TRUST IN MSME AND INTERMEDIARIES IN PEER TO PEER (P2P) LENDING: EVIDENCE IN INDONESIA

This title will be presented on Friday, December 15, 2023 at 08.15 - 08.25 GMT+7

Abstract

Authors’ attendance on Friday, December 15, 2023 at 08.15 - 08.25 GMT+7

This study aimed to analyze the effects of trust determinants on the willingness to invest in peer-to-peer (P2P) lending platforms in Indonesia. A significant gap existed between the number of lenders and borrowers, which limited the funding of P2P lending. To increase funding, it is essential to understand the determinants of trust that affect the willingness of lenders to invest. This study focused on the trust determinants divided into trust on borrowers and trust on intermediaries. An online questionnaire was completed by 109 individuals, and the results were analyzed using structural equation modeling. The results indicated that trust in borrowers had a significant impact on the willingness to lend. On the other hand, trust in intermediaries did not significantly affect the willingness to lend but had a significant impact on trust in borrowers. The most important attribute to increase the willingness to lend was the borrowers' trustworthiness, protection systems/policies adopted by P2P platforms, a sense of security when making transactions, attractive investment returns, and quality assurance for prospective borrowers. The outcomes of this study are expected to benefit lenders, borrowers, organizers, and the government as a regulator. For borrowers and organizers, the willingness of lenders to issue loans is crucial, and this study highlights the importance of borrowers' trustworthiness in building lender confidence. P2P platforms can indirectly aid the country's economic growth by assisting the development of micro, small, and medium-sized enterprises (MSMEs) and community empowerment. In conclusion, this study emphasizes the significance of trust determinants in P2P lending, and the findings suggest that borrowers' trustworthiness and protection systems are essential in building lender confidence. To expand the desire to lend, P2P platforms must consider these factors and develop strategies to address them.