AFPI Responds to Draft Revision of P2P Lending Regulations

OJK is preparing a revision of the POJK 77/2016 for industry p2p loans which has grown rapidly since the regulation was published in 2016. There are seven points emphasized in the revised draft. As follows:

1. Removal of registration status, only permissions.
2. An increase in the minimum paid-up capital requirement, to Rp15 billion during licensing from the previous Rp2,5 billion.
3. Terms of equity requirement of 0,5% of total outstanding or at least IDR 10 billion.
4. Existence fit & proper test administrator and PSP.
5. Loan obligations to the productive sector and outside Java.
6. Strengthening provisions so that shareholders Existing more committed in supporting the implementation of p2p loans.
7. Adding the provisions of sharia principles that have not previously been regulated.

“OJK needs to fix the existing organizers. If there are new P2PL additions without having sufficient capital, a good strategy, and a supportive ecosystem, then it has the potential to only increase the number of P2PLs, but the contribution is small and not optimal," said OJK IKNB Supervisory Chief Executive Riswinandi, quoted from Infobank.

OJK took this new policy to sort out the industry p2p loans in order to make a maximum economic contribution. Currently, there are 36 licensed companies and 177 registered companies. Of all the organizers, OJK recorded only the top 10 players with a contribution of up to 61,68% of the share outstanding industry.

“The industry's contribution is only by a few players, others are minimally distributed. Strength depends on each one too. Many have not developed because of capital problems and eroded liquidity status.”

AFPI Response

AFPI Secretary General Sunu Widyatmoko said there were four main points that the association suggested regarding this RPOJK. Among other things, AFPI hopes that the new regulations will not hamper the growth of transactions and the number of funders from the organizers. In addition, the new regulations should not make it difficult for investment to enter the industry.

Next, the association suggested a more streamlined bureaucracy so that the platform, which is still in its early stages, remains agile. "So that they can still adapt to changes, especially in times like this," said Sunu.

Finally, there is a need to relax the provision of a time limit of up to a certain period in several aspects of the new regulation. The goal is to provide breath for new players to develop first.

"Because not all players are at the same stage. Some are already established, some are just starting, some are still developing. So this is mainly for our members who can actually comply with the rules, but it will take a little longer.”

AFPI Chairman Adrian Gunadi responded to another point related to increasing core capital. According to him, this policy can open up space for consolidation (to merge) between organizers. Capital is something that is important especially in financial services because core capital is closely related to the focus of growth.

"With quality growth, commitment from the stakeholders is needed shareholders to increase this aspect of capital. In essence, we agree. Maybe we need to discuss the stages of increasing the capital because not all organizers are in the same growth stage,” explained Adrian.

Adrian continued, “We are proactively looking at whether there is room for consolidation, merging of several so something that we open the space and discuss with OJK.”

Regarding more distribution to the productive sector and outside Java, Adrian said that this opportunity could be worked on through collaboration. Association can bridge multipurpose and productive players to do joint financing.

To enter outside Java, the player fintech able to work with financial institutions such as BPR and BPD because they understand the risks and the industry. "Fintech lending have technology and credit scoring which is good, but after all BPR and BPD have local knowledge. Hopefully next year there will be more collaborations like this," he concluded.

Sunu continued that all inputs from the association for regulators had been submitted in writing since the end of last November. “The discussion process for the RPOJK has been going on for a long time [..] We want regulations that are not attached but do not eliminate the important essence fintech, does not collect public funds. We need leeway so that we can move agilely in our business activities,” he concluded.

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