Flexible Lending as An Inclusive Financial Innovation Tool to Expand Credit Outreach

Abstract

Financial inclusion policies have traditionally focused on expanding access to credit. Even though, access alone does not ensure that borrowers can effectively utilise credit when repayment arrangements are not aligned with their income patterns. While previous studies have primarily examined the effects of repayment flexibility on borrower outcomes, limited evidence has examined about its contribution to credit outreach of cooperatives financial institutions. This study analyzes the adoption of flexible lending and its relationship with credit outreach in Koperasi Simpan Pinjam Credit Union Kridha Rahardja. Utilizing monthly administrative data from three branches covering January 2023 to May 2026, this study examines the trends of flexible lending adoption in loan disbursements and borrower participation. Differences in outreach performance across adoption levels are assessed using the Kruskal–Wallis rank-sum test. The findings clarify that flexible lending was progressively adopted across all branches although the intensity varied considerably. Moreover, higher intensity of flexible lending adoption was consistently associated with greater loan disbursements, whereas their association with borrower participation was comparatively weaker. These results suggest that repayment flexibility contributes more consistently to deepening the utilisation of institutional credit than to substantially expanding the borrower base.

Keywords: financial inclusion, repayment flexibility, financial innovation, credit outreach, credit union.