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The New Regulation on P2P Lending Services in Indonesia

Author: Maichle Delpiero, Axel James Setiawan, Mon, Aug 1st 2022, 10:26

Background

The development of peer-to-peer lending services (“P2P Lending”) has rapidly increased following the growth of financial technology, especially in Indonesia. It can be seen from the Financial Service Authority/Otoritas Jasa Keuangan (“OJK”)’s report in March 2022 that loan disbursement has reached IDR 23.07 trillion provided to 17 million borrowers meaning that it has grown up to 97% from the preceding year. The presence of P2P Lending in Indonesia has brought a positive impact for people who need loan facilities in an effective and efficient manner. All they need is just their phone to access the P2P Lending platform and fulfill several information, and subsequently, the loan facility will be immediately transferred to their account.

 

P2P Lending was initially regulated on OJK Regulation Number 77/POJK.01/2016 regarding the Technology-Based-Fund-Lending Services (“OJK Regulation 77/2016”). However, recently on 4th July 2022, OJK issued a new regulation, namely OJK Regulation Number 10/POJK.05/2022 regarding Information Technology-Based Co-Funding Services (“OJK Regulation 10/2022”) revoking its predecessor the OJK Regulation 77/2016. [1] However the implementing regulation would still be applicable provided that the provisions are not, in any event, contradictory with the new regulation.[2]

General Overview

Under OJK Regulation 77/2016, P2P Lending or also commonly known as the Technology-Based-Fund-Lending Services, is defined as organization of financial services bridging the lender with the borrower for the purpose of entering loan agreement in rupiah currency directly through an electronic system by using an internet connection.[3] However, in OJK Regulation 10/2022 the nomenclature of P2P lending has been changed into “Technology-Based Co-Funding Services/Layanan Pendanaan Bersama Berbasis Teknologi Informasi (“LPBBTI”) and it is defined as the implementation of financial services to bring together funders with fund recipients in conducting conventional or sharia-based funding directly through an electronic system using the internet.[4]

Although the definition and nomenclature have changed, the concept of P2P Lending remains the same, whereas it involves 3 parties which are the Lender, Borrower, and Provider.[5] The following chart is the general concepts of P2P Lending.

 

Comparison

Comparison of the general provisions between OJK Regulation 77/2016 and OJK Regulation 10/2022
ASPECTS OJK REGULATION 77/2016 OJK REGULATION 10/2022

Nomenclature

Technology-Based-Fund-Lending Services

Technology-Based Co-Funding Services

Legal Entity Form

  1. Limited liability company;
  2. Cooperative (koperasi).[6]

Limited Liability Company[7]

Capital

  1. Rp 1.000.000.000,- (one billion Rupiah) at the registration stage and;
  2. Rp 2.500.000.000,- (two billion five hundred million Rupiah) during the licensing application stage[8]

Rp 25.000.000.000,- (twenty-five billion Rupiah) at the time of company establishment.[9]

 

The capital requirement must be fully paid in cash and placed in a term deposit on behalf of the Provider in a conventional or sharia commercial bank, or sharia business unit, depending on the Provider’s principle business (e.g. conventional or sharia),[10] and must not have been derived from any financial crimes (e.g. money laundering, terrorism funding) or have been sourced through loans.[11]

Shares Ownership

Indonesia citizens and/or legal entities/or[12]

Foreign citizens and/or legal entities, with a maximum direct or indirect ownership level of 85%.[13]
  1. Indonesia Citizens and/or legal entities; and/or
  2. Indonesian citizens and/or legal entities in cooperation with foreign citizens and/or legal entities[14], provided that:
  • Foreign citizens may only become owners of provider by purchasing shares through the stock exchange/IDX;[15]
  • Any foreign ownership in an provider either directly, or indirectly is limited to 85% of the total amount of the Provider’s paid-up capital unless the Provider is a public company trading its share through the stock exchange/IDX.[16]
Licensing
  1. Provider shall be registered in OJK;
  2. Provider license (private electronic system) maximum 1 year after P2P Lending has been registered.
  1. Business License from OJK;
  2. Provider license (private electronic system) within 30 days after obtain business license from OJK.

Board of Director (“BOD”)

Minimum one member[17].

Minimum two members.[18]

Board of Commissioner (“BOC”)

Minimum one member[19].

Minimum one member with a maximum member equals to the number of BOD.[20]

Sharia Supervisory Boards/Dewan Pengawas Syariah (“DPS”)

-

Minimum one member, if relevant.[21] 

Maximum Funding Amount for Borrower

Rp 2.000.000.000,- (two billion Rupiah).

Rp 2.000.000.000,- (two billion Rupiah).

Maximum Funding Amount for Lender

-

Maximum funding with a latest position of funding at the end of an ongoing month:[22]

  1. 80% up to six months since the issued of OJK Regulation 10/2022;
  2. 50% up to 12 months since the issued of OJK Regulation 10/2022; and
  3. 25% up to 18 month since the issued of OJK Regulation 10/2022.

 

The maximum funding limitations outlined above do not apply if the lenders concerned are financial services business actors that are supervised by the OJK.[2] Such lenders are allowed to provide funding amounting to up to 75% of the outstanding funding amount at the end of a month.[24]

For instance, in the event that the Provider submit financial records totaling 50 million at the end of the month, subsequently, each Lender is only permitted to transfer a maximum of 12.5 million dollars in funding the next month (50 x 25 percent).

Equity Amount -

Provider shall have minimum equity in the amount of Rp 12.500.000.000,00 (twelve billion five hundred million Rupiah) and maintain such equity as follows:[25]

  1. Minimum Rp 2.500.000.00, - (two billion five hundred million Rupiah) – by 4 July 2023;
  2. Minimum Rp 7.500.000.000, - (seven billion five hundred million Rupiah) by 4 July 2024; and
  3. Minimum Rp 12.500.000.000,- (twelve billion five hundred million Rupiah) by 4 July 2025 and beyond.

Controlling Shareholder

-

Minimum one person.[26]

OJK Approval  (Corporate Action)

-

Change of Ownership (except public company)[27]
Increase paid-up capital[28]
Change of BOD/BOC/DSP (fifteen days since appointment by the GMS)[29]
Merger and consolidation[30]

Debt Collection -

Warning letter given by the Provider which contain information of:[31]

  1. Delay time
  2. Total outstanding debt
  3. Economic benefit of funding
  4. Outstanding penalty.

Key Takeaways

Although OJK Regulation 10/2022 revoked the OJK Regulation 77/2016, but it is stated in Article 117 that all the implementing regulations (The circular letter of OJK/Surat Edaran OJK) of P2P Lending provisions on OJK Regulation 77/2016 are still applicable provided that the provisions are not, in any event, contradictory with the new regulation.

The OJK Regulation 10/2022 brought significant changes in terms of the nomenclature, legal entity form, minimum capital, shares ownership, licensing process, the minimum amount of BOD/BOC/DPS, maximum funding for the User of LPBBTI, and equity amount for the Provider in P2P Lending.

[1] Article 118 OJK Regulation 10/2022.

[2] Article 117 OJK Regulation 10/2022.

[3] Article 1 Number 3 OJK Regulation 77/2016.

[4] Article 1 Number 1 OJK Regulation 10/2022.

[5] The lender and borrower collectively referred to as the User of LPBBTI.

[6] Article 2 paragraph (2) OJK Regulation 77/2016.

[7] Article 2 paragrpah (2) OJK Regulation 10/2022.

[8] Article 4 paragraph (1) OJK Regulation 77/2016.

[9] Article 4 Paragraph (1) OJK Regulation 10/2022.

[10] Article 4 paragraph (2) OJK Regulation 10/2022.

[11] Article 4 paragraph (3) OJK Regulation 10/2022.

[12] Article 3 paragraph (1) OJK Regulation 77/2016.

[13] Article 3 paragraph (2) OJK Regulation 77/2016.

[14] Article 3 paragraph (1) OJK Regulation 10/2022.

[15] Article 3 paragraph (2) OJK Regulation 10/2022.

[16] Article 3 paragraph (5) OJK Regulation 10/2022.

[17] Article 14 paragraph (2) OJK Regulation 77/2016.

[18] Article 55 paragraph (1) OJK Regulation 10/2022.

[19] Article 14 paragraph (2) OJK Regulation 77/2016.

[20] Article 56 OJK Regulation 10/2022.

[21] Article 57 OJK Regulation 10/2022.

[22] Article 26 paragraph (5) OJK Regulation 10/2022.

[23] Article 26 paragraph (6) OJK Regulation 10/2022.

[24] Article 26 paragraph (7) OJK Regulation 10/2022.

[25] Article 50 paragraph (1) and (2) OJK Regulation 10/2022.

[26] Article 5 paragraph (1) OJK Regulation 10/2022.

[27] Article 68 paragraph (1) OJK Regulation 10/2022.

[28] Article 70 paragraph (1) OJK Regulation 10/2022.

[29] Article 71 paragraph (1) OJK Regulation 10/2022.

[30] Article 72 paragraph (2) OJK Regulation 10/2022.

[31] Article 102 paragraph (1) and (2) OJK Regulation 10/2022.