The Indonesian Joint Funding Fintech Association (AFPI) is preparing to establish a consortium with its members to provide financing for micro, small, and medium enterprises (MSMEs) that require more than IDR 5 billion in funding as reported by Bisnis.com.

As stipulated in Financial Services Authority Regulation (POJK) Number 40 of 2024, the Financial Services Authority (OJK) has set the maximum financing limit for productive-sector peer-to-peer (P2P) lending at IDR 5 billion.

According to Kuseryansyah, Head of Public Relations of AFPI, several P2P lending platforms can collaborate through consortiums to fund MSME projects with higher capital requirements.

However, based on OJK Circular Letter Number 19 of 2023, borrowers cannot receive funding from more than three P2P lending platforms. This means that even if the consortium is established, an MSME borrower will still be limited to financing from three platforms.

AFPI welcomed OJK's decision to increase the financing cap for productive loans from IDR 2 billion to IDR 5 billion, though the association had initially proposed an increase to IDR 10 billion.

"Large-scale funding carries greater risk. However, each P2P platform has its own mechanisms to assess eligibility and determine financing amounts in stages—starting from IDR 500 million, then IDR 1 billion, and gradually increasing to IDR 5 billion," Kuseryansyah explained to Bisnis (23/1).

AFPI Chairman Entjik S. Djafar added that the raised financing cap will significantly support MSMEs seeking funding above IDR 2 billion.

Insurance Consortium for P2P Lending Under OJK Review

Meanwhile, an insurance consortium has been established to provide coverage for P2P lending transactions, and its approval is currently being processed by OJK (28/1).

However, AFPI Chairman Entjik S. Djafar revealed that the association has not yet engaged in discussions with the consortium and has limited information on its details.

"We have not held any discussions with the consortium, nor do we have detailed information about it," he stated.

He emphasized that credit insurance for P2P lending is not a mandatory requirement. AFPI allows lenders to decide whether they wish to use credit insurance for additional protection.

"However, in my opinion, relying on insurance could pose a serious risk to lenders, as it might encourage borrowers to default intentionally, thinking their loans are covered. This could harm both the fintech industry and insurance companies," Entjik warned.

OJK has implemented safeguards against moral hazards in POJK Number 20 of 2023. One key measure is a 75-25 risk-sharing rule, meaning that lenders still bear 25% of the outstanding loan balance, ensuring that P2P platforms remain selective in choosing borrowers.

Additionally, insurance providers must have an adequate information system that allows them to assess borrower data before offering coverage. This ensures transparency and risk-based underwriting.

Another regulatory measure limits acquisition fees to 10% of the premium rate, preventing excessive costs that could burden lenders or encourage irresponsible practices.

Furthermore, Articles 21 and 22 of POJK 20/2023 mandate that insurers determine premiums based on actual risk and adhere to prudent underwriting practices.

PHOTO: PEXELS

This article was created with AI assistance.