Online lenders like UangTeman to face new regulations in Indonesia

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Indonesia’s financial services authority (OJK) is working on new rules for online money lenders, The Jakarta Globe reported earlier this week. The expected release date is between April and June this year.

The regulations concern online lenders who give out loans from their own capital – so-called balance sheet lenders.

That’s different to peer-to-peer (P2P) lending – where the online platform matches third-party money lenders with borrowers, taking a cut from each transaction. OJK already introduced regulations specific to the P2P lending model.

The rules will put a cap on the the maximum amount balance sheet lenders can hand out, OJK official Dumoly Pardede told the Jakarta Globe. The aim here is to keep the loan size small. This way, online balance sheet lenders would fill a gap rather than compete directly with banks.

According to Dumoly, OJK has no plans to limit the interest balance sheet lenders are allowed to take on their loans. It does, however, require these companies to submit regular reports about their financial performance.

Legal certainty should come as good news to startups like UangTeman. It’s perhaps Indonesia’s most prominent online balance sheet lending firm.

See: Microlending site UangTeman raises pre-series A

Rio Quiserto, deputy CEO of UangTeman, told Tech in Asia the startup has been working with OJK since its launch in 2015.

“[In] our understanding, OJK encourages UangTeman to grow, as part of efforts to provide an alternative source of loans for society.”

Launched in 2015, UangTeman gives out small loans for period of 10 to 30 days. It targets people who stand little chance to be approved for a conventional credit or a loan, so its model fits nicely with OJK’s ambition to let fintech companies complement typical services offered by banks.

UangTeman told Tech in Asia that it has also separately applied for a P2P lending license – a process that could take a few more months. It still operates under its current business model.