The Future of Our Local Shops Amidst the Onslaught of Algorithms and the Shadow of Online Loans

Try observing the market near your home. In Palopo, small shops and grocery stores dominate the community, controlling 68% of the market share compared to minimarket chains like Indomaret (14%) and Alfamart (10%), according to 2023 data published in the Al-Kharaj journal by IAIN Palopo. While this might seem reassuring, the researchers predict that the market share of these local shops will eventually decline.

The greater concern is that the biggest threat to small shops is not just minimarket chains. Today’s challenge is far more dangerous and operates much more quietly. This challenge is the combination of illegal online loans and online gambling. The Financial Services Authority (OJK) recorded that digital online loan financing reached Rp 87.61 trillion in August 2025, growing by more than 21% year-on-year. The Financial Transaction Reports and Analysis Centre (PPATK) noted that funds circulating for online gambling could reach around Rp 1,200 trillion by the end of 2025. Ironically, 71.6% of online gamblers earn less than Rp 5 million and have loans from informal banks. In reality, most of them are small traders and lower-middle-income earners looking for a quick way to solve their financial problems.

The great irony is that small traders struggling against the invasion of modern retail to maintain their shops could end up collapsing faster because they are trapped by illegal online loans with interest rates soaring up to 60% per week. Conventional bank loans charge 10%-15% interest annually, yet small traders have very few financing options because unsecured loans are difficult to obtain. This creates a difficult situation for many small traders, as they have no other alternatives.

As students of economic philosophy, we can analyse this situation from the perspective of justice. Borrowing money that involves usury is exploitative, driving the business of money lending. This is no different from gambling, which is designed to benefit the bookmaker at the expense of the player. The combination of usurious loans and gambling will only lead to the collapse of many small businesses operating outside the umbrella of the formal competitive market.

Small traders in Palopo have limited funding options and even fewer choices that do not involve oppressive interest rates. Given this situation, we do not think that avoiding technology is a wise move; quite the opposite. What if, instead of requiring collateral for a loan, a microfinancing score could utilise the daily business activities of small traders to assess funding requests? Several Islamic fintech companies in Indonesia have already implemented such a model. We believe these fintech companies should focus on traditional markets.

This is not just an idea on paper. The OJK, the Ministry of Communication and Informatics, PPATK, and Bank Indonesia have been working since early 2025 to shut down thousands of illegal lending institutions and block tens of thousands of online gambling accounts. However, enforcement alone is not enough if the root problem—unequal access to capital—is not addressed. This is where universities can be most useful. Universitas Muhammadiyah Palopo, with the spirit of Muhammadiyah’s Progressive Economy, has sufficient value capital to solve the burdensome microfinance problem and create fair, innovative solutions.

We do not want to become a statistic. We want the solutions we have poured so much energy into in the classroom to have an impact on local shops, on the everyday traders trapped in a treadmill of survival versus bankruptcy. All our shops have potential, provided we have the courage to close the long-standing gaps and move them from the proximity of digital loan sharks to ethical financing alternatives. It is time for us, the youth of Palopo, to shift from being technology consumers to becoming designers of fair microfinance solutions.