Default Risk Mitigation Strategy and Debt Management for Micro, Small, and Medium Enterprises in the Digital Lending Ecosystem

Abstract

Access to financing through financial technology (FinTech P2P Lending) provides capital convenience for Micro, Small, and Medium Enterprises (MSMEs), yet simultaneously introduces new financial risks in the form of potential default risk due to daily interest structures and rigid repayment deadlines. Most previous literature focuses on quantitative approaches to statistical risk modeling, creating a gap in deep understanding regarding the dynamics of debt management at the operational level. This study aims to analyze default risk mitigation strategies and digital debt management mechanisms implemented by MSME owners to maintain business financial resilience. This study employs a qualitative approach with a multiple-case study design involving six MSME owners using registered digital lending platforms who have experienced liquidity vulnerabilities. Data were collected through semi-structured in-depth interviews, daily transaction documentation, and field notes, then analyzed using Thematic Analysis following the Miles, Huberman, and Saldana model. Data trustworthiness was established through source triangulation and member checking. The findings reveal four main themes: (1) default risk identification is based on operational intuitive indicators such as inventory turnover rates; (2) the implementation of a daily cash flow partitioning mechanism for debt repayment allocations; (3) emergency mitigation strategies through stock efficiency, tenor negotiation, and the use of internal cash reserves; and (4) high barriers of information asymmetry and psychological pressure from digital debt collection. This study concludes that MSME financial resilience relies on disciplined daily cash allocation and the rejection of chain-debt practices. The implications of this study emphasize the importance of digital contract transparency by regulators and healthy digital debt governance education for micro-business owners