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W&P Newsletter – Key Highlights of P2P Lending Platforms

Indonesia’s peer-to-peer (“P2P”) lending industry has been subject to increasing regulation as it continues to mature. This newsletter discusses some key aspects of OJK Regulation No. 10/POJK.05/2022 on Information Technology-Based Collective Financing Services and OJK Circular No. 1/SEOJK.06/2024 on Procedures and Mechanisms for Data Submission on Lending Transactions and Reporting for Information Technology-Based Collective Financing Service Providers.

Below are the key highlights regarding P2P lending platforms, internal work outsourcing, lending limits, interest rates, and late payment penalties.

General Requirements

To operate in this sector, P2P platforms must be incorporated in Indonesia as either a limited liability company or a cooperative. They must obtain a business license from the OJK and register with the Ministry of Informatics and Communication (Kementerian Komunikasi dan Informatika) as an Electronic System Provider (Penyelenggara Sistem Elektronik). The maximum foreign shareholding is capped at 85% (whether direct or indirect).

Outsourcing Restrictions

P2P platforms are prohibited from outsourcing these two types of work:

  1. Credit Scoring
    P2P platforms must perform their own credit scoring assessment and are not allowed to outsource this work to other parties. However, P2P platforms may collaborate with credit scoring firms solely for the purpose of obtaining additional information as reference, but these firms must not be involved in performing the actual credit assessment.
  2. Information Technology (“IT”)
    IT development and operations—including user access management, database management, backup and restore, troubleshooting, and disaster recovery—must not be outsourced to external parties.

Lending Limits, Interest Rates, and Late Payment Penalties

Since late December 2016, the lending limit applicable to every P2P platform has been set at a maximum of IDR 2 billion per borrower.

As the regulations apply to not only conventional lending but also sharia funding (which is based on sharia principles), they move away from using the term ‘interest’ to describe returns and use the term ‘economic benefit’ instead.

Economic benefit encompasses interest (for conventional lending), yield (for sharia funding), commission, administrative, and platform fees charged by P2P platforms, as well as other applicable fees (excluding late payment penalties).

The maximum rates for economic benefit and late payment penalties per calendar day are as follows:

Type in 2024 in 2026
Economic benefit Productive funding 0.1% 0.067%
Consumer funding 0.3% 0.1%
Late payment penalty Productive funding 0.1% 0.067%
Consumer funding 0.3% 0.1%

The economic benefit and late penalties charged to customers must not exceed 100% (one hundred percent) of the funding value specified in the relevant financing agreement.

OJK Moratorium and Lock-Up Period

The current moratorium on new P2P licenses, put into effect by the OJK since 2020, remains in place; therefore, the only way for investors to invest in the P2P sector is through the acquisition of an existing P2P company.

OJK Regulations prohibit P2P companies from changing their share ownership structure in a way that results in either (i) the entry of a new shareholder, or (ii) a change in the controlling party of the company, within 3 years of obtaining the P2P business license. Therefore, before acquiring a P2P company, investors need to make sure that the target company is not subject to this 3-year restriction.

Data and Reporting Submission Obligations

As of 1 July 2024, P2P platforms must submit the following types of data:

  1. Lending transaction data (including customer information and lending quality);
  2. Periodic financial reports (including profit/loss, changes in equity, and cash flow statements, as well as outstanding funding quality and activity reports); and
  3. Incidental reports (including reports on fraud, legal disputes, and operational disruptions).

Future Outlook for Indonesian P2P

In an effort to address current issues and anticipate future challenges, the OJK has released a Roadmap for Developing and Strengthening the P2P industry. The roadmap outlines strategies to develop and strengthen the P2P sector across three phases.

First Phase (2023-2024) – Strengthening the Foundation

During the first phase, the OJK aims, among other things, to: (i) improve governance by imposing stricter regulations to better manage risks, and (ii) promote compliance within the industry.

Second Phase (2025-2026) – Consolidation and Momentum Building

The second phase focuses on solidifying existing efforts and build momentum for higher growth. By July 2025, all P2P platforms are expected to meet the minimum equity requirement of IDR 12.5 billion and have the capacity to support the growth of micro, small, and medium enterprises and other productive sectors.

Third Phase (2027-2028) – Adjustment and Growth

In the third phase, the P2P industry is expected to experience further growth while simultaneously focusing on improving the quality of financing to support economic development and promote long-term growth in various productive sectors.

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