Indonesia to revise P2P lending regulation to include Shariah-compliant financing

(Updates to insert value of total bank financing)

JAKARTA – Indonesia’s Financial Services Authority (OJK) will revise its regulation for peer-to-peer (P2P) lending in the second quarter of this year at earliest to accommodate the growing P2P Shariah-compliant financing sector, Hendrikus Passagih, its director of Fintech Supervision and Licensing Arrangement told Salaam Gateway.

According to Passagih, the regulation, issued on December 2016, only governs conventional P2P lenders. It stipulates that P2P lenders must be registered with OJK, have $200,000 in capital before they can be approved for an operating license, and cap loan values at $150,000.

“We will issue a new regulation as soon as possible this year. The existing regulation (POJK No.77/2016) is not related to Shariah-compliant products. It should be updated to meet current needs,” he said.

The regulator is working with the National Sharia Board of the Indonesian Council of Ulema (DSN-MUI) on the new fintech regulation for Shariah-compliant P2P financing.

DSN-MUI’s March 2008 fatwa No. 67/DSN-MUI/III/2008 on factoring, a type of financing in which a business sells its accounts receivables to a third party at a discount, will be updated to be included as part of the new regulation for Shariah-compliant P2P financing.

“We have already summarized every underlying Shariah contract that has been used by fintech, for example wakalah and murabahah,” said Passagih.

300 billion Indonesian rupiah ($22.4 million) in Shariah-compliant financing by P2P platforms were disbursed to 22,000 customers as at January 29 this year, said Passagih.

Conventional P2P lending stands at 2.6 trillion rupiah to 250,000 people for the same period.

Total Shariah-compliant financing from non-bank financial institutions has reached 30 trillion rupiah.

Overall, bank lending in the country stands at around 500 trillion rupiah. 

Passagih expects Shariah-compliant financing from P2P start-ups to grow three to five times this year.

Since OJK’s December 2016 fintech regulation, the number of P2P start-ups has grown to more than 30 companies, representing 35 percent of all start-ups in the last year, according to OJK.

($1 = 13,392 Indonesian rupiah)

(Reporting by Yosi Winosa; Editing by Emmy Abdul Alim emmy.alim@thomsonreuters.com)

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