Issuing for the first time fintech regulations about six months ago, the Indonesian regulator is wasting no time in bolstering its fintech infrastructure with new rules expected to be implemented over the next few months.
Otoritas Jasa Keuangan (OJK), the country’s Financial Services Authority, is currently in the thick of designing regulatory frameworks for crowdfunding and digital banking, confirmed Muliaman Hadad, the chair of OJK, earlier this month at an event.
This follows new regulations on IT-based lending services released in December 2016 which the regulator hopes would stimulate and support the growth of peer-to-peer (P2P) lending as a new means of alternative financing for the Indonesian population, a majority of which are still unbanked. The P2P rules are also designed as a starting point to engineer a holistic fintech ecosystem that covers fintech 2.0 (services in banks, capital market, insurance operators, pension funds, microfinance institutions, financing companies, venture capital firms, pawnshops, underwriting companies and payments) and fintech 3.0 which includes big data analytics, aggregators, robo-advisory and blockchain, among others.
“Through this regulation, OJK also facilitates support for future digital economy innovation development by preparing the infrastructure, namely [the] Fintech Incubator Center,” noted the regulator when it released the P2P regulation.
The world’s most populous Muslim nation has been aggressively pushing to develop its nascent but fast-growing fintech sector, with the country’s financial regulators – both OJK and Bank Indonesia – forming dedicated fintech units and sandboxes in the second half of last year to nurture and bring to life new fintech ideas.
And efforts are paying off.
In a span of less than 12 months from the end of March to December 2016, the Indonesian fintech community almost tripled from 51 to 135, according to OJK. Statista projects the fintech transaction value in Indonesia to grow an average 18.8% annually over the next five years, reaching US$37.15 billion in 2021. While still a very small minority, there are several promising signs of growth for the Islamic fintech segment as well, including the entry of at least two new Shariah compliant fintech companies (See Reports on Investree and Paytren).