Summary of POJK 25/2023 concerning Venture Capital Business Activities

The Financial Services Authority (OJK) has issued OJK Regulation (POJK) Number 25 of 2023 which will further regulate the operation of venture capital companies in Indonesia.

This POJK is mandated in accordance with Law Number 4 of 2023 concerning Development and Strengthening of the Financial Sector (UU P2SK) to support industrial development and the current legal needs of venture companies.

Company venture capital has played an important role in the last decade in encouraging the startup industry in Indonesia through funding facilities that until now could not be accommodated by financial institutions, such as banks. Startups also play a role in opening new jobs.

"One of the main regulations in this POJK is the categorization of venture capital companies and sharia venture capital companies in carrying out their business activities," said OJK in its official statement.

Summary of main articles

The following is a summary of several main articles related to company categories and business activities and in this POJK.

Article 9 Paragraph 1a states the company is formed venture capital corporation obliged to carry out business activities according to the following categories:

• Venture Capital Company (PMV): a company that focuses on capital participation activities and/or participation through the purchase of convertible bonds.
• Sharia Venture Capital Companies (PMV) and Sharia Business Units (UUS): companies that focus on capital participation activities and/or investment through the purchase of convertible sukuk.
• These three categories can manage venture funds.

While, Article 9 Paragraph 1b states the company is formed venture debt corporation obliged to carry out business activities according to the following categories:

• PMV: financing through the purchase of debt securities issued by Business Partners at the initial start-up and/or business development stages.
• PMVS and UUS: financing through the purchase of sukuk issued by Business Partners at the initial start-up stage and/or financing business development based on the profit sharing principle.

As for, Article 13 Paragraph 2 details a number of business activities in venture capital and sharia venture capital with the aim of developing new discoveries, individual businesses experiencing funding difficulties, MSMEs and corporations, takeovers of businesses that are developing or experiencing setbacks, research projects, new technology, and transfer of ownership.

Apart from that, in its statement, OJK also conveyed several strengthening regulations in POJK Number 25 of 2023, namely related to:

1. Prudential: regulates PMV and PMVS obligations to maintain and/or improve health levels by applying the principles of prudence and risk management in carrying out business activities
2. POJK Venture Fund Management: regulate more fully regarding applications for permits to manage venture funds up to the dissolution of venture funds. This point also regulates the HR requirements and organizational structure of the PMV and PMVS that will manage the venture fund, including the use of the name of the venture fund, as well as the placement of the venture fund.

Venture capital performance

Previous, Association of Venture Capital for Indonesian Startups (AMVESINDO) had made a number of suggestions to the OJK to overhaul its policy on administering venture capital. This is to encourage the contribution of related industries to Indonesia, for example regarding incentives and collaboration.

Quoting Bisnis.com, OJK through the June 2023 edition of Financing Institution Statistics data recorded that total assets owned by venture capital companies amounted to IDR 27,3 trillion in the first semester of 2023, up 14% from IDR 23,9 trillion in the same period the previous year. 

Total revenue was recorded as growing 20,1% (YoY) to IDR 2,37 trillion. However, reports reveal that venture capital companies experienced a decline in net profit of up to 19,7% (YoY) to IDR 176 billion in the first semester of 2023.