OJK to Expand Financing Company Activities

 
Fathan Qorib, Christina Desy
 
Aiming to increase the number of Indonesian citizen who have accounts in financial institutions, the Financial Services Authority (Otoritas Jasa Keuangan – OJK) has switched from its microfinance strategy to a financial inclusion program. Under this initiative, the OJK is striving to establish a better balance between bank and non-bank financial institutions.
 
Initially, the OJK is focusing on the inclusion of financing companies as part of the non-bank financial industry (industri keuangan non-bank – IKNB). Dumoly F Pardede, OJK’s Deputy Commissioner of IKNB, stated that one measures will be to revise and draft regulations on financing companies.
 
The regulations prepared will most likely cover aspects of financing companies related to institutional and management matters, business practices, including business practices under sharia principles, and licensing. One of the most important issues under theregulationsis the expansion of business activities, under which financing companies may conduct financing activities related to investment and working capital, as well as multi-purposes financing or fee-based financing.
 
OJK’s move has been welcomed by financing companies. For instance, Ignatius Susatyo Wijoyo, CEO of Mandiri Tunas Finance, believes that this expansion is a great opportunity for financing companies, although he also sees some challenges still lie ahead.
 
The first challenge is the issue of the subsidizedfuel price increment. According to Mr. Wijoyo, the increment will affect financing companies’ income and trigger more inflation. Nevertheless, the CEO is quite confident that these impacts will only last for a maximum of three months before things return to normal.
 
Another challenge is the tightened of financing companies’ liquidity, which may result in higher interest rates. Another issue is down-payment obligations, in relation to which Mr. Wijoyo encourages other financing companies to comply with the applicable obligations.
 
Sharing Mr. Wijoyo’s view, Suwandi Wiratno, Chairman of the Indonesian Financing Companies Association (Asosiasi Perusahaan Pembiayaan Indonesia – APPI), expects that the targeted business expansion will encourage healthy competition between financing companies. With this, each financing company will strive to provide the best possible service and organize their businesses efficiently.
 
In addition, Mr. Wiratno said that APPI has suggested that the OJK include in their efforts certain matters regarding business activity expansion. Amongst other, the new provisions must mandate financing companies to run their business by also improving their human resources, infrastructure, and business stability.
 
(hot/kc)