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Technology-based financial sector can grow rapidly in Indonesia is not because of technological developments that are more advanced in Indonesia. The behavior of today’s people who prefer practical things and rely on smartphones and other gadgets to do many things in everyday life. It is therefore not surprising that access to finances that can be easily achieved using the gadget is very welcome because in this way all activities related to finance can be done more easily through online platforms, including looking for quick loans with P2P Lending scheme.

Photo Courtesy KoinWorks.

Photo Courtesy KoinWorks.

Factors that are not less important is the ease offered by fintech platforms. Financial technology platform that offers people who need quick funds to apply for cash loans through our platform. Later campaigns that go into the platform will be shown and viewed by the network of investors who are ready to disburse funds for the borrowers. Easy process because everything is done by online, no collateral, interest is fixed and also light. [1]


FinTech (Financial Technology): transforming Indonesia’s Digital Economy

Indonesia is undoubtedly one of today’s most attractive digital and tech markets in the world. With a population of over 260 million (the 4th largest in the world), the country’s digital economy is estimated to account for USD 81 billion fueled by more than 119 million online users by 2016.

At the moment, 85% of the population own mobile phones, of which 43% carry smartphones. Along with a flourishing infrastructure for e-commerce businesses, these smartphone users will soon be able to engage in full mobile commerce, from topping up their mobile phones’ virtual wallets, pay bills and make e-commerce payments at a number of online merchants.

Photo Courtesy Digital News Asia.

Photo Courtesy Digital News Asia.

However, payment mechanisms still remains as a challenged. Most transactions currently occurring are between merchants and customers, with that over 70% of Indonesians use cash as their main payment method. On another side of the coin, approximately 150 million Indonesians and 49 million SMEs do not have access to the financial credit services.

The emergence of FinTech (“finance” and “technology“) industry therefore provides the answer to the current problems.

The industry will ultimately be a game changer for Indonesia’s tech sector and digital economy as a whole, especially for any small to medium enterprises (SMEs) that would want to keep their cash-flow in check as well as to secure proper financing in order to prosper. As Indonesia houses more than 2,000 start-ups, building a solid financial business model through FinTech – with their innovative ways to originate, assess credit risk and fund SME loans – might as well be the best alternative for SMEs to secure funding for their growth.


Financial Technology and Its Trend in Indonesia

The forever developing technology has improved many aspects of our lives. The modern technology does not only help our daily activities but also affect our customs and cultures as well. The advanced technology, of course, influences business sectors too, especially the financial sector. Nowadays, a lot of entrepreneurs think that starting a Financial Technology (Fintech) company is a good idea. They get this idea probably by looking at today’s business environment where everyone combines their businesses with technology. So, what is Financial Technology? And how is its trend? We hope through this opportunity, you will get a better insight about the fin-tech industry and its trend in Indonesia.

Financial technology or Fin-tech is a new industry that developed in the 21  century. Basically, fin-tech industry combines financial sector with technology innovations. Fintech has helped a lot of sectors such as financial education, retail banking, investment, and crypto-currencies. In Indonesia, fin-tech officially became the rising industry when Indonesia’s Fintech Association was established 2 years ago. Up to 2017, we calculated there are around 145 fin-tech companies in Indonesia. Most of them are in the payment sector while the rest is scattered around other sectors.

So far, the Indonesian government, specifically the Indonesia Financial Service Institution, has issued one regulation regarding this industry. The regulation (POJK No. 77/POJK.01/2016) is about P2P Lending based on Information technology. Through this regulation, now the government is able to control the business activities, licensing and registration, risk mitigation, reporting and governance of information technology systems related to P2P Lending. The main purpose of this regulation is to protect the consumers and the financing institution. The government also wishes with this regulation, Indonesia can build an encouraging fin-tech environment to attract more local and foreign investors.

Aside from the government, Bank Indonesia (Central Bank) has also issued one regulation (No. 18/40/PBI/2016) with the purpose of controlling e-commerce transactions so that it becomes safer and more efficient. Another reason why Bank Indonesia made this regulation is for them to have the ability to manage, give permission and supervise the implementation of the e-commerce payment transactions.

Fintech’s influences vary from e-commerce, hotel and tourism, insurance and property. We predict that fin-tech industry will keep growing as long as the needs for electronic money and virtual accounts are never ending. With today’s society that is full of technology and small numbers of fin-tech company in Indonesia, there is no better time for investors to enter this industry than right now. [2]


OJK’s regulation on financial technology-based lending services

To support the development of technology-based financial industry in Indonesia, in December 2016, the Financial Services Authority (“OJK”) issued OJK Regulation No. 77/POJK.01/2016 regarding Technology-Based Fund-Lending Services (“POJK 77/2016”). In its press release, the OJK stated that the regulation was also designed to protect consumer and national interests while at the same time providing opportunities for local providers of financial technology (Fintech) to grow and expand and contribute to national economy.

Suasana pelayanan Kantor Regional Otoritas Jasa Keuangan (OJK) Wilayah VI Sulampua di jalan Sultan Hasanuddin Makassar, Selasa (19/1/2016). OJK Sulampua menempati kantor baru setelah sebelumya menempati kantor di lantai 4 Gedung Bank Indonesia, Jl Jenderal Sudirman.tribun timur/muhammad abdiwan . Photo Courtesy Tribun News.

Suasana pelayanan Kantor Regional Otoritas Jasa Keuangan (OJK) Wilayah VI Sulampua di jalan Sultan Hasanuddin Makassar, Selasa (19/1/2016). OJK Sulampua menempati kantor baru setelah sebelumya menempati kantor di lantai 4 Gedung Bank Indonesia, Jl Jenderal Sudirman.tribun timur/muhammad abdiwan . Photo Courtesy Tribun News.

OJK’s “LPMUBTI”, the acronym for Layanan Pinjam Meminjam Uang Berbasis Teknologi Informasi, or Financial Technology-Based Money Lending Services or Fintech Peer-to-Peer Lending (Fintech P2P) platforms are meant to facilitate the provision of cash funds on an expeditious, easy and efficient basis especially for micro, small, and medium scale business operators (UMKM) to boost their competitiveness.

POJK 77/2016 sets out a range of comprehensive guidelines for the organization of P2P Lending Services. It defines P2P lending services as financial services which are provided via online systems and which facilitate meetings between lenders and borrowers for the purpose of entering into loan agreements in the Indonesian Rupiah currency.

The P2P lending scheme involves three principal parties: (i) Providers, which are Indonesian legal entities which obtain funds from lenders and pass them on to borrowers; (ii) Borrowers, which are Indonesian citizens or legal entities; and (iii) Lenders, which are Indonesian and/or foreign citizens and/or entities, as well as international organizations. The lending transaction is to be effected by the parties’ entering into two types of agreement: (1) Agreement between Providers and Lenders; and (2) Agreement between Lenders and Borrowers. Both agreements must be drawn up in an electronic form. Providers are restricted by the following rules:

  • Providers must be established as a legal entity in the form of a limited-liability company as meant by Law No. 40 of 2007, or in the form of a cooperative as meant by Law No. 25 of 1992.

  • The maximum direct or indirect foreign share ownership in Providers in the form of a limited-liability company which are established and owned by foreign citizens and/or legal entities is 85% of the total issued capital.

  • Providers are required to have IDR 1 billion in capital (i.e. paid-up capital for a limited-liability company and self-capital for a cooperative) at the time they apply for registration and IDR 2.5 billion at the time they apply for the license. Limited-liability companies or cooperatives intending to engage in the P2P Lending Services business are required to register with and subsequently apply for a license to the OJK.

  • Providers are prohibited from conducting other businesses outside the P2P Lending Services, such as acting as lender or borrower, providing security or guarantee for other parties’ debt and issuing bonds.

It should be noted that parties which had been engaging in this type of lending services before the issuance of POJK 77/2016 are required to register with the OJK by June 2017 at the latest. [3]


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We consider to take journalism ethics and contents reposting etiquette seriously, that you can find here about media ethics. We do curation article for our audiences, not for search engine bots. By addressing this growing area of concern we hope reader can be smart to filter and understand between content plagiarism and content curation method.

References Sources:

[1] Taken from Development Of Financial Technology In Indonesia written by SOFIS.Id.

[2] Taken from Financial Technology and Its Trend in Indonesia written by GlobalExpandia.

[3] Taken from OJK’S Reglations On Financial Technology – Based Lending Services written by Miriam Andreta for ABNR Law.


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