Indonesia’s fintech industry has boomed over the past couple of years. As of August 2019, there were 48 fintech companies listed in 15 clusters of digital financial innovation, 127 registered P2P lending companies, and one registered equity crowdfunding company, according to OJK’s chairman Wimboh Santoso. As of September 2019, the AFPI had 280 members, of which 250 fintech companies.
To spur Indonesia’s fintech development, the OJK is preparing several new policies, Wimboh told the Jakarta Post in September. “We will launch them before year-end,” he said, without elaborating on the proposed policies further.
The OJK is also exploring possible fintech partnerships with other Southeast Asian countries, Wimboh said.
P2P lending regulatory framework in Indonesia
To prevent abuse yet enable the growth of a healthy P2P lending sector, the OJK has released a set of rules P2P lenders must comply with and has also been actively cracking down on illegal platforms, stopping the operation of around 1,073 illegal fintech companies in Indonesia so far this year.
P2P lending companies in Indonesia are regulated under the OJK Regulation No. 77/POJK.01/2016 on information technology-based lending. The regulation limits the foreign shareholding limitation to a maximum of 85%, prohibits the balance sheet lending model, sets a two-tier licensing mechanism and mandates customer protection, among other things.
In February, the OJK issued an updated “checklist” for licensed P2P lending platform providers and those looking to get licensed. The checklist imposes a new restriction on the choice of name for P2P companies, which are no longer allowed to use words such as money, rupiah, cash, installment, express, fast, bank, credit and finance in their name.
Another requirement is that P2P lending services providers must be members of the Indonesian Fintech Association (AFPI), the umbrella organization representing the industry, and must comply with the organization’s code of ethics and related commitments.
Additionally, P2P lenders are required to go through an interview with the OJK as part of the registration and business license phase. They are also only allowed to enter into a cooperation with a credit information management institution that has obtained a license from the OJK, and must have an agreement to mitigate the credit risk of lenders and borrowers by, for example, entering into an agreement with a credit insurance provider.
The OJK is planning to issue a new OJK regulation to replace the current OJK Regulation No. 77/POJK.01/2016 on P2P lending services, but it is still unclear when the new framework will be issued. It is however expected to introduce stricter requirements for companies involved in the sector.
In December 2018, disbursement of credit through P2P lending platforms reached IDR 22.67 trillion (US$1.62 million), a 645% year-on-year increase. These funds originated from 101 local P2P platforms that registered with the Financial Services Authority of Indonesia (OJK).
Since then, the sector has continued growing, reaching IDR 41 trillion (US$2.92 billion) in May 2019, a 44% rise fr