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How Does P2P Lending Lead to BI-Rate and Commercial Bank Income? Empirical Evidence from Indonesia

In: Proceedings of the International Colloquium on Business and Economics (ICBE 2022)

Author

Listed:
  • Hadi Ismanto

    (Sebelas Maret University
    Universitas Islam Nahdlatul Ulama (UNISNU Jepara))

  • Atmaji

    (Sebelas Maret University)

Abstract

Technological developments have shifted the traditional financial system to digitalization by bringing joy and convenience to some parties. P2P lending comes with that excitement to debtors who do not qualify for bank lending. For this reason, this study aims to analyze the relationship of P2P lending companies to interest rates and income of commercial banks in Indonesia. Using monthly data from January 2017 to April 2022, we analyze this association with the VAR-VECM model. Through various diagnostic model tests, the regression results show that in general P2P lending companies affect interest rates, interest income, and non-interest income of commercial banks. The existence of P2P lending companies currently has a positive effect on interest rates next year. At the same time, P2P lending companies boost bank interest and non-interest income. They significantly hold down the interest and non-interest income of banks. The results record a two-way causal relationship between P2P lending companies and interest rates. The causality of P2P lending companies to non-interest income is also found, but not vice versa. This paper implies several leaps to maintain and control P2P lending risks that could potentially affect the macroeconomic and bank’s financial conditions. A healthy business climate can be created when risk monitoring of P2P lending and banking can go hand in hand.

Suggested Citation

  • Hadi Ismanto & Atmaji, 2022. "How Does P2P Lending Lead to BI-Rate and Commercial Bank Income? Empirical Evidence from Indonesia," Advances in Economics, Business and Management Research, in: Rahmawati Rahmawati & Mulyaningsih Tri & Arifin Taufiq & Hendarsjah Hidajat (ed.), Proceedings of the International Colloquium on Business and Economics (ICBE 2022), pages 114-139, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-066-4_12
    DOI: 10.2991/978-94-6463-066-4_12
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