Does Fintech Lending Crowd Out Rural Bank Credit? Provincial Evidence from 2018 to 2025

Abstract

This paper asks whether the rapid expansion of peer-to-peer fintech lending has displaced credit extended by rural banks (BPR) in Indonesia. We assemble a provincial panel covering 34 provinces over 30 quarters and estimate a spatial error model that accounts for credit spillovers across neighbouring provinces.

We find no evidence of aggregate crowding out. Instead, fintech expansion is associated with a modest increase in rural bank lending to micro enterprises, consistent with a market-expansion rather than a substitution effect. The pattern reverses only in provinces where rural bank branch density is already above the national median.