Indonesia – Pawnshop Under New Rule.

In Indonesia, the pawnshop (gadai) industry has emerged as a significant alternative financing channel, particularly for retail borrowers and micro-scale businesses requiring short-term, collateral-based funding. The Financial Services Authority (Otoritas Jasa Keuangan / “OJK”) has reported strong growth in the sector throughout 2025. As of November 2025, OJK data indicates that the pawnshop industry recorded year-on-year growth of 42.89%, with total financing disbursed exceeding that of the multifinance industry during the same period. 

This growth has occurred alongside broader national efforts to strengthen financial inclusion and improve access to financing, particularly for “underserved” segments. In response to evolving economic conditions, government policy priorities, and the increasing complexity of the financial services sector, the OJK introduced OJK Regulation No.39 of 2024 on Pawnshop, which has been amended by OJK Regulation No. 29 of 2025 (hereinafter referred to as “OJK Regulation No.39/2024”). 

The update in 2025 is intended to provide a more adaptive and proportionate regulatory framework, streamline administrative requirements, and enhance governance and risk management standards. These changes aim to support the sustainable development of the pawnshop industry while ensuring legal certainty, consumer protection, and alignment with Indonesia’s broader financial sector and economic policy objectives.

This article aims to discuss key regulatory requirements for pawnshop companies (“Pawnshop Company”) in Indonesia as set out under OJK Regulation No. 39/2024.

Scope of Business, Corporate Structure, and Ownership Requirements

By definition, a Pawnshop Company is a legal entity which carries out business activities in the provision of loan with collateral in the form of movable objects in a conventional manner. Pursuant to OJK Regulation No. 39/2024, an entity of a pawnshop can be in the form of a limited liability company (perseroan terbatas) or a cooperative (Koperasi). 

Foreign entities and/or foreign citizens are also allowed become shareholders in pawnshop companies, subject to the following restrictions: 

1. Foreign entities may only become shareholders by way of partnership with:

• The Indonesian government;
• State Government;
• Indonesian citizens; and/or
• Indonesian entities. 

However, OJK Regulation No. 39/2024 does not provide any further elaboration as to the partnership form which can be conducted. 

2. Foreign citizens may only become shareholders in pawnshop through transactions conducted on the stock exchange.

In addition, under Article 5 of Regulation No. 39/2024, a Pawnshop Company must also establish at least 1 controlling shareholder (pemegang saham pengendali), which can be legal entities, individuals, and/or business groups that:

• Owns at least 25% of the issued shares of the company having voting rights; or 
• Owns less than 25 of the issued shares of the company having voting rights, however, such shareholder is proven to exercise control over the company, whether directly or directly as a controlling shareholder. 

Capital and Equity Requirements 

In addition to ownership requirements, Pawnshop Company must also comply with the minimum paid-up capital and equity requirements under OJK Regulation No. 39/2024. 

The minimum paid-up capital requirement varies depending on the geographical scope of the Pawn Company’s business activities, as follows:

a. IDR 2,000,000,000 for the scope of regencies/city;
b. IDR 8,000,000,000 for the scope of provinces; and
c. IDR 100,000,000,000 for the national scope. 

(Please also refer to section Simplification of Business License Acquisition for Existing Pawn Companies below for transitional provisions of existing pawnshops that are currently applying for OJK’s license). 

The paid-up capital must be paid in cash and in full, and placed in the form of a deposit in the name of the Pawnshop Company at either: 

1. commercial banks, sharia commercial banks, or sharia business units of commercial banks in Indonesia for Pawnshop Companies; or
2. sharia commercial banks or sharia business units of commercial banks in Indonesia for Sharia Pawnshop Companies.

In addition, the source of funds for capital or investment in a Pawnshop Company must (i) derive from a loan and (ii) derive from and for the purposes of money laundering, financing terrorism, financing the proliferation of weapons of mass destruction, and other financial crimes.

In addition to the paid-up capital requirements, Pawnshop Companies must also fulfil equity requirements as set out under Article 194 of OJK Regulation No. 39/2024, which consist of as follows: 

1. IDR 1,000,000,000 for the scope of regencies/cities;
2. IDR 4,000,000,000 for the scope of provinces; and
3. IDR 50,000,000,000 for national scope. 

Furthermore, a Pawnshop Company must have an equity to Paid-up Capital ratio of at least 50% (fifty percent).

Business Licensing and Reporting Obligations

Business License Requirements: 

In order to conduct its business, Pawnshop Company’s must obtain a business license from the OJK. The director of the Pawnshop Company must apply for a business license to the OJK together with the application to conduct a fit and proper assessment for the directors, board of commissioners, controlling shareholders, or syariah supervisory board member (for syariah-based Pawnshop Companies).

The OJK will deliver its approval or rejection for the business license application within 20 business days after the application if determined to be complete. After issuing the business license, a company must commence business activities at the latest 30 calendar days after the date of issuance of the business license. Periodic Reporting: 

Aside from business licensing requirements, Pawnshop Company must also deliver a periodic report to the OJK in the form of:

1. Monthly reporting;
2. Annual financial report audited by a public accountant listed in the OJK.

The obligation to provide annual audited financial reporting is applicable for Pawnshop Company which fulfilled the following criteria:

1. Pawnshop Companies operating at provincial or national scope; and
2. Pawnshop Companies operating at regency/city scope with equity of at least IDR 4,000,000,000 (four billion rupiah).

Simplification of Business License Acquistion for Existing Pawn Companies

The OJK also provides “transitional provisions” for individuals, corporations, and other business entities that were already conducting pawnshop activities at the regency or city level but had not yet obtained a business license. Article 228A of OJK Regulation No. 39/2024, such entities must submit a license application to the OJK by 12 January 2026 and may continue the licensing process subject to specific requirements, including, among others, having a minimum paid-up capital of IDR 500,000,000 at the time of application and completion of fit and proper tests for proposed management and controlling shareholders.

However, pending license approval, these entities are prohibited from generating new transactions or receivables after 12 January 2026. Upon obtaining a license, they are granted a transitional period until 12 January 2029 to comply with the full capital and equity requirements, during which time they are restricted from opening new branches, changing shareholders or management, or distributing dividends unless OJK approval is obtained or the requirements have been fully satisfied.

Manpower 

Pawnshop Companies are also subject to manpower and human resources requirements. 

Under Article 56 of OJK Regulation No. 39 of 2024, a Pawnshop Company’s which operates a branch are required to employ at least one certified appraiser for collateral at each branch office. Such appraiser may not hold concurrent position and act as appraiser for other branches. 

Pawnshop Companies with at least 25% foreign ownership may employ foreign manpower, subject to prior approval from the OJK. However, foreign manpower may only be employed in limited roles, namely as: 

1. a member of the board of directors responsible for functions other than compliance, human resources, and internal audit; or
2. a member of the board of commissioners. 

In addition, a foreign nationals employed as a director and/or board of commissioner must meet the following requirements: 

1. possess knowledge about Indonesia, especially regarding the Indonesian economy, culture, and language; and
2. comply with the provisions of laws and regulations in the field of employment, including immigration.

There should not be more than 1 foreigner in the board of directors and board of commissioners, respectively. 

Other requirements for companies which employs foreign manpower includes the obligation for companies to (i) organize knowledge transfer from foreign workers to company employees and (ii) employ at least 1 Indonesian worker as a companion for each foreign worker. 

Change of Ownership and Acquisition

Any changes of ownership in a Pawnshop Company must acquire the approval of the OJK. The plan for change of ownership must be included in the business plan as described under the provisions of laws and regulations on business plans for non-bank financial service institution. 

In addition, if a change of ownership results from an increase of paid-up capital, such increase may not be made in any form other than:

1. cash deposit;
2. conversion/transfer of retained earnings;
3. conversion/transfer of loans; and/or
4. bonus shares. 

For publicly listed Pawnshop Companies, the OJK’s approval is required where such changes result in a change of controlling shareholder.

Maximum Lending Limit

Pawnshop Company’s must comply to the maximum lending limit (Batas Maksimum Pemberian Pinjaman / “BMPP”) set out under OJK Regulation No. 39/2024:

A. Loans to Related Parties: 

The maximum lending amount to all related parties must not exceed 50% of the company’s equity. 

Pursuant to Article 168 (4) of POJK No. 39/2024, the related parties consist of:

1. Private persons or legal entities which controls the company; 
2. Business entities where the company acts as a controller; 
3. Individuals or legal entities acting as controllers of the entity in letter b above; 
4. business entity of which control is carried out by:

• individuals and/or business entities as referred to in letter a; 
• individuals and/or business entities as referred to in letter c;

5. board of commissioners or directors of the Company; 
6. Parties who have family ties up to the second degree, either horizontally or vertically, from:

• an individual who is a controller of the Company as referred to in letter a; and/or
• The Board of Commissioners or Directors of the Company as referred to in letter e;

7. the board of commissioners or directors of the business entity as referred to in letter a to letter d;
8. a business entity of which the board of commissioners or board of directors are:
   • Board of Commisioenrs or Directors of the Company; or 
   • The board of commissioners or board of directors of the business entity as referred to in letter a to letter d; 
9. Business entities where:
   • the Board of Commissioners or Board of Directors of the Company as referred to in letter e acts as a controller; or
   • the board of commissioners or directors of the parties referred to in letter a to letter d, act as controllers; and
10. business entities that have financial dependence on the Company and/or parties as referred to in letter a to letter i.

B. Loans to Non-Related Parties: 

Loans extended to a single non-related borrower may not exceed 20% of the company’s equity. For group of customers, the maximum BMPP is set at 50% of the company’s equity. 

Customers are classified as member of a group of customers if such customer has a controlling relationship with other customers through ownership, management, and/or financial relationships, including: 

1. Customer is the controller of another Customer; 
2. 1 (one) party is the controller of several Customers;
3. Customers have financial dependencies with other customers;
4. the Customer issues a guarantee to take over and/or pay off part or all of the obligations of another Customer in the event that the other Customer fails to fulfill its obligations (default) to the Company; and/or
5. the board of commissioners and/or directors of the Customer becomes the board of commissioners and/or directors of another Customer.

The basis for calculating the company’s equity to determine the BMPP shall be the Equity in the Company’s last month report before the loan is provided. For new companies which obtains a business license less than 1 month, the basis for calculating entity shall be the equity in the financial report submitted at the time of the business license application. 

Funding Sources

A Pawnshop Company may not acquire funding aside from: 

1. increase in Paid-up Capital not through a public offering of shares;
2. loans from government institutions, banks, non-bank financial industries, institutions, and/or other business entities;
3. subordinated Loan;
4. issuance of securities through public offering;
5. issuance of debt securities not through a public offering; and/or 
6. asset securitization.

Companies must use funds obtained from funding sources in accordance with the objectives set out in a written agreement.

Participation in Other Businesses 

OJK Regulation No. 39/2024 prohibits companies to conduct any participation in any business, aside from:

1. company’s in the field of financial service in Indonesia; and/or 
2. company’s related to the activities of the Company. 

The amount of all participation by the Company may not exceed 20% of the equity of the Company. 

Soundness Level

The OJK also sets out terms relating to the soundness level (Tingkat kesehatan) of Pawn Companies. Pawn Companies are obliged to meet Soundness Level of at least “Composite Rating 3”, which rating is assessed by the following factors: 

1. Capital;
2. Loan receivables quality;
3. Profitability; 
4. Liquidity; 
5. Management. 

The Composite Rating spans from “Composite Rating 1” which reflects that a Pawn Company’s condition is very healthy so it is considered very capable of facing significant negative impacts from changes in business conditions and other external factors, to “Composite Rating 5”, which reflects that a Pawn Company is generally unhealthy, and is deemed unable to face significant negative impacts from changes in business conditions and other external factors. 

Joint Financing for Syariah Based Pawn Companies

Through the update under OJK Regulation No. 29 of 2025, Syariah-based Pawn Companies are now permitted to conduct joint financing arrangement by cooperating with other parties conducting conventional business activities (non-syariah based), subject to certain requirements. In particular: 

1. the total portion of joint financing involving conventional parties must not exceed 20% of the Sharia pawn company’s total loan receivables portfolio; and 
2. the Sharia pawn company must maintain a minimum participation of 51% in each joint financing arrangement.

A cooperation to carry out the joint financing by a Syariah Pawn Company and other parties as above must obtain the opinion of the Syariah Supervisory Board. 

Ease of Financing 

Through the update under OJK Regulation No. 29 of 2025, the OJK has also introduced greater flexibility in the assessment of financing eligibility by pawn companies. In particular, Pawn Compaines are permitted to extend financing to customers who meet certain criteria, including where the customer: 

1.  has non-current receivables that are considered immaterial;
2. demonstrates the continuing ability to repay the financing; and
3. meets the pawn company’s internal risk appetite and risk management policies.

This provision allows pawn companies to apply a more proportionate and risk-based approach in evaluating financing applications, thereby enabling broader access to financing while maintaining prudent risk management standards.

Conclusion: 

OJK Regulation No. 39/2024 represents an important step in strengthening the regulatory framework governing the pawnshop industry in Indonesia. By introducing clearer institutional, licensing, governance, and operational requirements, OJK Regulation No. 39/2024 enhances legal certainty and promotes prudent business conduct among pawnshop operators. The updates provided throughout OJK Regulation No. 29 of 2025 also facilitate the licensing process and amend several provisions with the objective of bolstering the people’s economy (ekonomi kerakyatan), accelerating financial inclusion, and enhancing the ease of doing business index.

For further information, please contact:

MetaLAW, Legal Consultant, Jakarta, Indonesia

general@metalaw.id

1. https://www.cnbcindonesia.com/market/20260109095542-17-700945/bisnis-gadai-tumbuh-subur-tahun-lalu 

2. Article 2 OJK Regulation No. 39/2024 

3. Article 4 OJK Regulation No. 39/2024 

4. Article 6 (1) OJK Regulation No. 39/2024 

5. Article 6 (3) OJK Regulation No. 39/2024 

6. Article 7 OJK Regulation No. 39/2024 

7. Article 10 OJK Regulation No. 39/2024 

8. Article 11 OJK Regulation No. 39/2024 

9. Article 206 OJK Regulation No. 39/2024 

10. Article 206 (1) OJK Regulation No. 39/2024 

11. Article 57 OJK Regulation No. 39/2024 

12. Article 59 OJK Regulation No. 39/2024 

13. Article 59 (2) OJK Regulation No. 39/2024 

14. Article 59 (3) (4) OJK Regulation No. 39/2024 

15. Article 60 OJK Regulation No. 39/2024 

16. Article 169 OJK Regulation No. 39/2024 

17. Article 169 OJK Regulation No. 39/2024 

18. Article 182 OJK Regulation No. 39/2024 

19. Article 196 OJK Regulation No. 39/2024 

20. Article 203 OJK Regulation No. 39/2024 

21. Article 159B (2) OJK Regulation No. 39/2024 

22. Article 159B (3) OJK Regulation No. 39/2024 

23. Article 152 (3) OJK Regulation No. 39/2024