Debt Crowdfunding Growth and MSME Credit Risk in Indonesia’s Sustainable Digital Economy

Micro, Small and Medium Enterprises (MSMEs) in Indonesia often lack the collateral that banks require, and Peer-to-Peer (P2P) lending, the debt form of crowdfunding, has become a channel through which they raise capital in the digital economy. Lending now grows fastest outside Java, where platforms hold the shortest records on their borrowers. This study builds a monthly panel of 34 provinces from official statistics of the Financial Services Authority (Otoritas Jasa Keuangan/OJK) for December 2023 to December 2024 and estimates two-way fixed-effects models with standard errors clustered by province. The models test whether faster growth of outstanding loans is followed by a higher share of loans more than 90 days overdue (Tingkat Wanprestasi 90 Hari / TWP90) and whether this link differs between Java and the other regions. Outstanding loans rose by 29.1% to Rp 77.02 trillion, by 20.5% in Java and by 57.8% elsewhere, and MSMEs held 36.7% of the stock at the end of 2024. Current growth shows no significant link with TWP90. Growth three months earlier is followed by a lower TWP90 in Java, with a coefficient of −0.084 (p < 0.01), while outside Java the coefficient is only −0.011 (p = 0.079), and the gap between the two regions is significant (p < 0.01). Rapid P2P expansion was not associated with higher TWP90 during the study period, while the observed negative relationship between earlier loan growth and TWP90 in Java was substantially weaker outside Java. Platforms and regulators therefore need closer credit assessment where lending grows fastest if debt crowdfunding is to support MSME capital formation and the targets of Sustainable Development Goals 8 and 9. The evidence is associational and covers thirteen months, so longer panels with data specific to MSMEs are needed.