The impact of fintech peer-to-peer lending and Islamic banks on bank performance during COVID-19

Abstract

This study delves into the influence of Peer-to-Peer (P2P) Fintech lending on bank performance in Indonesia, with a specific focus on its effects on Islamic banks both before and during the COVID-19 pandemic. Employing a fixed-effects model, unbalanced panel data from 121 banks, including 16 Islamic banks, were analyzed. The findings unveil a significant and positive impact of growth loan disbursement to borrowers from P2P lending on bank performance, particularly in terms of return on assets. Additionally, Islamic Banks exhibit a significant and favorable effect on overall bank performance. Conversely, the joint interaction between P2P lending and Islamic Banks demonstrates a negative and significant influence on Islamic bank performance, suggesting that while P2P lending may benefit conventional banks, it adversely affects Islamic banks. Furthermore, this negative impact is exacerbated during the COVID-19 period. These outcomes underscore the importance of collaboration or strategic alliances between P2P lending platforms and Islamic banks, particularly in the context of the COVID-19 pandemic.