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Key Changes in the New Regulation on P2P Lending Operations

27

Feb

2025

Key Changes in the New Regulation on P2P Lending Operations

BY : Fakhri Anfasa, SH and Angelica Janet Dosroha, SH

On 24 December 2024, the Indonesian Financial Services Authority (Otoritas Jasa Keuangan or "OJK") issued OJK Regulation No. 40 of 2024 on Information Technology-Based Joint Funding Services ("OJK Reg. 40/2024"), replacing and revoking OJK Regulation No. 10/POJK/05/2022 on Information Technology-Based Joint Funding Services ("OJK Reg. 10/2022").

New Provisions in OJK Reg. 40/2024

OJK Regulation No. 40/2024 introduces several provisions aimed at strengthening the regulatory framework for peer-to-peer lending ("P2P"), particularly in areas such as ownership, controlling shareholders, and the employment of foreign workers. It also establishes new requirements for financial soundness, risk management, governance, and credit scoring, with the goal of enhancing lending operations, regulatory compliance, and overall business practices of P2P lending operators ("P2P Operators").

Below are some of the key provisions introduced by OJK Reg. 40/2024:

  1. P2P Operators - Legal Entity Form and Foreign Ownership
    OJK Reg. 40/2024 introduces new provisions regarding the legal entity form and foreign ownership. In addition to limited liability companies, the regulation now allows cooperatives to operate as P2P Operators. Furthermore, it expands the list of entities eligible to become the shareholders, including the Republic of Indonesia and the regional government.

    Even though OJK Reg. 10/2022 already states that the foreign ownership limitations are set for maximum 85% (eighty-five percent) of the paid-up capital for P2P Operators, OJK Reg. 40/2024 introduces new provisions stating that this limitation will be subject to future government regulations.

  2. Controlling Shareholder
    OJK Reg. 40/2024 introduces an additional provision for controlling shareholders, which stipulates that controlling shareholders in the form of legal entities must have been operational for a minimum of 2 (two) years to participate in capital investment in P2P Operators. However, this requirement does not apply to new controlling shareholders resulting from mergers, acquisitions, or consolidations.

  3. Expansion of Business Activities
    In addition to the business activities of P2P Operators regulated under OJK Reg. 10/2022, P2P Operators are now permitted to engage in certain auxiliary activities as newly regulated under OJK Reg. 40/2024, provided that the P2P Operators has met the specific requirements. For a detailed list of permitted activities according to OJK Reg. 40/2024, please refer to No.5 in the table below.

  4. Credit Scoring Obligations
    P2P Operators must conduct credit scoring when providing financing. P2P Operators are required to perform, at a minimum, the following steps in the credit scoring process:
    1. Verify the accuracy of submitted documents in accordance with credit scoring guidelines;
    2. Conduct clarification and confirmation through direct face-to-face meetings, electronic face-to-face meetings, and/or non-face-to-face electronic means with prospective fund recipients;
    3. Process data from relevant third parties necessary for assessment; and
    4. Analyze the prospective fund recipient's eligibility.
    Further considerations include the prospective recipient's financial capital, economic prospects, and any collateral provided. In this regard, the Board of Directors of the P2P Operators are required to establish credit scoring guidelines.

  5. Financial Soundness Criteria
    OJK Reg. 40/2024 establishes new requirements for P2P Operators to maintain a Financial Soundness Level of at least a composite rating of 3 (three). This assessment covers the following criteria: (i) capitalization; (ii) funding; (iii) profitability; (iv) liquidity; and (v) management.

To provide a brief comparison between OJK Regulation No. 10/2022 and OJK Regulation No. 40/2024, the key differences are outlined in the table below. Please note that the table includes several additional details beyond the points discussed in the previous sections.

No.

Aspect

OJK Reg. 10/2022

OJK Reg. 40/2024

1 Form of Legal Entity Limited liability company.
  1. Limited liability company; and
  2. Cooperative.
2 Shareholders
  1. Indonesian citizens and/or legal entities; and
  2. Foreign citizens and/or legal entities.
  1. Republic of Indonesia;
  2. Regional government;
  3. Indonesian citizens;
  4. Indonesian legal entities;
  5. Foreign legal entities*; and
  6. Foreign citizens**.
*) Shall be carried out in the form of a partnership with local ownership.
**) Shall be carried out through transactions in the capital market.
3 Term of Employment for Foreign Worker 3 (three) years with no extension. 2 (two) years and may be extended for another 2 (two) years.
4 Outsourcing P2P Operators are prohibited from outsourcing work related to:
  1. Funding feasibility assessment; and/or
  2. Information technology.
 P2P Operators are prohibited from outsourcing work related to:
  1. Funding feasibility assessment; and/or
  2. Information technology operation, including: (i) user access management; and (ii) data base management.
5 Business Activities
  1. Provisions;
  2. Management; and
  3. Operation of information technology-based co-funding services.
  1. Provisions;
  2. Management; and
  3. Operation of information technology-based co-funding services.
In addition to the above activities, P2P Operators are permitted to the following activities:
  1. Distribution partner for government securities to support government programs;
  2. Collaborating in informative service initiatives; and
  3. Undertaking other approved activities as authorized by the OJK.
6 Funding Limit IDR 2,000,000,000 (two billion Indonesian Rupiah).
  1. For consumptive financing up to IDR 2,000,000,000 (two billion Indonesian Rupiah); and
  2. For productive financing up to  IDR 5,000,000,000 (five billion Indonesian Rupiah).
P2P Operators may give productive loan up to IDR 5,000,000,000 (five billion Indonesian Rupiah) provided that:
  1. The non-performing financing ratio does not exceed 5% (five percent) within the last 6 (six) months; and
  2. P2P Operators are not subject to any sanctions by the OJK.
7 Conditions for Cooperation P2P Operators are permitted to collaborate with financial institutions and non-financial institutions, provided that they meet the following conditions:
  1. Conducted with the parties that are registered, licensed, or recognized by the OJK or other relevant authorities;
  2. Formalized in a written agreement; and
  3. Included in the business plan.
 P2P Operators are permitted to collaborate with financial institutions and non-financial institutions, provided that they meet the following conditions:
  1. Conducted with the parties that are registered, licensed, or recognized by the OJK or other relevant authorities;
  2. Formalized in a written agreement;
  3. Included in the business plan; and
  4. Indonesian legal entity.

Upcoming OJK Circular Letter Draft: Key Regulatory Updates on P2P Lending

In addition to OJK Reg 40/2024, the OJK is in the process of issuing a draft Circular Letter as a further regulatory implementation of the regulation ("Circular Letter Draft").

Based on the current version of the Circular Letter Draft, some of the key provisions include the following:

  • Minimum User Age Requirement - Users of P2P lending platforms must be at least 18 (eighteen) years old or legally married.
  • Borrower Income Requirement - The minimum income threshold for borrowers is set at IDR3,000,000 (three million Indonesian Rupiah).
  • Lender Classification - Lenders will be categorized as professional funders and non-professional funders.
  • Outsourcing Provisions - Additional regulations on outsourcing practices applicable to P2P operators.
  • Credit Scoring Implementation - Further guidelines on credit scoring procedures conducted by P2P operators.
  • Economic Benefit Limitations - Regulations regarding the maximum economic benefits that P2P operators can obtain.

Please note that the above provisions are still subject to change as the Circular Letter Draft is currently under development.

Conclusion

OJK issued OJK Reg. 40/2024 to strengthen P2P lending regulations and enhance consumer protection by improving financial soundness assessments, risk management, governance, and credit scoring. These measures promote prudent operations and a more secure digital lending ecosystem.

Note: The content of this article does not constitute legal advice and should not be relied upon as such. If you require specific advice related to this topic, please contact us by email at info@yangandco.com.


1 Article 8 paragraph (2) of OJK Reg. 40/2024.
2 Article 150 paragraph (1) of OJK Reg. 40/2024.
3 Article 150 paragraph (2) of OJK Reg. 40/2024.
4 Article 167 paragraph (1) of OJK Reg. 40/2024.
5 Article 2 paragraph (2) of OJK Reg. 10/2022 and Article 2 of OJK Reg. 40/2024.
6 Article 3 paragraph (1) of OJK Reg. 10/2022 and Article 3 paragraph (1) of OJK Reg. 40/2024.
7 Article 18 paragraph (1) of OJK Reg. 10/2022 and Article 55 paragraph (1) of OJK Reg. 40/2024.
8 Article 19 paragraph (2) of OJK Reg. 10/2022 and Article 56 of OJK Reg. 40/2024.
9 Article 24 paragraph (1) of OJK Reg. 10/2020 and Article 130 paragraph (2) of OJK Reg. 40/2024.
10 Article 26 paragraph (3) of OJK Reg. 10/2022 and Article 137 paragraph (3) and (4) of OJK Reg. 40/2024.
11 Article 38 paragraph (1) and (2) of OJK Reg. 10/2022 and Article 156 paragraph (1) and (2) of OJK Reg. 40/2024.

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