The Loan Shark Dilemma: As Tax Revenues Soar, Is the State Turning a Blind Eye to the People’s Debt Trap?

In the past few years, digital lending platforms—known locally in Indonesia as pinjol (short for pinjaman online)—have grown like wildfire. They offer what many struggling citizens desperately need: quick cash. Just a few taps on a smartphone, and the money lands in a bank account. For a nation where millions lack access to formal banking, pinjol seems like a lifeline.

But beneath the glossy promise of “financial inclusion” lies a silent storm. Household debt is piling up, mental health is taking a toll, and ironically, tax revenues from this booming industry are soaring.

This raises a disturbing question: As tax collections rise, is the state turning a blind eye to the suffering of its people caught in the web of digital debt?

 

A Growing Industry—And A Growing Burden

Indonesia’s Financial Services Authority (OJK) reported that the outstanding amount of online loans in 2025 has reached tens of trillions of rupiah, growing significantly year after year. Pinjol companies, whether licensed or illegal, have managed to penetrate almost every layer of society—from urban workers to rural farmers.

Many borrowers are young adults, blue-collar workers, and micro-entrepreneurs. They are not taking these loans to start new businesses or invest in productive assets. More often, they borrow to cover daily needs, pay hospital bills, or settle existing debts.

“Borrowing Rp 500,000 felt easy at first,” says Sari, a 27-year-old factory worker. “But the interest kept increasing. Soon, I was borrowing from another app just to pay the first one. It became a loop I couldn’t escape.”

Her story is not unique. In neighborhoods across Indonesia, thousands face similar struggles. Digital loans, once seen as a solution, have quietly become a trap.

 

When Debt Becomes a Source of State Revenue

Here’s where the irony begins. The growth of pinjol transactions also means more tax money flows into state coffers. Digital lending companies are subject to value-added tax (VAT), income tax, and sometimes withholding tax. As more people borrow and pay interest, the government’s tax intake climbs.

In 2024 alone, tax revenue from financial technology (fintech) grew at double-digit rates. This figure looks great in a fiscal report—but behind every rupiah in tax revenue may be a citizen struggling to pay off a loan.

Economist Dini Arifin explains:

 “It’s a double-edged sword. On one side, pinjol supports economic activity and contributes to the tax base. On the other, it exposes vulnerable groups to unsustainable debt. If not regulated strictly, the state risks benefiting from people’s suffering.”

 

The Human Cost Behind the Numbers

Debt doesn’t just drain wallets. It affects mental health, family stability, and productivity. Many borrowers report constant stress, sleepless nights, and even harassment from illegal debt collectors.

One study found that debt-related stress can lead to depression, anxiety, and even suicidal thoughts. Some illegal pinjol operators publicly shame borrowers, sending messages to their families or colleagues to pressure them to pay.

Rudi, a 34-year-old ride-hailing driver, shared:

“I only borrowed Rp 1 million. After late fees and penalties, it became Rp 4 million. I got calls every hour, even at midnight. They threatened to call my employer. I felt like my life was collapsing.”

This is the dark side of financial technology—a side that is often hidden beneath the glamorous promise of “easy and fast loans.”

 

A Question of Policy and Ethics

The state faces a moral and policy dilemma. On one hand, the government welcomes fintech innovation to boost the digital economy, broaden financial access, and increase tax revenues. On the other hand, it has a duty to protect citizens from predatory practices.

Some critics argue that the government has been too lenient, focusing more on the economic benefits than on consumer protection. While OJK has revoked licenses of some illegal lenders, thousands still operate underground.

The Ministry of Finance has also collected significant taxes from this sector—but has yet to allocate a clear portion of that revenue to debt relief, financial education, or mental health support for affected citizens.

In short, the state is collecting tax from a problem it hasn’t fully solved.

 

Can Regulation Be the Answer?

A number of experts have called for stricter regulations to protect borrowers. This includes:

1. Tighter licensing requirements for pinjol operators.

2. Caps on interest rates and late payment fees, to prevent debt snowballing.

3. Stronger enforcement against illegal lenders, including criminal charges.

4. Mandatory borrower protection policies, such as transparent contracts and debt restructuring options.

5. Public financial literacy campaigns, so people understand the risks before borrowing.

Other countries have taken similar steps. In the Philippines, for example, regulators have cracked down on abusive collection practices. In Kenya, the central bank has suspended hundreds of lenders that failed to comply with consumer protection laws.

Indonesia can learn from these experiences. Regulation must not only encourage innovation—but also ensure justice.

 

A Call for Fairness: Tax Justice and Social Protection

It’s not wrong for the government to collect tax from fintech companies. After all, they operate as businesses and must contribute to the nation’s revenue.

But what’s dangerous is when the state profits from a system that harms its citizens. Tax justice means not only collecting money—but also redistributing it fairly to help the vulnerable.

Imagine if a portion of the fintech tax revenue was used to fund debt counseling centers, legal aid for borrowers, or emergency funds for those trapped in illegal loan schemes. This would turn tax collection into a tool for protection, not exploitation.

 

Empowering People, Not Just Companies

Financial inclusion should empower the people, not burden them. Digital loans can be a force for good—but only if accompanied by strict oversight, strong education, and fair taxation.

“We need to remind ourselves that tax is not just about numbers,” says Dini. “It’s about people’s lives. Every fiscal decision has human consequences.”

For Sari, Rudi, and millions of others, this is not just a financial issue. It’s a daily struggle for dignity and survival.

 

Conclusion: A Nation at a Crossroads

Indonesia stands at a crossroads. The booming pinjol industry offers fiscal benefits and economic growth—but it also carries the pain of millions trapped in debt.

Will the government continue to collect taxes while ignoring the cries of its people? Or will it turn fintech growth into a fair, humane system that uplifts—not exploits—its citizens?

The answer to this question will define not just the future of financial technology in Indonesia—but also the moral compass of the nation.