The Fintech Association Feels "Exiled" by OJK

The Indonesian Fintech Association (Aftech) feels "isolated" by the Financial Services Authority (OJK) when compared to its treatment of other financial service institutions. This was triggered by a statement by the Chairman of the OJK Board of Commissioners, Wimboh Santoso, last week (3/3), who said that the use of the OJK logo was not allowed as a form of validation of p2p lending activities.

Aftech rate Wimboh's statement contradicts POJK Number 77 of 2016. In the regulation, specifically Article 35 paragraph B, it is stated that registered companies must include the OJK logo in their business activities.

"The logo is in line with POJK 77. All registered players must display a logo. If you prohibit the inclusion of a logo, it is contrary to the legal basis issued by the OJK itself," said Deputy Chairman of Aftech Adrian A. Gunadi, Tuesday (6/3).

OJK believes that the ban on the inclusion of this logo is because fintech companies are not categorized as financial institutions. OJK will not be responsible if there are fintech companies that go bankrupt or fraud occurs.

Related to this, Adrian agrees that p2p lending companies are more accurately called financial service providers. OJK does not bear the risks posed by its business activities, but players still meet the same terms and conditions as formal financial institutions that have been operating.

For example, p2p lending companies are required to meet standards equivalent to ISO 27001 which is the banking reference.

"When compiling the POJK, p2p lending companies became an inseparable part of formal financial institutions, because in our business practices we still standardized ourselves with existing financial institutions."

Adrian continued, OJK should tighten its supervision rather than let it go. The trick is to strengthen any rules that can be detailed through derivative rules to determine the seriousness of the operation and performance of a p2p lending business.

The derivative rules that OJK can review are those related to good governance, transaction transparency, and reporting involving independent auditors.

There are also rules on risk management that are neatly arranged to protect consumers and business actors, as well as to reduce NPL numbers. Good control from the regulator, he continued, will automatically select business actors who are not serious.

"Business activities that are regulated and protected by OJK regulations actually protect fintech players from the possibility of misusing public funds. Considering that the distribution of funds is monitored through banking mechanisms. The potential for collaboration with fintech and other financial institutions will even increase in the near future."

High flower flick

In addition to mentioning the revocation of the OJK logo, Wimboh also teased the giving of relatively higher interest rates than banks, thus calling him a loan shark. Aftech rejected this designation.

Adrian said p2p lending doesn't operate like moneylenders who give money payday loan (daily interest) to its customers. P2p lending exists because it is based on the spirit of financial inclusion and the large community need for access to loan funds.

According to Adrian, OJK needs to understand better that there are various fintech lending business models with different customer segments. In giving interest, players usually refer to the interest rate on bank loans or other financial institutions.

For fintech lending engaged in micro-enterprises such as Amartha, benchmarkingit uses a BPR with a standard interest rate in the range of 27%-28%. As for lending in medium-sized businesses, such as Investree, using benchmarks at BUKU I and II banks with interest rates in the 14%-15% range.

"Dear very if OJK generalizes. Interest in p2p lending is difficult to determine directly by the OJK because our business segments are different."

The interest given to the loan recipient does not go into the company's pocket, but is directly received by the lender. The lending company itself only receives income from commissions that come from successfully funded projects. Generally, the range of commissions received by the company is 3%-5%.

"We can fee from borrowers for every successfully funded project, it's our right as a platform. The interest on the credit goes directly to the lender."

Interest restriction rules

After being mentioned by the OJK, the Head of the Aftech P2P Lending Working Group Reynold Wijaya said that the association is currently preparing a "Guideline for Responsible Online Lending and Borrowing Service Behavior". It is planned that these guidelines will be issued no later than April 2018.

In this guideline, the association will agree on a maximum loan interest limit. There are several references used to determine the upper limit of interest rates for p2p lending, such as KTA interest in banks, multi-finance, rural banks, to interest in BUKU I and II banks.

"We will make pricing stamp (interest limit) by subsector. For example, the limit (interest) for MSME loans is what percentage and for individuals or consumers what percentage," said Reynold.

He continued, "Aftech continues to be committed and works intensively to support the formation of wise regulations, both in terms of advocating for their preparation and in terms of operational implementation, as well as educating the public so that they can transact safely and comfortably."