Millennials Have Bad Credit”/>
The Financial Services Authority (OJK) noted that Gen Z and Millennials contributed 37.17% to bad debts.
Chief Executive of Supervision of Financing Institutions, Venture Capital Companies, Microfinance Institutions, and Financial Services Institutions
Others (PVML) OJK Agusman emphasized the importance of financial literacy among the younger generation regarding the case.
“Our data shows that in July 2024, the portion of 90-day bad debts (up to TWP 90) for the 19 to 34 age group, consisting of
from generation Z and millennials, reaching 37.17%,” said Agusman in Makassar, Thursday (13/9).
According to him, Gen Z and Millennials are significant contributors to the increasing 90-day default rate (TWP) on fintech peer-to-peer (P2P) lending or online loan (pinjol) platforms.
Agusman continued that this figure needs to be a concern because it shows that young people are more vulnerable to the risk of default on online loans.
Agusman also noted that although the overall risk level of bad debt on P2P lending platforms was maintained at 2.53% in July 2024, down from 2.79% in June, the contribution of the younger generation to this default is still quite large and needs to be addressed seriously.
Also read: Largest Population in Indonesia, Young People Also Need Health Insurance
In addition, Agusman highlighted the growth in the amount of outstanding financing in the P2P lending fintech industry, which recorded an annual increase (yoy) of 23.97% in July 2024, with a total outstanding reaching IDR69.39 trillion.
These figures show that, despite significant growth in the online lending sector, the risk of bad debt remains a major challenge, especially among young users.
In order to overcome the high risk of default, OJK has taken preventive measures.
Also read: Let’s Look at the Financial Positions of Gen Z, Millennials, and Gen X
One of them is to require P2P lending organizers to post warnings on the main pages of their applications and websites.
“This warning aims to educate users about the risks they may face when using online lending services,” Agusman explained.
The warning reads, “Be careful, this transaction carries a high risk of loss. You may experience losses or lose money. Do not go into debt if you cannot afford to pay. Consider wisely before making a transaction.”
Also read: OJK: Gen Z and Millennials Vulnerable to Pinjol Traps
This step is expected to increase awareness of the younger generation regarding the risks of online loans and prevent them from getting caught in debt without the ability to pay.
OJK has also set stricter regulations for P2P lending services through Financial Services Authority Regulation Number 10/POJK.05/2022 and Financial Services Authority Circular Letter Number 19/SEOJK.06/2023.
This rule regulates the loan eligibility analysis procedure, with P2P lending organizers required to consider the ability
financial status of prospective loan recipients before funding is approved.
In addition, OJK has set a maximum limit on funding costs charged to users, including interest, margins, administration fees, platform commissions, and other relevant fees, apart from late fees and taxes.
This regulation aims to ensure that users are not burdened by excessive costs.
With stricter regulations and efforts to increase financial literacy recipients, OJK hopes that the P2P lending ecosystem in Indonesia can grow healthily and responsibly. (Ant/Z-1)
#Percent #Gen #Millennials #Bad #Credit
What are the main reasons for the high rate of bad credit among Gen Z and Millennials?
Table of Contents
The Alarming Rate of Bad Credit among Gen Z and Millennials: A Financial Literacy Concern
[Image: Illustration (Freepik)]
The Financial Services Authority (OJK) has revealed a concerning trend: 37.17% of Gen Z and Millennials have bad credit, contributing significantly to the growing problem of bad debts in Indonesia. According to Chief Executive of Supervision of Financing Institutions, Venture Capital Companies, Microfinance Institutions, and Financial Services Institutions, Agusman, this phenomenon highlights the importance of financial literacy among the younger generation.
The Risks of Online Loans
Agusman emphasized that Gen Z and Millennials are more vulnerable to the risk of default on online loans, particularly on fintech peer-to-peer (P2P) lending or online loan (pinjol) platforms. The OJK data shows that in July 2024, the portion of 90-day bad debts (up to TWP 90) for the 19 to 34 age group, consisting of Gen Z and Millennials, reached 37.17%. This figure is a cause for concern, as it indicates that young people are more susceptible to defaulting on online loans.
The Growth of Online Lending
Despite the significant growth in the online lending sector, with a total outstanding of IDR69.39 trillion in July 2024, up 23.97% year-on-year, the risk of bad debt remains a major challenge. The OJK has taken preventive measures to address this issue, including requiring P2P lending organizers to post warnings on the main pages of their applications and websites. These warnings aim to educate users about the risks they may face when using online lending services.
Preventing Debt Traps
The warning reads, “Be careful, this transaction carries a high risk of loss. You may experience losses or lose money. Do not go into debt if you cannot afford to pay. Consider wisely before making a transaction.” This step is expected to increase awareness of the younger generation regarding the risks of online loans and prevent them from getting caught in debt without the ability to pay.
Stricter Regulations
To further address the issue, the OJK has set stricter regulations for P2P lending services through Financial Services Authority Regulation Number 10/POJK.05/2022 and Financial Services Authority Circular Letter Number 19/SEOJK.06/2023. These regulations aim to regulate the loan eligibility analysis procedure, requiring P2P lending organizers to consider the creditworthiness of borrowers before disbursing loans.
Financial Literacy is Key
The OJK’s findings highlight the importance of financial literacy among Gen Z and Millennials. It is crucial for young people to understand the risks and consequences of online loans and to make informed decisions when borrowing money. By promoting financial literacy and awareness, we can reduce the risk of bad credit and debt traps among the younger generation.
Conclusion
The high rate of bad credit among Gen Z and Millennials is a pressing concern that requires immediate attention. Financial literacy, regulation, and awareness are key to addressing this issue. By working together, we can promote a culture of responsible borrowing and financial planning among young people, ensuring a brighter financial future for Indonesia.
Recommended Reading:
Largest Population in Indonesia, Young People Also Need Health Insurance
Let’s Look at the Financial Positions of Gen Z, Millennials, and Gen X
* OJK: Gen Z and Millennials Vulnerable to Pinjol Traps
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– What are the main causes of bad credit among Gen Z and Millennials?
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37.17 Percent of Gen Z and Millennials Have Bad Credit: A Growing Concern for Financial Literacy
The Financial Services Authority (OJK) has raised concerns over the high rate of bad credit among Gen Z and Millennials, with a whopping 37.17% contributing to bad debts. This alarming figure highlights the need for improved financial literacy among the younger generation, particularly in the wake of the growing online lending sector.
The Rise of Online Lending and the Risk of Bad Debt
According to OJK’s Chief Executive of Supervision of Financing Institutions, Venture Capital Companies, Microfinance Institutions, and Financial Services Institutions, Agusman, the 19-34 age group, comprising Gen Z and Millennials, has seen a significant increase in 90-day default rates on fintech peer-to-peer (P2P) lending or online loan platforms. This trend is worrisome, as it indicates that young people are more vulnerable to the risk of default on online loans.
Financial Literacy: The Key to Avoiding Bad Credit
Agusman emphasized the importance of financial literacy among the younger generation, highlighting the need for education on the risks associated with online lending. The OJK has taken measures to increase awareness, including requiring P2P lending organizers to post warnings on their application and website main pages. The warning reads, “Be careful, this transaction carries a high risk of loss. You may experience losses or lose money. Do not go into debt if you cannot afford to pay. Consider wisely before making a transaction.”
Regulatory Measures to Curb Bad Credit
In addition to promoting financial literacy, the OJK has implemented stricter regulations to prevent bad credit. The Financial Services Authority Regulation Number 10/POJK.05/2022 and Financial Services Authority Circular Letter Number 19/SEOJK.06/2023 require P2P lending organizers to conduct thorough loan eligibility analyses, considering the financial status of prospective loan recipients before funding approval. Furthermore, the OJK has set a maximum limit on funding costs charged to users, including interest, margins, administration fees, platform commissions, and other relevant fees, excluding late fees and taxes.
The Role of Fintech in Promoting Financial Literacy
The growth of the fintech industry has led to an increase in online lending platforms, which, while convenient, can lead to bad credit if not managed responsibly. Fintech companies must play a crucial role in promoting financial literacy among their users, ensuring that borrowers understand the risks and implications of online loans.
Consequences of Bad Credit
Bad credit can have severe consequences, including damage to credit scores, higher interest rates, and even financial distress. It is essential for Gen Z and Millennials to prioritize financial literacy, understand the risks of online lending, and make informed decisions when borrowing.
Conclusion
The high rate of bad credit among Gen Z and Millennials is a pressing concern that requires immediate attention. By promoting financial literacy, implementing stricter regulations, and encouraging responsible borrowing practices, we can mitigate the risks associated with online lending and ensure a healthier financial ecosystem.
Keywords: Gen Z, Millennials, bad credit, financial literacy, online lending, fintech, P2P lending, OJK, Financial Services Authority, financial regulation.
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