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OJK to tighten online P2P lending regulations, such as capital, permit
The Financial Services Authority (OJK) plans stricter rules for peer-to-peer (P2P) lenders.
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T
he Financial Services Authority (OJK) has announced a planned revision of rules for online peer-to-peer (P2P) lending that will tighten company establishment requirements.
OJK nonbank financial industry (IKNB) head Bambang W. Budiawan said the new rules would revise OJK Regulation (POJK) No. 77/2016 on online lending in key areas like capital requirements, registration and permits.
“We realize that the existing regulation is incomplete. [P2P lending] was an infant industry that needed to be regulated, but along the way we have noticed [regulatory] loopholes, and that is why we need to amend the regulation,” he said during an online press briefing on Wednesday.
Bambang went on to say that the authority had formulated new capital requirements for establishing a P2P lending company, but he declined to disclose the amount.
The prevailing regulation states that a fintech company must have at least Rp 1 billion (US$70,290) in capital when it registers its business with the OJK, and this needs to have risen to Rp 2.5 billion by the time it applies for a business license.
However, the OJK plans to remove the fintech registration step and wants companies to immediately apply for a P2P lending permit. Additionally, the agency would require a 3-year lock-up period for a fintech firm’s capital and equity to ensure the business’ sustainability.
“We want to make sure that fintech can commit and have a long-term business, so they don’t just quit within the first three years,” Bambang said. “But we do not want to rush this regulation, because we want it to last longer than the current one.”
The OJK plans to enact the new regulation once three registered P2P lending companies have obtained the authority’s permit and after the P2P lending moratorium in place since 2020 is lifted.
By the end of 2019, the OJK had recorded 164 registered P2P lending companies, a significant increase from the 88 at the beginning of that year. The rapid growth prompted the authority to enforce a moratorium on new lending firms in 2020.
Since the moratorium came into effect, the number of online lending platforms has declined to 104, after the OJK removed two fintech companies for their inability to continue business operations.
The OJK, through its investment alert task force (SWI), closed down 116 illegal P2P lenders in October alone. The task force has closed down more than 3,000 illegal online lending platforms since 2018.
Read also: Indonesia cracks down on illegal P2P lenders. But many people are already drowning in debt
Online lending has gained popularity over the years, especially during the pandemic. The recently published e-Conomy SEA 2021 report shows that digital lending reached an outstanding balance of $26 billion last year across Southeast Asia and is expected to grow 48 percent to $39 billion this year.
