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Four new fintechs receive long-awaited permits
Two years after registering for a permit with the Financial Services Authority (OJK), four homegrown peer-to-peer (P2P) lending platforms finally received their business permits from the regulatory body this month
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T
wo years after registering for a permit with the Financial Services Authority (OJK), four homegrown peer-to-peer (P2P) lending platforms finally received their business permits from the regulatory body this month.
The four lenders, Investree, Amartha, Dompet Kilat and Kimo, now make four out of five lenders to have completed the licensing process after lender Danamas, which received its permit in 2017. Excluding these five, there remain 108 registered but unlicensed lenders with the OJK.
Investree specializes in financing small and medium enterprises, Amartha in microentrepreneurs, Dompet Kilat in consumer loans and Kimo in prepaid phone credit retailers.
Tumbur Pardede, spokesman for the Indonesian Fintech Lenders Association (AFPI), said in a statement that the new permits signaled growing regulatory maturity in Indonesia’s fintech industry. Licensed lenders had to meet more stringent security requirements related to customer’s data and money on top of those stipulated by existing OJK regulations.
Indonesia saw its first financial technology (fintech) regulation in 2016 when the OJK issued regulation no. 77 on tech-based lenders. It was issued about a year after lenders such as Amartha and Investree were founded (2010 and 2015 respectively).
“It was a winding path to get the permit but, then again, it’s a very new industry,” said Investree founder Adrian Gunadi. “Two years is actually fairly short for an industry that had nothing just four years ago but now has regulations.”
He was referring to two OJK regulations issued last year; one on fintech innovation and the other on equity crowdfunding. Adrian himself was part of the working group that drafted the tech-based lender regulation at the DoubleTree Hotel in Jakarta.
Even though permits increased compliance costs, the founders of each company told reporters last week that they readily accepted OJK’s licensing requirements as it made the industry “more credible for all stakeholders”, said Amartha founder Andi Taufan Garuda Putra.
The licensed lenders are, for example, required to conduct financial and fintech literacy workshops in 12 Indonesian cities. Six in Java and six outside Java. Their purpose, other than pushing nationwide literacy above 30 percent, is to prepare the market for fintech.
Lenders are also required to acquire and maintain ISO 27001 certification on information security management. The certificate ensures that each company has certain technology, procedures and staff to protect consumer data, especially during data breaches.
OJK spokeswoman Sekar Putih Djarot told The Jakarta Post that licensed lenders also needed to have capital reserves of at least Rp 2.5 billion (US$172.7 million), which more than doubled the requirement for corporate registration.
In addition, licensed lenders are required to provide digital signature technology services. Such services allow lenders and borrowers, who seldom physically meet each other, to remotely sign legally binding documents on their agreed-upon financing schemes.
“Good corporate governance and consumer protection are better guaranteed when a fintech has a permit,” she said in a text message.
Looking forward, AFPI’s Tumbur said the organization was assembling a working group to draft a cheat sheet, which would guide other members on faster permit acquisition. The association eventually expects every registered lender to hold a permit.
“As long as lenders comply with the OJK and association regulations, go through the whole licensing process, then they can get their permits,” he said.
