In an interview with The Jakarta Post recently, internet policy expert Jovan Kurbalija praised Indonesia for implementing what he described as “smart and agile regulations”.

The regulations led to openness and did not prevent innovation developing as they remained responsive to issues arising from progress, said Kurbalija, who is also the executive director and co-lead secretary of the United Nation’s Secretary General High Level Panel on Digital Cooperation.

In Indonesia, the “smart and agile regulations” meant the digital economy development was regulated in pragmatic, balanced and inclusive ways, he said.

“This is the reason why Indonesia has Go-Jek [ride-hailing company] and other [digital-economy] actors growing very fast,” he said during his visit to Jakarta recently. “Because [the] government creates an ecosystem that provides chances for the small and medium company to come into the market and this is the key to the digital economy.”

With “smart and agile regulations”, Kurbalija said the government did not have to regulate digital innovation in advance. Instead, when startups or fintech companies started developing, he said the government could see and monitor if there were any problems or regulatory issue, and address them if it found any problems.

As an example, in 2016, when the local fintech industry was still in its infant stage, the Financial Services Authority (OJK) issued Regulation No. 77/2016, specifically regulating peer-to-peer (P2P) lending fintech companies, including stipulations on how P2P players should run their businesses.

In the regulation the government stipulated the basic requirements for fintech operations, including a minimum capital of Rp 1 billion (US$74,239) for any business registering as fintech with the OJK.

However, as the fintech industry continues to grow, the OJK once again is preparing a regulation that will not only focus on P2P lending, but also covering the wider scope of digital-finance innovation. The upcoming regulation will be issued in an effort to achieve discipline in the fintech industry.

“In the proposed regulation, we use several principles including supervisory-technology principles, as well as regulatory and customer-support technologies to improve customer protection,” said Triyono, the OJK’s head of digital-finance innovation and micro-finance development, recently.

Triyono said good governance, transparency and customer protection were several aspects covered in detail in the next regulation, which would be issued either at the end of July or early August as the OJK was harmonizing it with rules in other ministries.

Kurbalija said the Indonesian policy model had been implemented in other places where the digital economy flourished, such as in Silicon Valley, San Francisco, in the United States, home to many startups and technology companies.

He acknowledged that opening the door wider for innovation to grow would entail risks. However, he argued that managing the risks was much better than preventing innovation from playing a role in supporting the economy.

“It [the Indonesian policy model] leads to the emergence of a very vibrant digital economy in the country. So far, Indonesia is moving with a constructive strategy in dealing with digital problems, while benefiting from the digital economy,” he said.

Separately, Aidil Zulkifli, CEO of UangTeman, a P2P lending fintech company, said the OJK as a regulator had been encouraging the industry to grow and was very open to fintech development.

“I think today the goal of the fintech industry and what the OJK wants for financial inclusion is on the same lines,” he said, while acknowledging that fintech players were preparing for the upcoming OJK regulation.

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