Peer-To-Peer Lending as an Alternative Financing Innovation to Promote Financial Inclusion in Indonesia

Studies Management and Finance Economics, of Journal 0504-2644 (online): ISSN 0490,-2644 (print): ISSN 5202 November 11 Issue 80 Volume 8.317 Factor: Impact ,19-i11-10.47191/jefms/v8 DOI: Article 3057 -7301 No: Page JEFMS, Volume 08 Issue 11 November 2025 www.ijefm.co.in Page 7301 Peer-To-Peer Lending as an Alternative Financing Innovation to Promote Financial Inclusion in Indonesia Wahyu Panji Nugrahani1, Leni Nur Pratiwi2, John Henry Wijaya3 1,2,3Faculty of Economic and Business, Widyatama University, Bandung, Indonesia ABSTRACT: This study aims to analyze the role of Peer-to-Peer (P2P) Lending as an alternative financing innovation in promoting financial inclusion in Indonesia. Using a quantitative approach with secondary data from the Financial Services Authority (OJK) and survey data from micro, small, and medium enterprises (MSMEs), this research evaluates the extent to which digital-based financing can enhance capital access, financial efficiency, and business independence. The findings indicate that P2P lending plays a significant role in expanding access to financing, particularly for small business owners who are underserved by conventional financial institutions. However, credit default risk and low financial literacy remain major challenges that must be managed through effective regulation and financial education. The implications of this study highlight the importance of collaboration between regulators, fintech platforms, and business actors to create an inclusive and sustainable digital financial ecosystem. KEYWORDS: Peer-to-Peer Lending, Financial Inclusion, Fintech, Alternative Financing, Financial Management I. INTRODUCTION The development of financial technology (fintech) has revolutionized the global financial system by introducing digital innovations that enhance efficiency, transparency, and inclusiveness in financial services (Tambunan, 2021). In Indonesia, the advancement of fintech has significantly influenced the national financing landscape, particularly through the peer-to-peer (P2P) lending mechanism. This model enables direct interaction between lenders and borrowers without the need for conventional financial intermediaries such as banks (Khuntia et al 2025). The main advantage of this system lies in its ability to accelerate fund disbursement, reduce transaction costs, and expand financing access for segments of society that have been underserved by formal financial institutions (Nagarawati et al., 2024). The growth of P2P lending in Indonesia in recent years has shown a remarkably rapid trend. According to the Financial Services Authority (OJK, 2023), the number of licensed fintech lending providers has reached more than 100 companies, with total cumulative loan disbursements exceeding IDR 200 trillion by the end of 2023. This increase not only reflects public trust in digital financial services but also signifies a paradigm shift from the traditional financial system toward a technology-based financing ecosystem (AFPI, 2024). The micro, small, and medium enterprises (MSME) sector has been the most benefited group, as P2P lending offers non-collateralized financing alternatives and faster verification processes compared to conventional banking (Susanti et al., 2025). In reality, the financial access gap remains a major challenge for Indonesia’s national financial system. Based on the 2022 National Survey on Financial Literacy and Inclusion (SNLIK) by OJK, Indonesia’s financial inclusion rate reached 85.1 percent, leaving around 15 percent of the population without access to formal financial services. This condition indicates that government efforts to expand financial inclusion still face obstacles, particularly in rural areas and among low-income groups that struggle to access conventional banking services (OJK, 2022). Peer-to-peer lending has strategic potential as an innovative alternative financing mechanism that can bridge this gap in formal financial access. Through the use of digital algorithms, big data analysis, and online verification systems, P2P lending can assess borrowers’ creditworthiness more efficiently and inclusively. This aligns with the main goal of financial inclusion — to provide broad access to formal financial services for all levels of society to promote equitable economic growth (Maulana dan WIharno, 2022). However, the rapid expansion of P2P lending also poses challenges in terms of risk governance and the sustainability of the digital financial system. Default risk, digital fraud, low financial literacy, and suboptimal regulation are critical issues that must be examined comprehensively to ensure that fintech development yields economic benefits without creating financial instability Peer-To-Peer Lending as an Alternative Financing Innovation to Promote Financial Inclusion in Indonesia JEFMS, Volume 08 Issue 11 November 2025 www.ijefm.co.in Page 7302 (Fauzi 2024; Chaterjee, 2025). Therefore, an academic study on the role of P2P lending in strengthening financial inclusion is essential—not only to explore its innovative potential but also to evaluate risk management and regulatory effectiveness. Based on the above background, this study focuses on evaluating the extent to which peer-to-peer lending contributes to improving financial inclusion in Indonesia by examining aspects of financing accessibility, financial management efficiency, and system sustainability challenges. The study also seeks to make theoretical contributions to the literature on fintech and financial management, while providing policy recommendations for regulators and industry players in building an inclusive, transparent, and sustainable digital financial ecosystem. II. LITERATURE REVIEW A. The Concept of Peer-to-Peer Lending Peer-to-Peer (P2P) lending is an innovation in the digital financial system that enables lenders and borrowers to connect through online platforms without the need for traditional financial intermediaries. This model utilizes technologies such as big data analytics, machine learning, and digital verification to assess creditworthiness more quickly, efficiently, and data-driven (Tiwati et al., 2024). The use of these technologies allows P2P lending platforms to perform credit scoring based on various nontraditional data sources, including digital transaction records, social media behavior, and digital payment histories. Consequently, this mechanism expands financial access for groups previously excluded from formal financial institutions (Tiwari et al., 2024). Moreover, one of the primary advantages of P2P lending lies in its ability to reduce operational costs and accelerate the financing process compared to conventional banking systems (Armein et al, 2024). The fully online application and disbursement process make this service particularly relevant amid the growing demand for fast and inclusive financing—especially among micro, small, and medium enterprises (MSMEs), which often face capital access constraints due to limited collateral and insufficient credit history (Armein et al., 2024). B. Financial Inclusion Financial inclusion encompasses efforts to provide access to formal financial services for all segments of society, including individuals and business groups traditionally excluded from conventional banking systems (Afeef et al., 2024). Its objectives go beyond mere participation in the financial system; it aims to strengthen economic stability, reduce social inequality, and promote sustainable economic growth. In this context, financial technology (fintech)—particularly the Peer-to-Peer (P2P) lending model— plays a strategic role in expanding financial inclusion by offering financing solutions that are accessible, efficient, and adaptable to the needs of modern society. P2P lending contributes significantly to broadening access to finance, especially for the unbanked and underbanked populations—those without bank accounts or access to formal financial products. Through digital platforms, individuals can apply for loans online with faster processing times, no collateral requirements, and assessments based on digital data analytics (alternative data), such as online transaction histories, consumption behavior, and bill payment records (Golic, 2025). This model enables P2P lending providers to evaluate borrowers’ creditworthiness using technology-driven approaches like machine learning and big data analytics, thereby enhancing efficiency and reducing bias in the credit assessment process (JAYARAM, 2024). III. METHOD This study employs a quantitative descriptive approach aimed at analyzing the relationship between the use of Peer-to-Peer (P2P) lending platforms and the level of financial inclusion among micro, small, and medium enterprises (MSMEs) in Indonesia. The research focuses on understanding the extent to which digital financing services influence access to capital and the efficiency of financial management within MSMEs. The data utilized in this study consist of both primary and secondary data. Primary data were obtained through direct surveys involving 150 MSME actors who use P2P lending platforms across three provinces with high levels of digital economic activity— Jakarta, West Java, and East Java. Respondents were selected using a purposive sampling method, with criteria requiring them to have used P2P lending services for at least the past six months for business financing purposes. The primary data were collected using a structured questionnaire containing questions related to platform usage intensity, ease of financing access, and the perceived impact on business financial performance. Data processing and analysis were conducted using SmartPLS (Partial Least Squares) software, which allows for testing of structural models and latent variable relationships simultaneously. This analytical approach provides a comprehensive empirical overview of the role of P2P lending in enhancing financial inclusion within Indonesia’s MSME sector. The findings are expected to offer valuable insights for regulators and fintech industry players in formulating sustainable and inclusive digital financing strategies that can strengthen access to finance and promote equitable economic growth. Peer-To-Peer Lending as an Alternative Financing Innovation to Promote Financial Inclusion in Indonesia JEFMS, Volume 08 Issue 11 November 2025 www.ijefm.co.in Page 7303 IV. RESULT A. Respondent Description This study involved 150 micro, small, and medium enterprise (MSME) actors who utilized Peer-to-Peer (P2P) lending platforms across three provinces—Jakarta, West Java, and East Java. Based on the survey results, most respondents operated in the trade sector (40%), followed by services (35%) and small-scale manufacturing (25%). In terms of demographics, the majority of respondents were aged between 30 and 45 years, with education levels of at least high school (65%) and undergraduate degrees (30%). About 60% of respondents had used P2P lending platforms for more than one year, indicating a relatively high level of trust in this digital financing mechanism. B. Descriptive Statistics of Research Variables The descriptive statistics indicate that the intensity of P2P lending usage had an average score of 3.85 (on a 5-point scale), suggesting that most MSMEs frequently use this platform for business financing. The average loan amount per MSME per year was approximately IDR 150 million, with an average financing frequency of 3–4 times per year. Meanwhile, the financial inclusion level recorded an average value of 4.10, indicating that P2P lending use positively contributes to improving access to financial services. Additionally, access-to-capital convenience scored an average of 4.25, while financial efficiency had an average score of 3.95. C. SEM-PLS Model Analysis Measurement Model Evaluation (Outer Model) Convergent validity testing showed that all indicators had outer loading values above 0.70 and Average Variance Extracted (AVE) values above 0.50, confirming the constructs’ validity (Hair et al., 2021). Variable AVE Status Intensity of P2P Lending Use 0.67 Valid Loan Amount 0.64 Valid Financing Frequency 0.62 Valid Ease of Access to Capital 0.69 Valid Financial Efficiency 0.65 Valid Financial Inclusion 0.71 Valid Reliability testing indicated that all constructs had Composite Reliability (CR) values above 0.70 and Cronbach’s Alpha values above 0.70, meaning they possessed good internal consistency. Variable Cronbach’s Alpha Composite Reliability Status Intensity of Use 0.84 0.89 Reliable Loan Amount 0.80 0.88 Reliable Financing Frequency 0.78 0.86 Reliable Ease of Access to Capital 0.85 0.91 Reliable Financial Efficiency 0.83 0.89 Reliable Financial Inclusion 0.87 0.92 Reliable D. Structural Model Evaluation (Inner Model) R-Square (R²) values illustrate the explanatory power of independent variables toward dependent variables. Dependent Variable R-Square Category (Hair et al., 2021) Ease of Access to Capital 0.563 Moderate Financial Efficiency 0.478 Moderate Financial Inclusion 0.612 Strong The model demonstrates good explanatory capability. An R² value of 56.3% for ease of access to capital indicates that more than half of the variance is explained by the intensity of use, loan amount, and financing frequency. Similarly, 47.8% of financial efficiency variance is explained by access-to-capital ease and P2P lending use. The highest R² value (61.2%) for financial inclusion signifies that P2P lending significantly contributes to broadening financial inclusion among MSMEs. Peer-To-Peer Lending as an Alternative Financing Innovation to Promote Financial Inclusion in Indonesia JEFMS, Volume 08 Issue 11 November 2025 www.ijefm.co.in Page 7304 Significance Test Results (Bootstrapping SEM-PLS) Relationship Path Coefficient (β) t-statistic p-value Result Intensity of Use → Financial Inclusion 0.312 4.121 0.000 Significant Loan Amount → Financial Inclusion 0.278 3.254 0.001 Significant Financing Frequency → Financial Inclusion 0.291 3.842 0.000 Significant Intensity of Use → Ease of Access to Capital 0.334 4.507 0.000 Significant Ease of Access to Capital → Financial Efficiency 0.405 5.031 0.000 Significant Intensity of Use → Financial Efficiency 0.198 2.742 0.006 Significant The bootstrapping results show that all paths in the model are statistically significant (p-value < 0.05) and positively related. This suggests that the use of P2P lending contributes significantly to improving financial inclusion, ease of access to capital, and financial efficiency among MSMEs. The intensity of P2P lending use positively influences financial inclusion (β = 0.312; t = 4.121; p = 0.000), meaning that more frequent engagement with P2P platforms increases MSMEs’ integration into the formal financial system. Loan amount also has a significant positive effect on financial inclusion (β = 0.278; t = 3.254; p = 0.001). This implies that higher digital loan values enhance MSMEs’ capacity to expand their businesses and access further financial services (Li & Wang, 2022). Financing frequency significantly affects financial inclusion (β = 0.291; t = 3.842; p = 0.000). MSMEs with repeated P2P financing are more likely to build trust and maintain relationships with digital financial systems, strengthening their credit histories and eligibility for future funding (Jayaram, 2024). The intensity of P2P lending use also positively influences access to capital (β = 0.334; t = 4.507; p = 0.000). This confirms that frequent platform users are more likely to secure fast and transparent funding (OJK, 2023). Ease of access to capital significantly affects financial efficiency (β = 0.405; t = 5.031; p = 0.000), indicating that better access to working capital enables MSMEs to optimize operations and profitability (AFPI, 2023). Furthermore, the intensity of use directly influences financial efficiency (β = 0.198; t = 2.742; p = 0.006), showing that active P2P lending engagement enhances business financial management through digital tools. Finally, mediation testing reveals that ease of access to capital acts as a partial mediator between P2P lending usage intensity and financial efficiency. This means that easier digital financing access amplifies the positive effect of P2P lending on efficient and sustainable financial management among MSMEs. CONCLUSIONS This study demonstrates that Peer-to-Peer (P2P) lending plays a strategic role in promoting financial inclusion and enhancing the financial efficiency of Micro, Small, and Medium Enterprises (MSMEs) in Indonesia. Based on the analysis using Structural Equation Modeling–Partial Least Squares (SEM-PLS) involving 150 respondents from three main provinces—Jakarta, West Java, and East Java—several key findings were obtained. First, the intensity of use, loan amount, and financing frequency through P2P lending have a positive and significant effect on financial inclusion. This confirms that the more frequently and extensively MSMEs use digital financing platforms, the greater their opportunities to integrate into the formal financial system. Second, P2P lending significantly contributes to ease of capital access, as the technology-based financing process—fast and free from administrative barriers—enables MSMEs to obtain funding more efficiently than traditional financial institutions. Third, ease of capital access has been proven to improve financial efficiency among MSMEs. Easy access to capital strengthens their ability to manage cash flows, reduce transaction costs, and increase business productivity. Fourth, ease of capital access partially mediates the relationship between the intensity of P2P lending usage and financial efficiency, indicating that P2P lending not only serves as an alternative financing source but also improves MSMEs’ financial management in a sustainable manner. Overall, this research confirms that P2P lending acts as a driver of digital financial inclusion in Indonesia, particularly for unbanked and underbanked populations, while simultaneously strengthening the technology-based financing ecosystem. The implications of this study cover several important aspects. Theoretically, this research expands the literature on digital financial innovation and financial inclusion by demonstrating the empirical mechanism through which P2P lending usage intensity affects financial efficiency via ease of capital access. The findings reinforce the Financial Inclusion Framework and the concept of Technology-Enabled Finance, both of which emphasize that digitalization can reduce friction in financing access for MSMEs. Practically, the study provides evidence that actively using P2P lending services can enhance business capacity and improve financial performance. Digital financing platforms enable entrepreneurs to obtain loans through simpler and more transparent procedures compared to conventional banks. Peer-To-Peer Lending as an Alternative Financing Innovation to Promote Financial Inclusion in Indonesia JEFMS, Volume 08 Issue 11 November 2025 www.ijefm.co.in Page 7305 From a policy perspective, the findings provide valuable insights for regulators such as the Financial Services Authority (OJK) and the Indonesian Joint Funding Fintech Association (AFPI) in formulating policies to strengthen the P2P lending ecosystem. Regulations that promote transparency, credit risk mitigation, and consumer protection need to be enhanced to ensure industry sustainability and financial system stability. The government should also improve digital financial literacy among MSMEs to help them use fintech services wisely and productively. Collaboration between P2P lending platforms, educational institutions, and formal financial organizations is also necessary to create a financing system that is inclusive and adaptive to technological development. From a socio-economic perspective, P2P lending has proven effective in bridging the financial access gap between formal and informal sectors. By leveraging digital technology, this service has the potential to increase MSME productivity, create new job opportunities, and strengthen local economic structures in a sustainable way. ACKNOWLEDGMENT The author would like to thank the University of Widyatama for providing funding assistance for completing and supporting the writing of this article. REFERENCES 1) AFPI. (2024). Laporan Tahunan Fintech Lending Indonesia 2024. Asosiasi Fintech Pendanaan Bersama Indonesia. 2) Al-Afeef, M. A., Alsmadi, A. A., Al‐Okaily, M., & Al-Sartawi, A. (2024). The Role of Peer-to-Peer Lending Platforms in Expanding Financial Inclusion (pp. 137–150). 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