After almost five years, the Indonesian Financial Services Authority or OJK (Otoritas Jasa Keuangan) finally issued the long awaited new regulation governing multifinance activities in Indonesia, namely OJK Regulation No. 35/POJK.05/2018 on Multifinance Activities (“POJK 35”), replacing the previous OJK Regulation No. 29/POJK.05/2014 (“POJK 29”) on the same matter.
The significant changes introduced by POJK 35 include, among others, as follows: (i) possibility of a multifinance company (“MFC”) to extend cash loans directly to borrowers; and (ii) relaxation of the down payment requirement for motor vehicle financing.
With the enactment of POJK 35, the rules for the cooperation with Peer to Peer (“P2P”) companies and Venture Capital Companies (“VCC”) are much clearer as it expressly permits MFCs to seek cooperation with both of them; but at the same time certain compliance requirement seems much stricter, as it requires MFCs to disclose interest rates and establish their data centre in Indonesia.
In summary, the key differences between POJK 35 and POJK 29 are described below:
| No. | Categories | POJK 29
(Previous Regulation) |
POJK 35
(New Regulation) |
| 1. | Extension of Cash Loans Directly to Borrowers. | Prohibited. | Permitted, in the forms of (i) Cash Loan Facility (for personal consumption); and (ii) Working Capital Facility (for working capital). |
| 2. | Minimum down payment (DP) for motor vehicle financing. | Required.
At least 20%–25% Down Payment. |
Not required.
0% down payment is permitted for motor vehicle financing (under certain conditions). |
| 3. | Cooperation with P2P Lending Companies and VCCs. | Not regulated.
|
Explicitly allowing MFCs to cooperate with P2P Lending Companies and/or VCCs by way of channelling or joint financing. |
| 4. | Fraud Mitigation. | Not regulated. | Explicitly requiring MFCs to implement fraud control and anti-fraud strategies. |
| 5. | Debt Collection procedure. | Not regulated. | (i) Explicitly requiring MFCs to provide defaulting borrowers with prior written warning letters.
(ii) Allowing MFCs to cooperate with a qualified third party to conduct debt collection. |
| 6. | Information Technology System implementation for multi-finance business. | Not regulated. | Explicitly requiring MFCs to set up and place their data centre and disaster relief centre in Indonesia. |
| 7. | Disclosure of Interest Rates. | Not regulated. | Explicitly requiring MFCs to disclose interest rates in their head office, branch office(s) and on their website. |
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