Asian Countries Are Clamping Down on Online Lenders : Here’s Why

Arpan Sarma
4 min readJul 9, 2021


Photo by Tusik Only on Unsplash

On 25th November 2020, the front page of the New Indian Express had a headline smeared in blood which read, “Bullied online by money-lending app company, Chennai man kills self!” This and several other suicides that followed in the upcoming months sparked several investigations and subsequent arrests by the Indian police.

India is not a standalone victim of bullying by online lenders. Several other South Asian countries, namely Indonesia, are struggling with this issue, which has created a domino effect of the government clamping down on online lenders.

However, even 5 years ago, this was not a persistent issue among these countries, when the digital lending revolution originally started in South Asia, which begs the question, why now?

The Wrath of the Asian Tiger

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As per the World Bank Global Findex report, more than 190 million Indians lacked access to bank accounts, and the number stood at 95 million for Indonesia in 2017. This and several other surveys indicate that these upcoming economies are primarily inhabited by a populace which financial institutions have traditionally ignored. While this is a problem that largely remains unsolved to date, some online lenders identified this as an opportunity to exploit a credit hungry population.

What started as a sly tactic of clever marketing to lure in borrowers with limited financial literacy quickly escalated to a scenario where the culprits were charging exorbitantly high-interest rates in the name of instant disbursal and faster checkouts. Coupled with this, since the government in these economies lacked a proper oversight mechanism and a governing body to keep a check on the rapidly growing fintech space, the authorities found themselves in the midst of growing public distrust and the wrath of an industry which has remained unchecked throughout its disruption.

What the Government Is Doing

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In an effort to take back control and instil regulation in the industry, governments in most South Asian countries started clamping down on online lenders who lacked proper licenses as a first measure.

For instance, in India, the RBI (Reserve Bank of India) formed an intermittent authority which is responsible for overseeing all online lenders and their subsequent transactions. However, the government is well aware of the fact that it is lagging in its actions and thus, for the long term, the RBI has issued a mandate that online lenders need to necessarily tie up with a licensed NBFC to facilitate any credit instruments to their customers.

Similarly, in Indonesia, the Financial Services Authority has drafted regulations which seek to increase the paid-up capital online lenders need to deposit in order to get a license, alongside making suggestions to increase the frequency of board meetings in an effort to bolster compliance and protect the interests of the general public.

However, current stakeholders in the industry comprised of rightful online lenders have largely displayed concerns that these mandates will end up causing collateral damage to genuine online lenders and create additional unrest in an industry which is undergoing rapid disruptions.

Private in Arms

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In an effort to protect their interest and with a genuine concern of increasing financial inclusivity, several online lenders both in India and Indonesia have formed private alliances with an aim to share best practices and enforce a self-regulatory model.

One example of this is Asosiasi Fintech Pendanaan Bersama Indonesia (AFPI), which is a private alliance of online lenders in Indonesia with a focus towards spearheading Peer to Peer lending along with enforcing a self-regulatory behaviour among online lenders. AFPI, which was formed in 2016, was officially entrusted as the regulatory body for technology based lending in Indonesia by the Financial Services Authority. As per industry observers, it has done a commendable job of reducing lending scams in Indonesia by raising financial literacy among the general public.

Another example of this is Digital Lenders’ Association of India (DLAI), an alliance formed by the top 9 online lenders in India. Established in 2016, DLAI shares a common set of goals with the AFPI and has consistently increased its member base over the last 5 years in an effort to counter government backlash and decrease the number of online lending scams.

But Is This Enough?

Although there is a significant display of efforts both from government and private stakeholders to curb the abuse of borrowers by online lenders, seasoned investors from the industry note that a short term solution will prove to be a larger hindrance in an industry which still needs to undergo disruption over the next 10 or 20 years.

Rather than enforcing short term tactics, maybe the formation of a transparent and immunised oversight architecture will prove to be of greater help? I guess we just have to wait and see where this leads us.

What do you think? Let me know by commenting below.


  1. Asian authorities clamp down on digital lenders [Link]
  2. Bullied online by money-lending app company, Chennai man kills self [Link]
  3. Digital Lenders’ Association of India (DLAI) [Link]
  4. Uproar among Indonesian online lenders over draft OJK regulations [Link]
  5. Asosiasi Fintech Pendanaan Bersama Indonesia (AFPI) [Link]