Indonesia’s Financial Services Authority (FSA), the body that regulates the banking and non-banking sector, is working with the Ministry of Communications and Information to bring out regulations governing online startup companies offering financial services, popularly referred to as fintech.
Dumoly F Pardede, Deputy Commissioner of Non-Bank Financial Institutions of Financial Service Agency (FSA), told DEALSTREETASIA, the new regulation will cover technology, security, human resources, governance and risk management. In terms of technology, he said, fintech companies could get permit from the Ministry of Communication and Information, while the financing services license can be obtained from FSA.
“We try to issue the new rules this year. For now, they can still run their business by the applicable rules and they could adjust their business later when the new regulations are issued,” he stated.
Currently, fintech startups do not clearly fall under the purview of any single authority. While technology startups are regulated by the communication ministry, those engaged in financial services are governed by the FSA. Hence, fintech, which is a confluence of technology and financial services, needs a new regulation that is being worked out by both departments.
Based on the Bank Indonesia (BI) regulation No.15/11/PBI/2013 on Prudential Principles in the Activities of Capital Investments, all financial institutions including fintech companies should get endorsement from BI and get permit to enter into the settlement services.
Indonesia has seen a wave of fintech startups and crowd funding sites that are tapping the growing tech-savvy population of southeast Asia’s largest economy.
The FSA is also looking at issuing a regulation covering crowdfunding platforms in the country. Recently, the FSA brought out a detailed framework of regulations for the venture capital industry that required VC firms to have a paid up capital Rp 50 billion ($3.6 million) to operate in this space.
Besides, international VCs are also stipulated to have a local partner that will hold a minimum 15 per cent equity stake in the firm.
The new norms come at a time when early-stage VC funds are proliferating to tap into the demand created by the booming startup ecosystem in the country.
The mushrooming of startup hubs in the largest market in South East Asia, which accounts for over 50 per cent of the population in the region, has also led to investors from Singapore, Japan, West Asia, Malaysia among others, rushing in to seek the first-mover advantage.
Besides, Indonesia is also poised to become the biggest e-commerce hub in the region, and has been attracting major VC interest in consumer internet-oriented businesses.
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