Mitigation of Default Risk through Insurance in Peer-to-Peer Lending Financial Technology

Debora, Debora and Sirait, Ningrum Natasya and Sunarmi, Sunarmi and Siregar, Mahmul (2021) Mitigation of Default Risk through Insurance in Peer-to-Peer Lending Financial Technology. In: ICOLEG 2021, 29-30 June 2021, Semarang, Indonesia.

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Mitigation of default risk through insurance is a solution to the high default rate. The non-collateral loan system in the Peer-to-Peer Lending (P2PL) is the reason for the high popularity of this service. Nevertheless, some legal problems result from the absence of collaterals from the borrower and P2PL provider in the event of default because no one guarantees the lender's rights. A borrower can run because the P2PL provider does not require the lender and borrower to meet face to face. In addition, a lender also has to spend much money collecting the borrower’s debt. This problem weakens the lender’s interest in investing, thus hindering credit accessibility in society. This study applied a normative legal research method using a conceptual approach. This study concludes that default risk mitigation has not explicitly been regulated in the positive Indonesian law, thus creating legal problems related to legal certainty and legal protection, especially for lenders investing their funds in P2PL services. The implementation of default risk mitigation through an insurance mechanism in providing P2PL service is the best scheme to provide legal protection for lenders in investing their funds which have implications for increasing public confidence in improving capital needs in Indonesia.

Item Type: Conference or Workshop Item (Paper)
Uncontrolled Keywords: insurance default risk mitigation peer-to-peer lending
Subjects: H Social Sciences > H Social Sciences (General)
Depositing User: EAI Editor IV
Date Deposited: 10 Nov 2021 14:20
Last Modified: 10 Nov 2021 14:20

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