As of December 24, 2024, the Indonesian Financial Service Authority (Otoritas Jasa Keuangan, or “OJK”) has promulgated OJK Regulation No. 40 of 2024 (“OJK Regulation No. 40/2024”), superseding OJK Regulation No. 10/POJK.05/2022 on Information Technology-Based Joint Funding Services, as amended by POJK No. 22 of 2023. This revision aligns with amendments to the Funding Services provisions outlined in Law No. 4 of 2023 on Developing and Strengthening the Financial Sector, particularly with regard to Information Technology-Based Joint Funding Services, commonly referred to as Fintech Peer-to-Peer (“P2P”) Lending.
This publication will summarize the key updates under OJK Regulation No. 40/2024.
Form of Fintech P2P Lending Organizer
Previously, under OJK Regulation No. 10/2022, it clearly stated that the only form of a legal entity that can act as a P2P Organizer is a limited liability company. The OJK Regulation No. 40/2024 now permits cooperatives to also be a shareholder of a P2P company.
P2P Organizer’s Shareholders
OJK Regulation No. 40/2024 expands the criteria of P2P Organizer’s shareholders. While it was not clearly regulated under OJK Regulation No. 10/2022, OJK Regulation No. 40/2024 states that the Republic of Indonesia, as well as the state and regional governments, may also invest in the stocks of P2P companies.
Foreign Shareholder Restriction
The foreign restrictions outlined in OJK Regulation No. 10/2022 remain in effect under OJK Regulation No. 40/2024. Currently, foreign citizens and foreign entities are generally subject to restrictions, with a maximum foreign ownership cap of 85% of the paid-up capital of the Organizer. Furthermore, OJK Regulation No. 40/2024 stipulates that the government will enact regulations to further govern the foreign limitations imposed on an Organizer. Until such regulations are issued by the government, the foreign restrictions under OJK Regulation No. 40/2024 will be enforced. As of the date of this publication, we are unaware of the issuance of these regulations.
Mandatory OJK’s Reporting for Changes of Ownership
Under OJK Regulation No. 10/2022, any change of ownership in an Organizer shall obtain prior approval from the OJK. Now, OJK Regulation No. 40/2024 requires only acquisition that results in the change of (i) controlling shareholders; and (ii) controller of the Organizer’s controlling shareholders to obtain the approval from the OJK. Any other transfer of ownership in the P2P company will only be required to submit a notification to the OJK.
P2P Organizer’s Business Activities
OJK Regulation No. 40/2024 has expanded the business activities that may be conducted by Organizers. Previously, Organizers’ business activities were limited to the provisions, management, and operation of LPBBTI. However, according to Article 130 of the OJK Regulation No. 40/2024, Organizers are now permitted to engage in additional activities, including acting as: (i) a distribution partner for government securities to support government programs, (ii) an informative service cooperation, and/or (iii) other activities after obtaining approval from the Financial Services Authority (“Other Activities”).
To facilitate the implementation of the Other Activities as part of its operations, the P2P Organizer, which has met the requirements stipulated under OJK Regulation No. 40/2024, must submit an application to the OJK.
Types of Funding and Maximum Funding Limit
Previously, according to OJK Regulation No. 10/2022, the type of funding was categorized as (i) productive funding and (ii) multipurpose funding. However, the term “multipurpose funding” has been amended to “consumptive funding.” Productive funding is arranged as a form of capital to foster business growth, whereas consumptive funding is utilized for consumer spending and not for business or other productive activities.
Under OJK Regulation No. 10/2022, Organizers were permitted to provide funding to the fund provider in a capped amount, with a maximum of IDR 2,000,000,000, regardless of the type of fund providers. However, OJK Regulation No. 40/2024 has amended this regulation, allowing Organizers to provide funding beyond the cap up to IDR 5,000,000,000 for productive funding, provided that the Organizer meets the following conditions: (i) has a non-performing funding quality of maximum 5% within the last 6 months; and (ii) is not currently under sanctions or restrictions imposed by the OJK regarding business activities.
Credit Scoring
One of the new concepts introduced under OJK Regulation No. 40/2024 is Credit Scoring. According to Article 150 – 152 of OJK Regulation No. 40/2024, specific provisions now require credit scoring to be conducted by Organizers to fund recipients during funding. Organizers shall also now create a guideline for credit scoring, with which the effectiveness shall be re-evaluated by the Board of Directors every three months.
At the very least, credit scoring shall be conducted by conducting: (i) verification over documents based on the credit scoring guidelines; (ii) conduct clarification and confirmation through online and/or offline face-to-face means and/or non-face-to-face online means over candidate fund recipients to comply with anti-money laundering, prevention of terrorism financing, and prevention of the financing of the proliferation of weapons of mass destruction programs (“APU, PPT, PPPSPM”) requirements in the financial services sector; (iii) conduct data processing from other relevant parties for such scoring; and (iv) analysis of the candidate fund recipient. Furthermore, upon such credit scoring, several factors would come into play, among others, the character, financial ability to repay, capital, economic prospect, and securities provided for such funds. The purpose of this credit scoring is to assess the suitability and appropriateness of the prospective borrowers.
Capital and Equity Requirements
Capital Requirements
Similarly to OJK Regulation No. 10/2022, the Organizer is mandated to adhere to the minimum paid-up capital of IDR 25,000,000,000. Previous license holders may benefit from the grandfather clause, exempting them from this requirement. However, OJK Regulation No. 40/2024 stipulates that the grandfather clause will be terminated once there is a change of ownership in the P2P Organizer.
Equity Requirements
Previously, Article 50 of OJK Regulation No. 10/2022 mandated that Organizers maintain a minimum equity of IDR 12,500,000,000 at all times. This equity was to be gradually met over three years.
Article 169 of OJK Regulation No. 40/2024, while preserving the obligation to maintain a minimum equity of IDR 12,500,000,000, slightly adjusts the time frame for its fulfillment. The new milestones are as follows:
- Effective date of OJK Regulation No. 40/2024: At least IDR 7,500,000,000
- July 4, 2025: At least IDR 12,500,000,000
Therefore, Organizers are now required to have a minimum equity of at least IDR 12,500,000,000 no later than July 4, 2025.
Composite Level
OJK Regulation No. 40/2024 introduces new provisions for Organizer to maintain their financial soundness as financial service providers. According to Article 167 of the OJK Regulation No. 40/2024, Organizer are required to meet a minimum financial soundness rating of at least Composite Rank 3, by considering the (i) capitalization, (ii) funding quality, (iii) profitability, (iv) liquidity, and (iv) management of the Organizer with details further outlined in OJK Regulation No. 40/2024. According to Article 176 OJK Regulation No. 40/2024, composites would be divided into 5 Composites Rank, by 5 being the lowest and 1 as the highest.
Good Governance Principle
OJK Regulation No. 10/2022 had generally introduced good governance principles as outlined under Article 53 OJK Regulation No. 10/2022. OJK Regulation No. 40/2024 governs a more detailed provisions as reflected under Article 192 paragraph (4) OJK Regulation No. 40/2024, which governs that the implementation of these good governance principles must, at a minimum, be reflected in: (i) the performance of duties and responsibilities of the board of directors, the board of commissioners, and the Sharia Supervisory Board (Dewan Pengawas Sharia); (ii) the completeness and execution of the duties of committees and work units responsible for internal control functions; (iii) the handling of conflicts of interest; (iv) the implementation of compliance functions, internal audits, and external audits; (v) the application of risk management and internal control systems; (vi) the implementation of remuneration policies; (vii) transparency of financial and non-financial conditions; and (viii) business plans.
Notwithstanding the foregoing, Organizers as financial services institutions shall also be subjected to further compliance on good governance as provided in OJK Regulation No. 48 of 2024 on Good Governance for Financing Institutions, Venture Capital Companies, Microfinance Institutions, and Other Financial Services Institutions, allowing for a more robust governance and ultimately, trust from financial customers.
APU, PPT, PPPSPM Program
In comparison of the changes with the previous regulation, OJK Regulation No. 40/2024 now explicitly imposes an obligation on Organizers to implement an APU, PPT, PPPSPM program, as stipulated under Article 180 of the OJK Regulation No 40/2024. The implementation of such program shall be further governed under OJK Regulation No. 8 of 2023 on the Implementation of Anti-Money Laundering, Prevention of Terrorism Financing, and Prevention of the Financing of the Proliferation of Weapons of Mass Destruction Programs in the Financial Services Sector.
Foreign Workers
Previously, OJK Regulation No. 10/2022 did not mandate foreign workers to obtain approval from the OJK. However, as of now, any foreign workers employed by the Organizer are required to obtain approval from the OJK. The Organizer must obtain prior approval from the OJK before employing foreign workers and registering them with the Ministry of Manpower.
Nevertheless, this requirement does not apply to the Organizer who has employed foreign workers before the issuance of OJK Regulation No. 40/2024, provided there are no amendments to the terms of employment of such foreign workers. This requirement will then be applicable once the terms of employment of such foreign workers expire.
The foreign workers may be employed for 2 years and may be extended for another 2 years. Further, the foreign workers’ position is strictly limited to: (i) a position in the field of information technology as an expert with one level below the Board of Directors or (ii) consultant.
Organizer Prohibitions
Article 111 of OJK Regulation No. 10/2022 had previously set out prohibitions applicable to Organizers, among others, prohibitions on engaging in business activities other than those explicitly regulated, acting as a Lender or Borrower, granting access to members of the Board of Directors, Board of Commissioners, Sharia Supervisory Board, employees, and affiliates to act as Lenders, issuing debt securities, and entering into security in all forms for the fulfilment of other parties’ obligation.
These prohibitions have now been expanded under Article 158 of OJK Regulation No. 40/2024, which introduces three additional restrictions for Organizers, inter alia:
- Collecting funds directly from the public in the form of clearing accounts, savings, deposits, and/or other forms equivalent to public fund collection;
- Using third parties to manage funds from Lenders; and/or
- Engaging in lending practices classified as unsound financing.
Transitional Period
Although the OJK Regulation No. 40/2024 has been effective since December 27, 2024, not all of its provisions will be implemented immediately. OJK regulation No. 40/2024 regulates some transitional period for the previous license holders, among other things, including the implementation of the credit scoring activities requirements that will be effective by 27 June 2025.
Conclusion: Overview of OJK Regulation No. 40/2024
OJK Regulation No. 40/2024 supersedes OJK Regulation No. 10/2022 to align with Law No. 4/2023 on the Development of the Financial Sector. This change was not solely motivated by a legal requirement but also aimed to enhance the security and robustness of the P2P lending industry in Indonesia. The regulation has opened up numerous business opportunities, increased funding, and strengthened corporate governance, enabling stakeholders to maintain the industry’s integrity while fostering trust among borrowers.
For Further Information, Please Contact:
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