String of scandals renews call for startup watchdog in Indonesia

Over the past year, Indonesia’s startup ecosystem has drawn public scrutiny due to several fraud cases.

There’s aquaculture giant eFishery, of course, which allegedly inflated its revenue by nearly US$600 million between January and September 2024. But it’s not the only one.

Photo credit: eFishery

In May 2024, the country’s Financial Services Authority (OJK) revoked TaniFund’s business license after the peer-to-peer lending platform was implicated in financial misconduct, which led to liquidity issues.

Similarly, in October last year, Investree, another peer-to-peer lending platform, lost its business license because it failed to meet minimum equity requirements. The firm’s former CEO, Adrian Gunadi, was also placed on OJK’s wanted list as a suspect in an alleged financial crime.

This has sparked discussions in some circles on whether the startup industry needs a dedicated regulatory body, similar to the OJK, to oversee it.

On one hand, having an oversight body seems antithetical to the whole spirit of startups and innovation.

Financial scandals, however, affect investor confidence. Without improvements in transparency and accountability, such cases could recur. 

“The impact is quite significant in the short term, especially for inexperienced investors or those who are new to the Indonesian market,” says Alvin Evander, vice president of strategy and sustainability at MDI Ventures.

Is a new regulatory body necessary?

Being private companies, startups tend to have looser reporting standards, at least until they go public.

That’s perhaps why existing mechanisms – where investors sit on oversight boards – have proven insufficient in preventing fraudulent practices. 

However, Edward Ismawan Chamdani, treasurer at the Indonesian Venture Capital Association for Startups, believes that creating a separate regulatory body is not an urgent need.

He argues that such an institution could introduce additional regulations that could stifle innovation, particularly for early-stage firms.

“It’s important to design a framework that doesn’t burden startups with excessive bureaucracy while still protecting the interests of all stakeholders,” Chamdani tells Tech in Asia Indonesia.

Addressing the root cause