Institutional Capacity, Financing Expansion, and Repayment Performance in Indonesian Islamic P2P Lending
Abstract
Purpose: This study examines the effects of financing expansion and institutional capacity on repayment performance in Indonesian Islamic peer-to-peer (P2P) lending using the 90-day Payment Success Rate (TKB90). Methodology: A quantitative approach was employed using 59 monthly industry-level observations from February 2020 to December 2024 based on Financial Services Authority (OJK) data. The Autoregressive Distributed Lag (ARDL) model was applied to estimate both long-run and short-run relationships. Results: Institutional capacity, measured by asset size, positively and significantly affects repayment performance in both the long run and the short run. In contrast, outstanding financing has no significant long-run effect but shows significant short-run lagged effects. The ECM confirms convergence toward long-run equilibrium. Conclusion: Repayment performance depends more on institutional capacity than financing expansion alone, highlighting the importance of governance, organizational resources, and risk management for sustainable Islamic P2P lending. Implications: The analysis is limited to aggregate industry-level data and a limited set of explanatory variables. Future studies should employ firm-level data and additional determinants of repayment performance. Originality: This study provides new evidence on the long-run and short-run determinants of repayment performance in Indonesian Islamic P2P lending using an ARDL framework and industry-level regulatory data, extending Financial Intermediation Theory and Firm Size Theory.
References
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Alshater, M. M., Saba, I., Supriani, I., & Rabbani, M. R. (2022). Fintech in islamic finance literature: A review. Heliyon. 8(12). 1–66. https://doi.org/10.1016/j.heliyon.2022.e10385
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Bin-nashwan, S. A., Abdul-jabbar, H., & Aziz, S. A. (2020). Zakah compliance in Muslim countries : an economic and socio-psychological perspective. Journal of Financial Reporting and Accounting. 19(3). 392–411. https://doi.org/10.1108/JFRA-03-2020-0057
Bronzini, R., Giunta, A., Pierucci, E., & Sforza, M. (2025). More technology , more loans ? How advanced digital technologies influence firms ’ financing conditions. Structural Change and Economic Dynamics. 72(1). 47–66. https://doi.org/10.1016/j.strueco.2024.11.011
Claessens, S., Frost, J., Turner, G., & Zhu, F. (2018). Fintech credit markets around the world: size, drivers and policy issues. https://www.bis.org/publ/qtrpdf/r_qt1809e.pdf
Cornelli, G., Frost, J., Gambacorta, L., Rau, P. R., Wardrop, R., & Ziegler, T. (2023). Fintech and big tech credit: Drivers of the growth of digital lending. Journal of Banking and Finance 148(1). 1–14. https://doi.org/10.1016/j.jbankfin.2022.106742
Dell’Ariccia, G., Igan, D., & Laeven, L. (2017). Credit Booms and Lending Standards : Evidence from the Subprime Mortgage Market. Journal of Money, Credit and Banking. 44(2). 357-384. https://doi.org/10.1111/j.1538-4616.2011.00491.x
Edward, M. Y., Fuad, E. N., Ismanto, H., Atahau, A. D. R., & Robiyanto. (2023). Success factors for peer-to-peer lending for SMEs: Evidence from Indonesia. Investment Management and Financial Innovations. 20(2). 16–25. https://doi.org/10.21511/imfi.20(2).2023.02
Feyen, E., Natarajan, H., & Saal, M. (2023). Fintech and the Future of Finance. The World Bank Group. https://doi.org/10.1596/978-1-4648-1914-8
Frost, J., Gambacorta, L., Huang, Y., Shin, H. S., & Zbinden, P. (2019). BigTech and the changing structure of financial intermediation. Economic Policy. 34(100). 761-799. https://doi.org/10.1093/epolic/eiaa003
Hashfi, R. U. Al, & Zusryn, A. S. (2019). Exploring Islamic Peer to Peer Lending for the Unbankable. Airlangga International Journal of Islamic Economics and Finance. 2(2). 71–84. https://doi.org/10.20473/AIJIEF.V2I2.20648
Idris, M., Paserangi, H., Liman, P. D., & Deviany, O. (2025). The Prudential Regulation : the Preventive Effort against Non-Performing Loan ( NPL ) for MSMEs in Indonesia. Journal of Ecohumanism. 4(1). 1809–1825. https://doi.org/10.62754/joe.v4i1.5998
Iqbal, Z., & Mirakhor, A. (2017). Ethical Dimensions of Islamic Finance. Palgrave Macmillan.
Jagtiani, J., & Lemieux, C. (2019). The roles of alternative data and machine learning in fintech lending : Evidence from the LendingClub consumer platform. Financial Management 48(4):1009-1029. https://doi.org/10.1111/fima.12295
Kazak, H., Saiti, B., Kılıc, C., Akcan, A. T., & Karataş, A. R. (2025). Impact of Global Risk Factors on the Islamic Stock Market: New Evidence from Wavelet Analysis. Computational Economics Springer US. 65(6). https://doi.org/10.1007/s10614-024-10665-7
Khoury, R. El, Nasrallah, N., Hussainey, K., & Assaf, R. (2023). Spillover analysis across FinTech , ESG , and renewable energy indices before and during the Russia – Ukraine war : International evidence. Journal of International Financial Management & Accounting. 34(2). 279–317. https://doi.org/10.1111/jifm.12179
Kripfganz, S., & Schneider, D. C. (2023). ardl : Estimating autoregressive distributed lag and equilibrium correction models. The Stata Journal. 23(4). 983–1019. https://doi.org/10.1177/1536867X231212434
Laeven, L., Ratnovski, L., & Hui, T. (2015). Bank Size , Capital , and Systemic Risk : Some International Evidence ( International Monetary Fund , Tilburg University , and CEPR ) Lev Ratnovski Hui Tong. Journal of Banking & Finance. Journal of Banking & Finance. 69(3). https://doi.org/10.1016/j.jbankfin.2015.06.022
Lemma, V. (2020). FinTech Regulation Exploring New Challenges of the Capital Markets Union. Palgrave Macmillan.
Mergaliyev, A., Asutay, M., Avdukic, A., & Karbhari, Y. (2021). Higher Ethical Objective ( Maqasid al ‑ Shari ’ ah ) Augmented Framework for Islamic Banks : Assessing Ethical Performance and Exploring Its Determinants. Journal of Business Ethics Springer Netherlands. 170(4). https://doi.org/10.1007/s10551-019-04331-4
Nabilou, H., & Pacces, A. M. (2018). The law and economics of shadow banking. Ecgi. 1-52
Noory, S. N., Shahimi, S., & Ismail, A. G. (2021). A Systematic Literature Review on the Effects of Risk Management Practices on the Performance of Islamic Banking Institutions. Asian Journal of Accounting & Governance. 16(1). 53–75. http://dx.doi.org/10.17576/AJAG-2021-16-05
Otoritas Jasa Keuangan. (2024). Peraturan Otoritas Jasa Keuangan Republik Indonesia Nomor 40 tahun 2024 tentang Layanan Pendanaan Bersama Berbasis Teknologi Informasi. https://jdih.ojk.go.id
Rabbani, M. R. (2022). Fintech innovations , scope , challenges , and implications in Islamic Finance : A systematic analysis. International Journal of Computing and Digital Systems. 13(1). 579-608. http://dx.doi.org/10.12785/ijcds/130147
Rinaldi, N. R., Noor, R. S., Ramadhani, D. P., Silaban, M. P., & Rahayu, S. (2026). Digitalization and Adoption of Islamic FinTech : Bibliometric Literature Mapping Using VOSviewer. Proceeding of International Conference Technology, Economics, and Social Science. 430–437. https://journals.adaresearch.or.id/ictess
Unal, I. M., & Aysan, A. F. (2022). Fintech , Digitalization , and Blockchain in Islamic Finance : Retrospective Investigation. Fintech. 1(4). 388–398. https://doi.org/10.3390/ fintech1040029
Waliullah. (2024). Leveraging Management Information Systems for Enhancing Credit Risk Assessment in Commercial Banks. Academic Journal on Business Administration, Innovation & Sustainability. 4(4). 19–32. https://doi.org/10.69593/ajbais.v4i04.112
Wooldridge, J. M. (2020). Introductory Econometrics: a Modern Approach (7th ed.). Cengage.
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