OJK lowers interest rate ceiling for Indonesia’s online lenders

OJK headquarters in Jakarta / Photo credit: OJK

Otoritas Jasa Keuangan (OJK), Indonesia’s financial services authority, has lowered the maximum interest rate that online lenders can charge their customers. The new rules are effective as of January 1, 2024.

According to an OJK circular, productive loans – those used to help borrowers generate income – may charge a maximum of 0.1% interest per day, while the figure for consumptive loans is 0.3%. Previously, both loan types had a ceiling of 0.4% per day.

Late fees, which previously can go up to 0.8% interest per day, are now set at 0.1% for productive loans and 0.3% for consumptive loans.

OJK is set to reduce the amounts further in the coming years.

The circular also stipulates that the total interest, admin fees, and other fees – including late fees – must not exceed 100% of a loan’s principal amount. Moreover, OJK stated that debtors can borrow a maximum of 50% of their monthly salary in 2024. This number will go down to 40% in 2025 and 30% in 2026.

In November 2023, OJK specified that debtors can only borrow from a maximum of three online lending platforms at a time.

Kuseryansyah, head of public relations at the Indonesian online lenders’ association, previously told Katadata that the new regulations will encourage peer-to-peer lenders to be more innovative in finding consumers with appropriate risk profiles.

He added that the new rules would not be an issue to these platforms as long as they adjust their quality control, credit assessment, and operational costs.

A version of this article was published by Abidah Naqiya on Tech in Asia Indonesia.