In response to the rapid advancement of information technology within the financial sector, the Indonesian Financial Services Authority (“OJK”) issued OJK Regulation No. 40 of 2024 (“OJK Reg. 40/2024”) on Information Technology-Based Peer-to-Peer Lending Services (“P2P Lending Services”). This regulation serves as the legal framework to ensure the stability, security, and governance of the digital financing-based fintech industry.
OJK Reg. 40/2024 draws its legal basis on Law No. 21 of 2011 on the Financial Services Authority, as amended by Law No. 4 of 2023 on the Development and Strengthening of the Financial Sector. Below is a thematic analysis of the Regulation’s key provisions, particularly the (i) Legal Entity Structure and Ownership Limitations (ii) Scope and Restrictions on Business Activities (iii) Financing Limits and Territorial Scope (iv) Risk Mitigation and Partnership Governance (v) Minimum Equity Requirements (vi) Concluding Remarks.
Legal Entity Structure and Ownership Limitations
OJK Reg. 40 of 2024 introduces a clear legal structure and ownership limitations for P2P lending service providers (“Operators”). In terms of organizational form, Operators must be established either as a Limited Liability Company (Perseroan Terbatas) or a Cooperative (Koperasi) (Article 2 of OJK Reg. 40/2024).
A foreign party (entity and/or individual) is eligible to participate as the Operator. However, there are certain limitations aimed at maintaining the national oversight and regulatory control over financial technology services. Restrictions are imposed on foreign stakeholders to protect the domestic financial system and encourage local participation:
- Foreign legal entities must partner with Indonesian parties;
- Foreign individuals may only invest through capital market mechanisms; and
- foreign ownership is capped at 85% of the Operator’s paid-up capital;
(Article 3 (3), (4), (6) of OJK Reg. 40/2024).
In addition, OJK Reg. 40/2024 provides a governance framework aimed at preventing monopolistic practices or undue influences in the market. Under OJK Reg. 40/2024, an Operator, conventional or Sharia-based, is prohibited from having more than one controlling shareholder. This restriction does not apply to Operators owned by the Government of the Republic of Indonesia (Article 5 of OJK Reg. 40/2024).
From a capitalization perspective, Article 7 of OJK Reg. 40/2024 requires every Operator to have a minimum paid-up capital of IDR 25 billion, which must be deposited in a commercial or Islamic bank operating in Indonesia. This requirement serves as a barrier to enter the business and a financial buffer to support the Operator’s early operations and obligations.
Scope of Business Activities
Under the newly issued OJK Reg. 40/2024, the business scope of the Operator is limited to three core functions, namely (i) the provision, (ii) the management, and (iii) the operation of a P2P lending platform (Article 130 (1) of OJK Reg. 40/2024).
Although the scope of the Operators’ business activities is limited to three business categories, an Operator may conduct additional activities, including the distribution of government securities, informative service cooperation, and other activities subject to the approval by OJK. Such additional activities may be carried out when the Operator meets the following requirements:
- the additional activities are included in the Operator’s business plan;
- the Operator maintains a soundness level of, at least, composite rating 2;
- the Operator has an equity of, at least, IDR12.5 billion; and
- the Operator has not been subject to administrative sanctions.
(Articles 130 and 131 of OJK Reg. 40/2024)
Restriction
OJK Reg. 40/2024 imposes strict limitations on Operators to prevent conflicts of interest and safeguard market integrity. In particular, Operators are prohibited from acting as lenders or borrowers in any capacity. Operators cannot provide guarantees for loans, issue debt instruments, offer automated financing features, or provide recommendations to users. These prohibitions are intended to preserve the neutrality of Operators and prevent undue financial exposure.
Licensing
To commence operations, Operators must secure a formal license from OJK. The licensing process is stringent and requires the simultaneous submission of fit-and-proper test applications of directors and commissioners, as well as controlling shareholders and, where applicable, members of the Sharia Supervisory Board. (Article 10 of OJK Reg. 40/2024).
Following the issuance of the formal license by OJK, the Operator is required to register as an Electronic System Operator with the relevant authority within 30 calendar days from the date of issuance of the license.
Financing Limits and Territorial Scope
OJK Reg. 40/2024 also introduces significant restrictions regarding the scope and size of financing. In essence, the regulation only allows the Operator to provide financial support for consumptive and productive financing of up to a maximum of IDR2 billion.
The Operator may provide a financing support of up to IDR5 billion under specific conditions. These include the Operator maintaining a non-performing loan (NPL) ratio below 5% over a 6-month period and being free of any OJK sanctions (Article 137 of OJK Reg. 40/2024).
Such financing activities may be carried out only within the jurisdiction of Indonesia and only to Indonesian citizens, Indonesian legal entities, and/or Indonesian business entities. In other words, OJK Reg. 40/2024 prohibits cross-border financing activities. (Article 139 of OJK Reg. 40/2024).
Minimum Equity Requirements
From a capital adequacy standpoint, OJK Reg. 40/2024 establishes specific financial thresholds to ensure that Operators maintain the sound financial conditions. Pursuant to Article 169 (1) of OJK Reg. 40/2024, an Operator is required to maintain a minimum equity of IDR 12.5 billion at all times.
In addition, Article 170 of OJK Reg. 40/2024 requires the Operator to maintain an equity to a paid-up capital ratio of no less than 50%, to ensure that the Operator’s equity remains proportionate to its paid-up capital and is not materially reduced as a result of losses (Article 170 of OJK Reg. 40/2024).
Concluding Remarks
OJK Regulation No. 40 of 2024 reflects a comprehensive effort by the regulator to shape a well-governed, transparent, and resilient digital lending ecosystem. By stipulating detailed provisions across various dimensions, ranging from business conduct to capital adequacy, the regulation seeks to strike a balance between enabling innovation and protecting public interest.
For P2P Operators, investors, and fintech stakeholders, the regulation poses a compliance challenge and an opportunity for strategic alignment. Those who can adapt efficiently to this evolving regulatory landscape are more likely to build trust, ensure operational resilience, and secure long-term growth in Indonesia’s dynamic fintech environment.
Disclaimer: The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.
