Regulation Update on Peer-to-Peer Lending Business in Indonesia

When it comes to fintech business in Indonesia, the peer-to-peer (P2P) lending has achieved a triple-digit growth. The growth is mainly due to the support of a large unbanked population in the country.

Therefore, in order to control and supervise the fintech industry, the Indonesian Financial Services Authority OJK (Otoritas Jasa Keuangan) published an updated regulation for P2P lending providers in February 2019. This latest regulation includes some changes to the earlier regulation issued in 2018.

This article focuses on new requirements and obligations as well as some key changes that will affect the P2P lending providers in Indonesia.

Name of P2P Company – Fintech Indonesia

With regard to choosing a name for a P2P company, there is a restriction that must be strictly followed. Words such as money (uang or duit), cash (kas), rupiah, bank, installment (cicilan), fast (cepat), express (kilat), finance, cooperative (koperasi), investment (investasi), savings (tabungan), credit (kredit), or fund (dana) are prohibited to be used in the name of a P2P company.

However, it is not clear if the restrictions by OJK apply to brand names as well. Investors, especially the novice ones, are encouraged to confirm with the OJK if the prohibition also applies to their brand names.

New Requirement: Interview

In accordance with the new regulation, the shareholders, commissioners, and directors must be interviewed by the OJK during the registration and business license stage. This interview is referred as “fit and proper test” by Indonesian industrial leaders and OJK personnel.

Although interview is part of the requirements for P2P lending providers, regulations to govern the interview have yet to be issued by the authority.

Requirements from Indonesian Fintech Association

The Indonesian Fintech Association (Asosiasi Fintech Pendanaan Bersama Indonesia – AFPI) has recently been acknowledged by the OJK. As a result of this recognition, P2P companies now have to meet certain AFPI-related criteria set out by the association itself.

Providing proof of AFPI’s recommendation and membership in order to register with OJK. The recommendation must at least include the following items:

• P2P companies must comply with provisions under the code of ethics of AFPI
• The shareholders, board of directors, and board of commissioners must have the AFPI-issued certification and qualifications of competence in the fintech industry

Providing proof of AFPI’s recommendation and membership in order to apply for a business license. The recommendation must at least include the following items:

• A statement to prove that the P2P company has never violated the AFPI’s code of ethics and never been punished by the AFPI.
• A pledge to comply with provisions under the code of ethics of AFPI
• Evidence showing that a data center is available at the P2P company, which can be linked with the AFPI and OJK’s data centers in no time.
• The shareholders, board of directors, and board of commissioners must have the AFPI-issued certification and qualifications of competence in the fintech industry

Other Major Changes P2P Companies Should Know

Some key changes mentioned under the updated regulation that are worth knowing encompass the following:

• P2P companies are only allowed to cooperate with credit information management institution licensed by the OJK.
• Under business license application, in order to alleviate the credit risk of both borrowers and lenders, P2P companies are required to have agreements with partners.

Fintech Business Setup in Indonesia with Cekindo

To set up a fintech business in Indonesia, the best legal entity to choose is a local company (PT) so that you can separate your personal assets from the company assets. You need to also take into account ownership, investment capital and necessary licenses and permits.

A team of professional consultants and legal experts at Cekindo is more than happy to provide you with more detailed information on fintech industry in Indonesia, particularly the peer-to-peer lending business. We are also ready to guide you through the business setup process.

Get in touch with us by filling in the form below. Or, visit our offices in Jakarta, Bali and Semarang.