Indonesia: Peer-to-peer lending

Author: | Published: 26 Jan 2017
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Ali Budiardjo Nugroho Reksodiputro

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Oene Marseille Emir Nurmansyah

In late December 2016, the Financial Service Authority of Indonesia (OJK) issued a regulation on the peer-to-peer lending business. The regulation affects peer-to-peer providers of loan products operating via internet platforms.

Under the new regulation, the relevant peer-to-peer platform provider needs to register its business with the OJK and obtain a licence to operate as a qualified peer-to-peer platform provider. This requirement also applies to entities already in operation (including start-ups such as Modalku, Taralite, Uangteman, and Tunaiku). These operational entities need to register with the OJK before the end of June 2017.

These businesses are also subject to continuing reporting obligations, confidentiality standards, and data protection measures.

The maximum foreign investment is limited to 85% of the entity's shares (either held directly or indirectly by the investors). The minimum paid-in capital is IDR2.5 billion ($190,000).

The maximum loan amount that may be disbursed under the new regulation is IDR2 billion per debtor. The OJK may adjust this limit from time to time. The debtor (whether natural persons or business entities) to whom the loan is disbursed must be domiciled in Indonesia.

Under the regulation it is envisioned that the platform provider's role will be limited to 'matching' interested lenders with borrowers. In fact, the platform provider is prohibited from acting as either a lender or borrower and from issuing any guarantees or debt instruments. It is also expected that under the regulation, the platform provider will enter into agreements with interested lenders, documenting the terms of the loan (including the desired interest rate, loan amount, terms, and fees).

If and when a borrower is matched with a lender, under the new regulation it is expected that a separate electronic agreement will be entered into between the lender and the borrower, setting out the terms of the loan.

The regulation was effective as of December 29 2016.

Oene Marseille and Emir Nurmansyah  Reksodiputro