Over the past five years, private pawnshops in Indonesia have grown in number and shown strong funding trends. The Financial Services Authority (Otoritas Jasa Keuangan or OJK) recorded a significant increase in the number of pawnshop companies, reaching 200 as of May 2025. Within a 12-month period, the number of private pawnshop entities rose by 38, compared to 162 companies recorded in May 2024. One of the main factors contributing to this development is the rising public demand for short-term financing, particularly pawn-based lending products. In contrast to conventional banking, pawnshops provide accessible alternatives to the general public.
As a measure to strengthen the regulation and supervision towards pawnshop companies, the Government of Republic of Indonesia through the OJK has issued OJK Regulation No. 39 of 2024 on Pawnshops (OJK Regulation No. 39/2024). This regulation governs various aspects of pawnshop companies, including capital requirements, ownership, lines of business, and human resources. Analogous to pawnshop activities that readily provide loan access to the public, another alternative exists: peer-to-peer lending (P2P). This article will also elaborate on the regulatory distinctions between pawnshop companies and P2P companies.
The following is an elaboration of the aforementioned aspects.
- Pawnshop Regulations
Legal Entity Form
Pursuant to Article 2 of OJK Regulation No. 39/2024, a pawnshop is established in the form of limited liability companies (perseroan terbatas) and cooperatives (koperasi).
Ownership
Pursuant to Article 3 paragraph (1) of OJK Regulation No. 39 /2024, a pawnshop company may be owned by: (i) the Government of Republic of Indonesia (in the form of a State-Owned Enterprise); (ii) regional governments; (iii) Indonesian citizens; (iv) Indonesian legal entities; (v) foreign legal entities; and/or (vi) foreign citizen.
In regard to foreign ownership, according to Article 4 of OJK Regulation No. 39/2024, ownership of a pawnshop company by foreign legal entities must be conducted through a partnership with one of the following: (i) the central government; (ii) regional governments; (iii) Indonesian citizens; and/or (iv) Indonesian legal entities. Furthermore, ownership by foreign citizen is only permitted through transactions conducted on the capital market.
While OJK Regulation No. 39/2024 does not establish a stipulated percentage of foreign ownership in pawnshop entities, the P2P Regulation imposes a limitation on foreign ownership to a maximum of 85%.
Capital requirement
Pursuant to Article 6 paragraph (1) of OJK Regulation No. 39/2024, the capital requirement for pawnshop companies is determined based on the geographic scope of their business operations (i.e., regency/city, provincial, or national). Furthermore, Article 6 paragraph (2) stipulates the following minimum capital requirements for pawnshop companies: (i) IDR 2,000,000,000 (two billion rupiah) for regency/municipality-level operations; (ii) IDR 8,000,000,000 (eight billion rupiah) for provincial-level operations; and (iii) IDR 100,000,000,000 (one hundred billion rupiah) for national-level operations. In comparison, this amount is relatively smaller when compared to peer-to-peer companies whose minimum capital requirements is IDR 25 billion.
Furthermore, Article 6 paragraph (2) of OJK Regulation No. 39/2024 stipulates that the capital of a pawnshop company must be fully paid-up in cash and placed in the form of a time deposit in (i) a commercial bank, a sharia commercial bank, or a sharia business unit of a commercial bank in Indonesia, in the case of a conventional pawnshop company; or (ii) a sharia commercial bank or a sharia business unit of a commercial bank in Indonesia, in the case of a sharia pawnshop company. In addition, pursuant to Article 7 paragraph (1) of OJK Regulation No. 39/2024, capital contributions for a pawnshop company are prohibited from being sourced from loans.
License
Pursuant to Article 10 paragraph (1) of OJK Regulation No. 39/2024, any company which intends to engage in business activities of pawnshop company is required to obtain a business license from the OJK prior to commencing operations.
The aspects assessed by OJK in granting such license are set out in Article 11 paragraph (2) of OJK Regulation No. 39/2024, which include: (i) completeness of documentation; (ii) paid-up capital deposit; (iii) feasibility of the business plan; (iv) the fitness and propriety of proposed members of the Board of Directors, proposed members of the Board of Commissioners, proposed Controlling Shareholders, and/or proposed members of the Sharia Supervisory Board (if applicable); and (v) compliance with laws and regulations in the pawnshop sector.
Types of Pawnshop Companies
OJK Regulation No. 39/2024 classfies pawnshop companies into two types: conventional pawnshop companies and sharia-based pawnshop companies. The distinction between the two is based on the underlying operational principles applied by the respective pawnshop companies.
Human Resources
Pursuant to Article 56 paragraph (1) of OJK Regulation No. 39/2024, a pawnshop company is required to employ at least one appraiser at each branch office to conduct appraisals of collateral. Furthermore, Article 1 point 25 of OJK Regulation No. 39/2024 defines an appraiser as a person who holds a certification in appraisal issued by a certification body registered with the OJK.
- How Pawnshop Companies Differ from Peer-to-Peer Lending Companies
In addition to the several distinctions outlined above regarding capital requirements and foreign ownership limitations, the following are summaries of other key distinctions between pawnshops and peer-to-peer lending platforms, as stipulated in their respective OJK regulations.
Scope of Business
Both P2P lending companies and pawnshops essentially serve a similar function in the financial sector, namely providing short-term loans to customers. However, the mechanisms for providing such loan are different between these two types of institutions.
Pawnshop companies provide loans in exchange of collateral in the form of pledge of movable goods submitted by the customers. According to Article 136 paragraph (1) of OJK Regulation No. 39/2024, the primary business activity of pawnshops is conducted through the granting of loans secured by pledge (gadai).
On the other hand, under the business operations of P2P lending companies, a collateral is not a mandatory requirement when providing financing. However, the use of collateral may be used as an optional risk mitigation measure by P2P lending platforms, as stipulated in Article 150 of OJK Regulation No. 40/2024. Furthermore, the disbursement of fund conducted by P2P Lending companies shall be based on a credit scoring assessment which process shall include at a minimum:
- Verification of the accuracy of documents submitted by prospective borrowers in accordance with the credit scoring assessment guidelines;
- Clarification and confirmation through face-to-face meetings (in person or electronically), in accordance with the provisions of the OJK regulation concerning the implementation of anti-money laundering, counter-terrorism financing, and counter-proliferation of weapons of mass destruction programs in the financial services sector;
- Data processing from third parties that are relevant to the credit assessment process; and
- Analysis of the prospective borrower.
Maximum Limit of Loan
OJK Regulation No. 39/2024 regulates that the maximum limit of lending to an affiliate party is 20% of the pawnshop companies’ equity – to an individual customer or 50% of the pawnshop companies’ equity – to a group of customers. On the other hand, OJK Regulation No. 40/2024 provides numerical limits, i.e. IDR 2 billion for consumptive and productive financing or IDR 5 billion for selective productive financing.
Electronic System
The provision of an electronic system constitutes a key distinction between P2P lending companies and pawnshops. P2P lending companies are required to operate their own electronic systems. Pursuant to Article 160 of OJK Regulation No. 40/2024, P2P lending companies must utilize electronic systems in conducting their business activities.
In contrast, the use of electronic systems is not mandatory for pawnshop companies. Article 163 paragraph (1) of OJK Regulation No. 39/2024 merely grants pawnshop companies the right to use information technology media to support their business activities, without imposing an obligation.
Human Resources
A pawnshop company is required to have an appraiser. This is due to the nature of pawnshop operations, which involve collateral-based lending. The appraiser is dedicated in each branch office and is prohibited to hold dual position in other branch office. Whereas the key personnel required by P2P Lending companies is experts capable of developing, modifying, and deactivating the Electronic System utilized by the P2P platform. This requirement is stipulated under Article 52 paragraph (1) of OJK Regulation No. 40/2024. The difference is due to the difference on the nature of business of both companies.
Fund Transfer Mechanism
Pursuant to Article 153 of OJK Regulation No. 40 of 2024, P2P lending companies are required to utilize escrow accounts and virtual accounts or payment gateways in conducting their business activities. This requirement arises from the nature of P2P lending operations, which facilitate the matching of funders and borrowers, and do not involve the use of the company’s own capital in providing financing. In contrast, OJK Regulation No. 39/2024 does not specifically regulate the mechanism for fund disbursement in the provision of loans by pawnshop companies.
Conclusion
OJK Regulation No. 39/2024 provides a comprehensive regulatory framework for pawnshop companies in Indonesia, addressing key aspects such as ownership, business activities, and corporate obligations.
As a financing institution, a pawnshop company is fundamentally different from a P2P lending company. One of the primary distinctions lies in the operational model: pawnshop companies rely on the use of collateral in extending credit, whereas P2P lending companies do not require collateral as a core element of their financing activities. Another notable difference is the use of electronic systems. P2P lending companies are required to operate their own electronic systems in conducting their business, a requirement that does not apply to pawnshop companies.
From a capital requirement perspective, establishing a pawnshop company is generally more feasible compared to a peer-to-peer (P2P) company. Notably, the OJK continues to impose restrictions on the issuance of new P2P company licenses. Consequently, pawnshop companies can emerge as novel investment options for investors seeking to engage in consumptive financing. Nevertheless, it is imperative for the government to remain vigilant and continuously enhance regulations in response to evolving business trends to ensure adequate protection for the public’s interests.
For Further Information, Please Contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia
general@metalaw.id
