Beyond Legality: A Holistic Perspective on Indonesia's Illegal Fintech Epidemic

Erwin Asmadi^1*Rizal Khadafi²

• ¹Universitas Muhammadiyah Sumatera Utara, Medan, Indonesia
• ²Universitas Muhammadiyah Cirebon, Cirebon, Indonesia

This perspective article argues that the rampant spread and resilience of illegal online lending (pinjaman online or pinjol) in Indonesia is not merely a legal violation to be policed, but a symptom of a broader, deep-seated systemic failure. While government crackdowns, including the shutdown of thousands of illicit platforms and mass arrests, are necessary immediate interventions, these measures largely treat the symptoms rather than the underlying disease. We posit that the endurance of illegal fintech stems from a complex, self-reinforcing crucible of socio-economic desperation, a critical deficit in functional financial literacy, a digital culture that aggressively encourages consumption over savings, and a technological agility on the supply side that consistently outpaces regulatory frameworks. By analyzing scholarly literature and media reports, we demonstrate that this phenomenon parallels other intractable societal issues in Indonesia, such as the consumption of lethal bootleg alcohol (oplosan) and the persistent flow of undocumented migrant workers. In all these cases, high-risk illegal choices are made not out of criminal intent, but out of perceived necessity due to structural exclusion. We contend that a sustainable solution demands a radical paradigm shift: moving from a strictly punitive "whack-a-mole" approach to a holistic strategy focused on prevention and inclusion. This requires a coordinated national effort to revolutionize financial literacy education, compel the design of inclusive financial products for the informal sector, foster responsible financial habits through community leadership, and implement adaptive, technology-driven regulation.