NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, January 10, 2017

Following the release of e-commerce roadmap in November, Indonesia ended 2016 by coming out with a new set of rules for the fintech sector, specifically regulating peer-to-peer (P2P) lending platforms. The policies had long been anticipated by players, who had been working closely with the Indonesian financial services authority (OJK) to come up with rules governing lenders and borrowers.

The rules cover issues such as foreign ownership, minimum capital requirements, interest rate provision, and consumer protection. The enhanced regulatory measures are expected to lure more investors into fintech as confidence rises, government officials said. Under the new rules, every P2P lending startup must register and obtain a business license from the authority before running its business.

A company must have at least $74,239 in capital upon registering, and an additional $186,300 to apply for the operating license. In total, the company must have access to minimum $260,000. The numbers are half the required capital initially pegged in the draft version of the regulation, which was roughly $500,000.

Foreign ownership is limited to 85 per cent, and foreigners can only act as lenders. Hence, foreign businesses will need to find a local partner.