Why Indonesia’s online lenders aren’t happy about proposed rules

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Hello readers,

I’ve always been a bit of a stickler for the rules. “Rules are made to be broken” is an adage that horrified me as a kid, which made me very popular (not) in school. Still, I won’t deny that sometimes, rules can feel really restrictive, especially when they don’t seem to make sense.

For Indonesia’s online lenders, plans to revise regulations governing them by the country’s financial services authority appear to have raised eyebrows, to say the least. While rules usually do exist for a reason, they can sometimes hold people back – and in this case, hamper the growth of a nascent industry.

Today we look at:

• Why Indonesia’s proposed regulations for online lenders has the industry in a tizzy
• How tech can treat neurodegenerative diseases
• Other newsy highlights such as Xiaomi’s shares dipping by 12% and PhonePe’s partial spinoff from Flipkart

PREMIUM SUMMARY

New rules, new problems

OJK, Indonesia’s financial services authority, is in the process of revising the regulations governing online lenders in the country. But the draft regulations it has presented to the industry have set off alarm bells, with concerns about heightened barriers to entry and increased bureaucracy as among the key issues raised by players in the space.

• A whole lotta red tape: Some of the proposed regulations include a six-fold increase in the minimum amount of paid-up capital required and the requirement that partnerships with external parties be subject to OJK’s written approval. The new rules also propose that online lenders can secure foreign investment only from investors that are also in the financial services industry. It’s unclear if foreign venture capital firms are even included in the equation.
• It’s not all bad news: However, some of the other regulations on the table could be beneficial to Indonesia’s nascent lending space. For example, the licensing process is being streamlined to just two stages. Additionally, 40% of outstanding loans must be given out as productive loans, which are usually income-generating and less susceptible to bad debt.
• Rules versus principles: These draft regulations appear to be rules-based, which doesn’t work well for fledgling industries such as online lending. Industry players are advocating instead for a principles-based approach, which would be more outcome-oriented and offer more flexibility for players in the sector.

Read more: Uproar among Indonesian online lenders over draft OJK regulations

PREMIUM SUBSCRIPTION

Tackling neurodegenerative diseases with tech