Key Takeaways:
Online gambling in Indonesia has experienced significant growth in recent years, especially following the pandemic.
BBRI Survey: 20% of the sample are involved in online gambling, and often linked to online loans, leading to increased credit risk in the banking sector.
PPATK data shows that 4 million people, including children, are involved in online gambling, driven by easy access and aggressive advertising on various sites.
The increase in online gambling transaction value raises economic concerns, exacerbated by the shift to informal employment, which drives more people to seek instant financial solutions like online gambling.
The online gambling (judol) phenomenon that has been on the rise in recent years has had significant and negative impacts on the Indonesian economy. This situation has been exacerbated by the COVID-19 pandemic, where many people lost their jobs and sources of income. Year by year, participation in online gambling has continued to increase, raising concerns among the public and the government. The growing involvement in this activity not only affects the individuals who are trapped in it but also has broader impacts.
A survey conducted by Bank Rakyat Indonesia (ticker: BBRI) revealed that out of 10,000 samples taken, about 20% of them are involved in judol. BBRI also found that online gambling activities are often closely linked to the use of online loans (pinjol). It is likely that individuals involved in online gambling use online loans as a source of funds to finance their gambling habits, which can increase the risk of default. The rise of online gambling has had a negative impact on BBRI's financial performance, particularly in terms of increasing Non-Performing Loans (NPL) or bad debt. Historical data shows a trend of increasing NPLs at BBRI year after year, as a result of the surge in online gambling and pinjol cases in society.
Figure 1: BBRI’s Historical Loan Quality
Source: BBRI, Juara Capital
According to data from the Financial Transaction Reports and Analysis Center (PPATK), it is estimated that around 4 million Indonesians are involved in judol, including children. About 2% of online gamblers are children under 10 years old. However, the actual number of participants is likely higher than the officially recorded, given the number of sites that may not have been detected. This phenomenon is further intensified by the ease of access to online gambling platforms which are easily accessible through ads in various official websites, further expanding the reach and attracting more individuals to participate.
Figure 2: Proportion of Online Gamblers in Indonesia by Age Group
Source: PPATK, Juara Capital
Figure 3: Online Gambling Transaction Value in Indonesia (2018-2024e)
Source: PPATK, Juara Capital
Figure 3 shows the total value of online gambling transactions in Indonesia from 2018 to the projected figures for 2024, which continues to increase. In 2023, the value was recorded at IDR 327 trillion, which is almost three times higher than the IDR 104 trillion in 2022. This trend is expected to continue, with the projected figure reaching IDR 383 trillion in 2024. This reflects how online gambling activities have grown rapidly and become a serious threat to the economy.
Figure 4: Percentage of Formal Employment in Indonesia (2018-2023)
Source: Badan Pusat Statistik, Juara Capital
The pandemic has triggered a crisis with wide-ranging impacts on various sectors. Many people who previously worked in the formal sector, which usually offers stability and job security, have been forced to shift to the informal sector due to layoffs and company closures. The informal sector, although it became an option for many who lost their jobs, tends to offer unstable income and is highly vulnerable to economic shocks. Due to high economic pressures, many of them sought quick solutions and fell into online gambling.
Overall, the widespread problem of online gambling not only reveals social issues but also highlights vulnerabilities in Indonesia's economy. The economic pressures caused by the pandemic, coupled with the transition to the informal sector, have created conditions where many individuals feel compelled to seek instant financial solutions, even if they are high-risk like online gambling. This situation is exacerbated by the ease of access through the internet and often driven by aggressive advertising. The combination of these factors creates a cycle that is difficult to break. As a result, the online gambling phenomenon not only becomes a problem for the individuals involved but also has broader negative impacts on Indonesia's economy.
However, with joint efforts from various parties, it is hoped that this phenomenon can be addressed. The government plays an important role in strengthening regulations and law enforcement. Financial institutions can also contribute significantly by enhancing inclusive financial literacy, enabling all levels of society to understand the importance of sound financial management and the risks associated with activities like online gambling. With an educational approach, it is expected that public awareness will continue to increase, thereby restoring and strengthening social and economic well-being in the future.
Juara Capital Indonesia, 31 August 2024
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