In response to the government’s recent raft of economic-policy packages, the Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) has also established several new programs, in line with its role as Indonesia’s oversight authority for the financial-services sector.[1] One of these programs is aiming to revitalize the country’s venture-capital industry, especially as regards its role in financing micro-, small- and medium-scale enterprises (usaha mikro, kecil dan menengah – “UMKM”), and this includes creative-economy startups.[2]
 
Utilizing venture capital in order to fund businesses is actually nothing new in Indonesia. Indeed, the practice was formalized through the issuance of Presidential Decree No. 61 of 1988 on Financing Institutions (“61/1988 Presidential Decree”)[3] and was fully implemented after the issuance of Minister of Finance (“MoF”) Regulation  No. 469/KMK.017/1995 on the Establishment and Guidance of Venture-Capital Companies (“469/1995 MoF Regulation”).
 
Unfortunately however, the development of the venture-capital industry here has been very slow, even in the wake of the issuance of Minister of Finance (“MoF”) Regulation No. 18/PMK.010/2012 on Venture Capital Companies (“18/2012 MoF Regulation”),[4] which it was hoped would give the industry a boost. According to OJK figures, the number of venture-capital companies in Indonesia has been in a continual state of flux, and in fact decreased from a total of 89 companies in 2012 to only 70 in 2014.[5] During the same year, the OJK also noted that the market share for this line of business stood at a mere 0.67%, which is very low in comparison with other non-bank financial institutions.[6]
 
Furthermore, the venture-capital industry has not been making an optimal contribution with regard to supporting its main target market: namely the UMKMs. In 2013, the Ministry of Trade observed that 80% of financing for UMKMs was still being obtained from banks. Moreover, many micro- to medium-scale businesses have not been able to obtain any loans from banks due to not possessing sufficient collateral to back the loans. This in turn is hampering the entire UMKM sector, which is seen as one of the backbones of the Indonesian economy.[7]
 
In order to address these challenges, the OJK is hoping to reinvigorate the venture-capital industry here by through the issuance of the following regulations: