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Higher returns lead to P2P boom in Indonesia

Lack of investment options push institutions to such platforms

Peer-to-peer lending, such as Modalku offers is growing in Indonesia, driven by huge demand from its largely under-banked population.    © Reuters

JAKARTA/SINGAPORE -- Institutional investors such as banks and investment management firms are increasingly deploying funds in peer-to-peer lending platforms in Indonesia, as they hunt for higher returns amid lackluster and uncertain equity markets.

The key factors driving institutional capital into this fast-growing space are huge demand from Indonesia's largely under-banked population and higher returns they can get from borrowers. As of Jan. 22, there were a total of 164 P2P companies registered with market regulator Financial Services Authority (OJK), nearly doubling from 88 at the end of December 2018.

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