The number of financial technology peer-to-peer lending companies (“Fintech P2P Companies”) has grown rapidly in Indonesia. The Financial Service Authority (Otoritas Jasa Keuangan – “OJK”) reported that as of 4 May 2021, as many as 138 Fintech P2P Companies have been registered at the OJK in which 57 of them have obtained a business license. Fintech P2P Companies which have not been registered or licensed may legally be deemed as illegal companies.
The registration and licensing status as stated in the OJK report is based on Regulation of Financial Service Authority Number 77/POJK.01/2016 on Technology-Based Fund-Lending Services (“POJK 77/2016”). POJK 77/2016 has classified the types of Fintech P2P Companies based on its status; namely registered and licensed. The legal status of a Fintech P2P Company brings significant impact to its business. The terms ‘illegal’, ‘registered’, and/or ‘licensed’ have their own legal meanings and consequences for the business of the Fintech P2P Companies.
Article 1 point 6 of POJK 77/2016 defines Fintech P2P Companies or organizer as an Indonesian legal entity which provides, manages, and operates technology-based lending services. However, it does not specifically provide a definition of an illegal Fintech P2P Company. The term “illegal” Fintech P2P Companies arises to refer to Fintech P2P Companies that are not registered and/or licensed at the OJK. This issue may be tested later by Courts or any other Tribunal.
In practice, the number of illegal Fintech P2P Companies is far higher than registered or licensed ones. From 2018 to 2021, the Investment Alert Task Force (Satuan Tugas Waspada Investasi – “SWI”) reported that it has blocked as many as 3,198 illegal Fintech P2P Companies. It is possible that the actual number is far higher than the reported number since the SWI only reports and investigates illegal Fintech P2P Companies that are subjects in their investigation.
The illegal status of Fintech P2P Companies means, such company cannot carry out its business under Indonesian law. On the other hand, it also means OJK, through SWI, has the authority to block the business and platform of illegal Fintech P2P Companies. The only way for Fintech P2P Companies to carry out its business is by registering it with OJK and fulfill all requirements as provided by POJK 77/2016 and other relevant regulations.
Pursuant to Article 8 of POJK 77/2016, Fintech P2P Companies are required to be registered at OJK provided that for companies which have been operating, such registration must be made within 6 (six) months as of 28 December 2016 namely the effective date of POJK 77/2016. A registered Fintech P2P Companies are defined as Fintech P2P Companies or organizers that may carry out their business who have met the requirements provided by OJK. Article 10 of POJK 77/2016 requires the registered Fintech P2P Companies to submit an application to obtain a license from OJK no later than 1 (one) year after of its registration date.
In the registration stage, Fintech P2P Companies should meet certain requirements, inter alia, as follows:
The registered Fintech P2P Companies have the obligation to submit quarterly reports to OJK and such reports shall contain the information as follows:
A licensed Fintech P2P Companies may be defined as Fintech P2P Companies that can carry out its business without any further licensing requirements. These companies have completely met all requirements as required by OJK. However, such Fintech P2P Companies are still required to submit reports to the OJK as part of their compliance procedure.
Article 10 of POJK 77/2016 requires registered Fintech P2P Companies to, no later than 1 (one) year after registration date, submit the application to obtain a license from OJK. If such period has lapsed, the registered status of the Fintech P2P Company will be cancelled and the relevant Fintech P2P Companies will not be allowed to submit a fresh application for registration in the future. This Draconian measure is probably designed to ensure strict compliance to the need to be registered. Fintech P2P Companies shall submit the application to OJK in order to obtain the license. Such application should be addressed to the Supervisory Executive Director of Insurance, Pension Fund, Financing Institution, and Other Financial Service at the Financial Service Authority by using Form 2 as provided in the Schedule to POJK 77/2016.
At the licensing stage, registered Fintech P2P Companies must also have a paid up capital (for limited liability company) or own capital (for cooperatives) of at least IDR2,500,000,000. As a part of compliance, the registered Fintech P2P Companies must submit monthly and annual reports to OJK. Monthly report shall contain at least as follows:
Meanwhile, annual reports must contain the financial report and activity report of these technology-based fund-lending services. (SCN)