Govt imposes new rules for 'buy now, pay later’ as debt rises among young people
Starting in 2027, BNPL credit will be available only to people who are at least 18 years old and have a monthly income of 3 million rupees (US$ 185). Experts warn that the criteria are still not stringent enough to prevent spirals of debt.
Jakarta (AsiaNews) – The surge in debt from Indonesia’s "Buy now, pay later" (BNPL) payment system has raised alarms among financial regulators, who are planning stricter measures to prevent young consumers from ending up in a spiral of debt, compromising their long-term financial stability.
According to the Financial Services Authority (OJK), debt accumulated through BNPL systems reached 30.36 trillion rupees (US$ 1.8 billion) in November 2024, a 42.68 per cent increase from the same month a year earlier.
In addition, almost 3 per cent of these debts were classified as non-performing loans (NPFs), i.e. not repaid by users.
Faced with this situation, the OJK announced new rules that will come into force on 1 January 2027. These stipulate that BNPL users must be at least 18 years old and have a minimum monthly income of three million rupees (us$ 185) to access these services.
“We don’t want the younger generation to get caught in debt while they don’t have the ability to pay it. That’s why we set [the minimum age] to 18 years,” Ahmad Nasrullah, OJK’s head of special financial institution supervision, told reporters during a media briefing in late January.
“We want to mitigate this risk for both parties, from the borrower’s side and from the lender’s side,” he added.
The use of BNPL services in Indonesia has exploded since 2019. In 2023, the OJK recorded over 79 million BNPL contracts, with an annual growth rate of 144.35 per cent compared to four years earlier.
According to OJK data, 43.9 per cent of BNPL users are aged 26 to 35, with 26.5 per cent between 18 and 25, who buy mainly clothing, household appliances, electronic devices and personal care products.
However, easy access to credit involves significant risks. Nailul Huda, a digital economy expert at the Center of Economic and Law Studies (CELIOS) in Jakarta, told the South China Morning Post that many young Indonesians have been denied home loans due to non-payments in their BNPL contracts.
“The BNPL services have been integrated into the Financial Information Service System (SKIL), so when users fail to pay their debt, they would be seen as bad creditors by banks. When they apply for other financing in the future, such as the Home Ownership Credit, they would be rejected by the banking system,” Nailul said.
Regulators have also proposed raising the age for using services from 18 to at least 24-25 and an increase in the minimum income needed to receive loans.
For Nailul risk assessments must be improved as debtors often find themselves spending most of their wages to repay creditors.
“We are not in a position to prohibit someone from going into debt. However, what we are worried about is if people borrow more than their payment capacity. This is what we found, many people’s ability to pay does not match their loans,” Nailul explained.
“The platform can give borrowers a credit limit of 50 million rupiah, when their income is only five million rupiah. This will trigger their consumptive nature that will harm them in the future.”
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04/05/2023 13:41
