB) in compiling a Fintech book and creating a digital financial literacy program module with the topic of Peer to Peer Lending, supported by the World Bank and will be launched soon,” he concluded.

Economic Terror

Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira, the existence of illegal loans caused considerable losses. How could he not, he saw that there was an illegal loan that charged high interest up to more than 300 percent of the loan principal.

“That is very unfair, and humane. Then illegal borrowing plays with the provision of unreasonable late fees, fines with interest can be higher fines. So this is categorized as economic terror,” he told Mouab.

Director of the Center of Economic and Law Studies (CELIOS), Bhima Yudhistira.  (Photo: Mouab)

Director of the Center of Economic and Law Studies (CELIOS), Bhima Yudhistira. (Photo: Mouab)

He said that supervising illegal lending is very difficult because it is not registered and licensed under the OJK, so that the speed of the regulator in eradicating it is increasingly hampered, especially since there are quite a lot of illegal lending servers based abroad.

“When blocked, this pinjol easily creates new marketing, or new applications and websites. So the regulator’s steps are always inferior to illegal loans. Moreover, there is a legal vacuum because there is no Fintech Law, or the Personal Data Protection Law, so it is very difficult to transfer illegal loans,” he explained.

Bhima mentions many factors that make people tempted by illegal loans. One of them is the ratio of bank credit to Gross Domestic Product (GDP) which is too low. The World Bank noted that the ratio of bank credit to GDP in Indonesia only reached 38.7 percent, far from other countries such as Malaysia (134 percent), Thailand (160.3 percent) and Singapore (132 percent) which resulted in most of the population in the country not being obtain equitable access to financing from banking institutions.

“Then digital penetration reaches the rural level and at all levels of society becomes an easy target for out-of-pocket marketing. Just click, fill out the form, the money is transferred. The convenience offered by this illegal loan makes potential victims seem to have no other option when the need for funds quickly increases. Maybe there are those who have been laid off because of the pandemic, there are those who pay for the needs of school children, the cost of basic needs, which finally sees this loan as the first option,” he explained.

Tips to Avoid Illegal Borrowing

He advised the public, if you really need a loan of funds to always check whether the loan is registered or licensed under the OJK, which can be easily checked directly on the OJK website. Then, he also emphasized that you should not take, withdraw and apply for loans via SMS, because there are no official financial institutions that offer their services or products via SMS.

“Then, how to do this supervision for the community must also involve educational institutions, so that from an early age the dangers of online loans, especially illegal loans that harm the community because some financial literacy is still low. So financial literacy must be improved by studying the product in more detail, studying contracts. Don’t want personal data, especially sensitive ones, such as the name of the biological mother, date of birth, data on the e-KTP, the SIM is just given with photos and application permissions to be able to access this gallery, which needs to be considered,” he said.

He advised the public to borrow as much as possible from formal financial institutions. He gave an example of the community being able to make business loans through People’s Business Credit (KUR) to state-owned banks, then there is Ultra Micro (Umi) financing which has very small interest and the loan process is relatively easy, as well as borrowing from cooperatives, People’s Pre-Credit Banks (BPR) and unsecured credit (KTA) in banking. [gi/ab]

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