Indonesia toughens rules for online lending platforms
The Indonesian Financial Services Authority (OJK) reports that out of 145 registered online lending platforms, 25 are in the process of applying for OJK’s operating license. Noting that there are currently many other lending platforms that require registration and permits, OJK decided to tighten up the licensing process to ensure that all platforms operating in Indonesia are of high quality. Some Indonesians who have borrowed from the growing online lenders have reported cases of unethical debt collection practices and complained of unreasonable interest charges.
OJK executive Hendrikus Passagi told local press that the regulator prioritizes quality over quantity.
OJK has set six conditions for the loan of fintech platforms; platforms are required to use digital signatures; must obtain authorization from the Ministry of Informatics; should work with microinsurance service providers; must cooperate with banks; collaborate with credit rating operators who have OJK licenses; and must be a partner of a debt collection company registered with the Indonesian Fintech Association.
In addition, OJK divides fintech loans into three types; those with a closed ecosystem (for example, Go-Jek partners with online lenders to provide loans to its driver partners); those with open but limited ecosystems (Platforms that offer loans to farmers or fishermen); and those who offer consumer loans. OJK says he will prioritize licenses for the first and second types of online lending platforms, as they are seen as providing productive financing.
In order to avoid any misuse of personal data provided by borrowers, OJK also stipulates that all registered and licensed lending platforms are only allowed to access three features on users’ smartphones, namely camera, microphone and localization. “If the platforms access data from any source other than these three features, we will unregister them or at least ask the IT ministry to immediately block the app,” Passagi said at a conference. hurry.
Meanwhile, because online lenders were also criticized for their high interest charges, OJK said that these platforms can only charge a maximum interest rate of 0.8% per day and one Maximum cumulative fine of 100% of the principal value.
Additionally, if debtors have loan arrears, FinTech companies can only collect arrears up to a maximum of 90 days. Debtors who fail to repay their loans will be blacklisted for credit in Indonesia, which limits their ability to apply for further loans from fintech platforms or banks.
Tightening regulation is one of the efforts to prevent problems with fintech lending. OJK has recently received numerous complaints from the public regarding P2P lending platforms, mainly regarding unethical debt collection methods and high interest charges. A report from the Jakarta Legal Aid Institute found that 86% of consumer complaints were about stifling interest charges. In response to these complaints, OJK has already blocked 635 illegal P2P lending entities.
Editor: Nadine Freischlad