P2P Fintech Firms see Regulation in Indonesia

Indonesian Fintech companies that facilitate peer-to-peer (P2P) lending in the country have seen new regulation imposed by the Financial Services Authority. Known as the Otoritas Jasa Keuangan (OJK) locally, the government agency regulates and supervises the financial services sector in the country.

The new regulation, POJK No. 77/2016, announced toward the end of December, is seen as an introductory move by the OJK to oversee the Fintech industry, so as to ensure a smooth regulatory oversight over the nascent but burgeoning sector.

Speaking at the OJK’s annual press briefing recently, the authority’s chair Muliaman D. Hadad stated:

What’s important is that they get onto our radar because we don’t want to regulate the prudential aspects (of the Fintech sector) hastily. We want to provide transparency guidelines first.

And so it proved, with the final regulation contrasting to initial proposed drafts. Industry companies and startups will gain from easier and relaxed requirements, as the OJK attempts a delicate approach with its regulation.

In figures reported by the Jakarta Post, the draft regulation proposed that a Fintech company is required to have Rp 2 billion (approximately $150,000) in working capital when registering its business with the OJK. The final regulation has halved that requirement, to Rp 1 billion. Further, Fintech companies will be required to show Rp 2.5 billion when applying for a business license, after its registration phase. That’s down from Rp 5 billion, stated in the draft regulation.

A notable takeaway from the original draft sees the proposal toward foreign ownership of Fintech lending providers to be capped at 85%.

Maximum interest rates on loans issued over Fintech platforms will not see strict regulation either. Instead, the regulation states that a firm will have to take into account “fairness and national economic development” while advising investors and customers of an interest rate.

To foster development of Fintech services under its watchful eye, the OJK has also introduced and established a regulatory sandbox. Firms will be encouraged to test services and offerings meant for consumers under the authority’s supervision.

Image from Shutterstock.

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