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The Default In Islamic Peer To Peer Lending: An Application Of The General Strain Theory

Author

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  • Dety Nurfadilah

    (Sekolah Tinggi Manajemen IPMI, Indonesia)

  • Dida Nurhaida

    (Fakultas Ekonomi dan Bisnis Universitas Trisakti)

  • Sudarmawan Samidi

    (Komite Nasional, Ekonomi, dan Keuangan Syariah and Sekolah Tinggi Manajemen IPMI, Indonesia)

Abstract

While the Islamic peer to peer (P2P) lending is useful especially during the present Covid-19 Pandemic, its default risk remains high. In this study, we apply the extended general strain theory to investigate borrowers’ default intention on the Islamic P2P lending during the pandemic period. Using the SEM-PLS method to analyse data gathered from a survey, we find economic pressure and socialization difficulty to be significant in increasing negative affects (life dissatisfaction, perceived unfairness, and inferiority feeling) and hence indirectly affecting the willingness to repay. Further, we find that socialization difficulty does not seem to have direct influences on default intention. Finally, moral norms appear to be a significant moderating factor in the framework. These should contribute to a better scoring system of the Islamic P2P lending.

Suggested Citation

  • Dety Nurfadilah & Dida Nurhaida & Sudarmawan Samidi, 2022. "The Default In Islamic Peer To Peer Lending: An Application Of The General Strain Theory," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 8(2), pages 219-250, May.
    • Handle: RePEc:idn:jimfjn:v:8:y:2022:i:2d:p:219-250
    DOI: https://doi.org/10.21098/jimf.v8i2.1432
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    Keywords

    Islamic P2P lending; Default behavior; Psychological factors; COVID-19 pandemic.;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G40 - Financial Economics - - Behavioral Finance - - - General

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