Determinant Factors of Financial Stability of Fintech Companies in Indonesia

Abstract

The company’s financial stability is impacted by the fintech industry development, therefore it requires supervision to manage the risks that arise. The purpose of this study is to analyze the factors that affect the financial stability of fintech Peer-to-Peer lending companies in Indonesia. The independent variables used are the number of Peer-to-Peer, firm size, Cost-to-Income Ratio, Loan to Total Assets, Non-Interest Income to Total Assets, Equity to Asset Ratio, and Non-Performing Loans. The data used comes from the statistical reports of fintech P2P lending companies published by Financial Services Authority Indonesia with the time span used, from May 2021 to March 2024. The dependent variable used is the Z-score Equity to Total Assets to measure financial stability. Research conducted on Peer-to-Peer lending fintech companies in Indonesia. This study applies the OLS analysis method through classical assumption and hypothesis testing. The regression analysis used shows some significant findings related to the factors that impact the financial health of the company. The outcomes show that Cost-to-Income Ratio is also an important factor, where firms higher cost ratios are associated with lower profitability and less financial stability. Loan to Total Assets and Equity to Asset Ratio, also have a significant impact on the financial health of the company. The findings highlight the importance of total assets, operating expense ratio, loan ratio and firm equity for the stability of peer-to-peer lending fintech firms since they have the potential to make the financial system more stable.