Indonesia’s Financial Services Authority, or OJK, says it will announce a regulation covering crowdfunding in the country.
The new rules will be introduced next week, said OJK chairman Muliaman Hadad on the sidelines of an event organised to sign an MoU between OJK, Eximbank and multifinance association at the OJK headquarters
The regulation would also outline strategies for promoting venture capital businesses and for the establishment of new funding sources, he said adding that the “regulation” would be simple and will allow startups open access to funding.
In an official communication, OJK had announced that Indonesia will also see the setting up of a new local venture capital fund before the end of 2015. Besides private equity and asset management firms, OJK will allow banks to set up venture capital arms.
Muliaman said, the establishment of an alternative source of funding would mean setting up a pool of funds involving insurance companies, pension funds, or state own enterprises.
According to the Finance Regulation No. 18/2012, Indonesian venture capital companies are able to provide equity or buy convertible funds to start-ups. VC firms can also base their partnership on a profit-sharing scheme.
OJK would also allow VCs to provide fee-based services, such as holding seminars and training for small and medium enterprises (SMEs) or start-ups.
The venture capital industry kicked off in Indonesia in 1973 with the establishment of the state-owned PT Bahana Pembinaan Usaha Indonesia and PT Perusahaan Nasional Madani which aimed to develop micro, small and medium enterprises.
According to OJK data, in 2014, total assets of venture capital firms grew 9.1 per cent to Rp 9 trillion from Rp 8.24 trillion in the previous year 2013. However, they contributed just 0.67 percent of the total financing provided by non-banking financial institutions.
The data also reveals that 1.6 per cent of the country’s 65-million productive-aged population is engaged in entrepreneurial activities compared to the global average of 2 per cent.
Muliaman added, OJK was teaming up with Indonesia Stock Exchange (IDX) to develop a second board for SMEs or startups to raise funds by tapping the market. The board will be functional in 2016, he said.
There are roughly 56.5 million SMEs in Indonesia. A special board is typically established for smaller companies that have not yet built up an earning or sales record needed for listing on the main board. IDX’s primary board, the Jakarta Composite Index (JCI), has 516 listed companies.
“The scheme is somewhat similar to new mining companies that are in exploration stage but with a different set of rules. We expect to make this happen in 2016,” Muliaman told DEALSTREETASIA.
Elaborating on the special board, IDX new chief executive Tito Sulistio said, the new bourse will attract more SMEs to list shares and raise funds from the capital market.
Tito said that the bourse would adopt the NASDAQ’s “dealers-driven” scheme, creating a parallel bourse for small-caps and start-ups, where designated market makers would set the prices for each share, in contrast with the existing bourse where prices are purely defined by supply and demand.
NASDAQ has three different market tiers, which includes the NASDAQ Capital Market, an equity market for companies that have relatively small levels of market capitalization with less stringent listing requirements than for larger market capitalizations.