Indonesia Fintech Regulatory Developments - June 2017
Australian government regulator seals agreement with Indonesian government for fintech promotion
Australia’s corporate regulator, the Australian Securities and Investments Commission (ASIC), has entered an agreement with Indonesian counterpart Otoritas Jasa Keuangan (OJK), Indonesia’s monetary authority. The agreement is to share information, expertise and regulatory frameworks regarding fintech (financial technology).
OJK regulatory team proposes changes before change of guard
Nine new OJK commissioners will be sworn in next month at Jakarta's presidential palace. The former OJK regulatory team will disband. In the interim period however, the OJK will look at the following regulatory areas: infrastructure funds, small and medium enterprises' (SMEs’) access to capital markets and the establishment of an advisory group for fintech startups.
National payment gateway to be built
Indonesia’s payments infrastructure strategy is to localise transactions and payment settlements. Bank Indonesia, its central bank, is developing a National Payment Gateway which will soon see electronic payments processed within the country. This national system will process all credit card and debit card transactions. The central bank is cooperating with Artajasa Pembayaran Elektronis, Alto Network and Rintis Sejahtera to develop the infrastructure.
Financial authority to launch Islamic finance road map
A regulatory roadmap for Islamic finance is being drafted for the period of 2017-2019. The roadmap is expected to address market share, variation of products, and the lack of knowledge in Sharia products. The government wants to develop Sharia-compliant products, and improve human resource shortages in this field.
There will be three focus areas: banking, capital markets and non-bank finance. Currently, the market share of Islamic finance covers only about 5 percent of the country’s total financial services, but is expected to grow in the light of overall fintech trends.
Payment system launched through Laku Pandai
A new zakat (welfare) payment system is now available through branchless banking in Indonesia. Branchless banking is rural banking that incorporates the deployment of agents and mobile phones, whereas Zakat is the payment of welfare funds usually done through physical boxes at mosques.
The National Alms Agency (BAZNAS) launched the zakat inclusion programme with the Financial Services Authority (OJK) on June 14, 2017. The aim is to expand zakat payments, over mobile phone, in all the provinces in Indonesia. The next step is to engage in awareness programmes and outreach of the zakat payment channel. There are currently more than 300,000 branchless banking agents signed up.
OJK looking to study new infrastructure financing models
The Indonesian government is looking for new solutions regarding the financing options for infrastructure projects. The government notes the current gap in infrastructure funding requirements. As such the OJK will be looking at new instruments for financing and ultimately to draw foreign and domestic investors. New instruments will be designed to attract funds from the insurance industry and stock market. Efforts will also be made to speed up bond issuances and asset securitisation processes for companies involved in major projects.
Update regarding OJK regulation on P2P lending
In December 2016 the Financial Services Authority (OJK) issued Regulation 77/POJK01/2016 regarding technology-based P2P fund-lending services. The regulation is meant to protect consumers and enable fintech companies to exist in the P2P space.
Fintech-based money lending services or fintech peer-to-peer (P2P) lending platforms facilitate the provision of cash funds on simple basis, particularly for small and medium-sized business. Under the rules, a provider must be established as a legal entity in the form of a limited liability company as defined by Law 40/2007, or in the form of a cooperative as defined by Law 25/1992 (among other things). Companies are to obtain licenses by June 29, 2017. That deadline is now pushed further into the future, allowing other P2P lending platforms to apply.
Investree, Amartha, and KoinWorks are among eight Indonesian P2P fintech startups that have already been officially registered under the OJK in May 2017.
Indonesia’s new fintech office and sandbox
Since Bank Indonesia launched the FinTech Office in 2016, the office has been busy lobbying for the sector’s growth and competitiveness. The Centre is continuing its mandate and is expected to increase activities to allow more fintech companies to participate. The FinTech Office also oversees the nation’s regulatory sandbox.
It is expected that Indonesia will have up to 300 fintech startups by 2018.
Government scholarships for Indonesian startups
Jakarta Creative Hub, North Jakarta Entrepreneur Centre (NJEC), EV Hive, vOffice, and Servio, and venture capital firms like Kejora Ventures and East Ventures, have partnered with the government to provide scholarships for startups in Indonesia. In addition to the office spaces, the scholarships also provide startups with access to events, network, and mentoring.
Google agrees on tax deal in Indonesia
Google’s parent company, Alphabet Inc, agreed to settle the tax issue in Indonesia following months of discussion regarding “OTT” and tax. The Indonesian government had pursued Google for five years of back taxes and the company could have faced a bill of more than US$400 million for 2015 alone if it were found to have avoided payments.
Indonesian tax officials had initially estimated that the total advertising revenue for the industry in Indonesia was around US$830 million. The exact settlement is not known.
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