Mitigating Default Risks in Peer-to-Peer Lending Platforms: A Study of the Impact of Information Asymmetry and Green Credit Implementation in Indonesia

The Peer-to-Peer (P2P) Lending platforms in Asia have been growing at an astonishing rate, and it has piqued the interest of many to understand the factors that contribute to their viability and the impact of default rates. This study delves into the extent and results of information asymmetry in P2P lending and investigates the effectiveness of interest rate restrictions in addressing adverse selection and moral hazard issues. The research expands on the empirical literature on the connection between asymmetric information and default in the P2P lending market, with a particular focus on unsecured loans in credit markets. P2P lending platforms in Asia, particularly in Indonesia, demonstrated that it has been able to reduce information asymmetry compared to traditional banks. In this study, using an advanced data analysis methods showed to gain a more comprehensive view of borrowers' creditworthiness. This has not only made lending more accessible to those who may have been previously excluded by traditional banks, but it has also made the lending process more efficient and secure.