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The Impact of Debt Literacy on Over-Indebtedness of Buy Now Pay Later (BNPL) Users in West Java

In: Proceedings of the International Conference on Sustainable Collaboration in Business, Technology, Information, and Innovation (SCBTII 2024)

Author

Listed:
  • Astrie Krisnawati

    (Telkom University, Faculty of Economics and Business)

  • Dzikra Malika Rabbani Sam

    (Telkom University, Faculty of Economics and Business)

Abstract

This paper examines the impact of debt literacy on the over-indebtedness of Buy Now Pay Later (BNPL) users in West Java. BNPL is widely used in Indonesia as a short-term loan option, with West Java having the highest number of users. BNPL services have a high non-performing loan (NPL) level, exceeding the threshold set by Otoritas Jasa Keuangan (OJK), Indonesia’s financial services authority. It indicates a need to consider the NPL level of BNPL services. One major cause of high NPL is over-indebtedness and financial knowledge as a determining factor of over-indebtedness. Therefore, debt literacy is one of the financial knowledge components assessed to fit the context of BNPL services. The questionnaire was distributed to 400 BNPL users in West Java. Data analysis using multinomial logistic regression assessed the impact of debt literacy on over-indebtedness. Findings reveal that BNPL users have low debt literacy levels. Additionally, the study indicates that higher debt literacy reduces the probability of over-indebtedness. It suggests that the government and financial services authorities should promote programs to increase financial literacy with a specific focus on debt literacy to enhance financial welfare and reduce the high-level NPL.

Suggested Citation

  • Astrie Krisnawati & Dzikra Malika Rabbani Sam, 2024. "The Impact of Debt Literacy on Over-Indebtedness of Buy Now Pay Later (BNPL) Users in West Java," Advances in Economics, Business and Management Research, in: Suhal Kusairi & Forget Mingiri Kapingura & Putri Fariska Sugestie & Nizam Ahmat (ed.), Proceedings of the International Conference on Sustainable Collaboration in Business, Technology, Information, and Innovation (SCBTII 2024), pages 203-213, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-558-4_12
    DOI: 10.2991/978-94-6463-558-4_12
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