OJK's Fintech Regulations Only Focus on P2P Lending, What's the Fate of Friends and Loans?

The Financial Services Authority (OJK) ensures that the regulator will not make fintech rules for players engaged in the financial sector on lending. This consideration was taken, because there are already rules on balance sheets that have been issued for banks and finance companies (multi-finance), and private mortgages.

Hendrikus Passagi, Senior Executive Researcher of the OJK Strategic Policy Department, said that in the Indonesian regulatory system there should be no conflicting regulations. According to him, regulations that have been regulated by the government basically cannot be regulated again in other regulations with the same hierarchy.

[Read also: The Long Journey of the POJK Design on Fintech Lending]

Services on lending has been regulated in the POJK in the banking sector where credit guarantees are mortgage rights, POJK in the field of finance companies with fiduciary guarantees, and POJK on private mortgages with goods guaranteed.

"In the Indonesian regulatory system, there should be no conflicting rules. Rules that have been regulated may not be regulated again with the same hierarchy. On lending is a loan on balance sheet that have been regulated in banks, multi-finance, and private pawnshops. The new RPOJK for off lending in P2P which will be published soon," he said.

According to Hendrikus, the meaning of P2P lending are unsecured loans and there are restrictions on P2P fintech operators from participating in lending. The reason is to prevent "front runner" activities, in which the organizers will take advantage of the first by providing loans to high-quality borrowers.

They are also not allowed to list all funds flowing through the platform to be included in the balance sheet and recorded as assets or liabilities.

Other prohibitions listed in the draft POJK , the organizers cannot act as lenders and provide guarantees in all forms of business for the fulfillment of other parties' obligations by issuing debt securities to strengthen their capital.

"We have narrowed the scope so that their business does not collide with multifinance or other financial services. They can only strengthen their capital and expand, by looking for new investors to inject capital."

He continued, for fintech on lending which is already operational. They only have two options to choose from, following P2P rules lending or apply for a business license to become a multi-finance or pawn.

"Those who already operate like UangTeman, they can choose one of the two existing rules. Apply for a license to become a multifinance or obey P2P rules lending with all the consequences."

Meanwhile, based on the POJK regarding private finance and pawning, the minimum capital required for a multi-finance application permit is Rp. 100 billion (for a PT) and Rp. 50 billion (for a cooperative). Meanwhile, for private pawnshops, the paid-up capital requirements depend on the location.

For pawns operating at the district/city level, the minimum paid-up capital is Rp 500 million, while at the provincial level the minimum is Rp 2,5 billion.

Fintech players on lending need to take steps

In Indonesia, there are enough players fintech P2P lending. Some of them, KoinWorks, Investree, Modalku, Amartha, Crowdo, and others. But player fintech on lending also quite crowded, such as Borrow and UangTeman.

Regarding this OJK statement, DailySocial attempted to contact the two players for comment.

Teguh B Ariwibowo, Founder and CEO of Borrowing said that his party is currently in the process of applying for a pawnshop permit in accordance with POJK No. 31/POJK.05/2016.

Nevertheless, he continues to hope that OJK will continue to develop other regulations, because fintech is not only lending just. And, lending not only off-balance sheet, but there are also on balance sheet.

"In this regard, we are currently in the process of applying for a pawnshop permit. Borrowing is now developing a loan product that is still a pilot, in the future we will follow the existing rules if it is on lending digital platforms have not been regulated and will continue to maintain good relations with OJK through associations," he explained.

Basically, he continued, Borrow really appreciates the steps taken by the OJK to regulate P2P lending, because it will encourage the growth of the fintech industry to encourage financial inclusion in Indonesia.

Unlike the case with Borrowing, Aidil Zulkifli as Co-Founder and CEO of UangTeman did not give a definite answer on how to take the next business step. He only explained that his party would follow any direction from the OJK and how the legal form was in accordance with UangTeman's business model.

According to him, UangTeman believes that basically financial service regulations must continue to be reviewed and must accommodate fintech in Indonesia, where they cannot stand alone without being protected by a regulatory foundation. Fintech touches everything in financial services.

"RPOJK concerning Fintech Lending it does not apply to UangTeman's business model. However, we will continue to follow all directions from OJK. We believe that financial services regulations should continue to be enforced.review to be more comprehensive and accommodate fintech that cannot stand alone," said Aidil.