The Financial Services Authority (OJK) said that it is looking at a new regulation that will allow the inception of a micro venture capital (VC) firm with lower capital requirement compared to a regular VC – in a bid to encourage the creation of a wider startup ecosystem in Indonesia.
The government also plans to provide more tax incentives for startups and small businesses in a bid to encourage entrepreneurship in the country, create new jobs and increase purchasing power.
Dumoly F. Pardede, deputy commissioner of non-bank financial institutions for OJK said, the micro version of VC firm will requires capital Rp 1 billion ($76,000) in capital.
The micro VC firms will be in a position to operate, offer funds and expertise to smaller startups in rural and remote areas in Indonesia, he added.
According to OJK’s data as of December 2015, there were 61 VCs in Indonesia, with assets totaling Rp 8.98 trillion.
The guidelines for VCs, which came into effect December 31, 2015, now require a VC fund or investor to set up a limited company (PT) with a minimum paid-up capital of Rp 50 billion or a limited partnership (CV) and cooperative for Rp 25 billion. Overseas venture investors can hold up to 85 per cent in the JV.
In the case of an Islamic-based VC company, the minimum paid-up capital requirement is Rp 20 billion for a PT and Rp 10 billion for either a cooperative or CV.
OJK is also planning to work with the Ministry of Communications and Information to regulate online companies offering various financial services like crowd-funding, financial technologies business and others .
The regulator is already coordinating with the Investment Coordinating Board (BKPM) to discover angel investors, including the majority of overseas investors, who were scouting for promising startups in the country.
“We will also intensify monitoring of the foreign venture capital firms which have entered local incubators,” he said.
Pardede added that the Creative Economy Agency (BeKraf) would regulate the tax relief from the government to help stimulate the growth of these incubators.
Meanwhile, Deputy Finance Minister Mardiasmo explained that the government is looking to give more fiscal and non fiscal incentives for startup business in the country.
He did not say what type of incentives the government will offer to small or startup businesses, saying the ministry is still weighing up several options with the OJK and Bekraf.