The Financial Services Authority (OJK) issued Regulation No. 25 of 2025 as an amendment to Regulation No. 49 of 2024 on the supervision and follow-up actions for finance companies, venture capital firms, microfinance institutions (MFIs), and other financial service providers (04/12).

The new regulation adjusts the quantitative parameters used to determine the supervisory status of MFIs, especially the equity-to-paid-up capital ratio.

Additional Transition Period for Equity-to-Paid-Up Capital Ratio

Through Regulation No. 25 of 2025, OJK provides extra transition time for MFIs in applying the equity-to-paid-up capital ratio.

This parameter was previously enforced immediately when Regulation No. 49 of 2024 was enacted, and the new adjustment ensures MFIs have enough room to strengthen their capital structure without disrupting operations or their intermediation roles.

Economic Conditions Influence Oversight Parameter Changes

Regulation No. 49 of 2024 introduced three supervisory status categories for the PVML industry, including MFIs: normal supervision, intensive supervision, and special supervision.

These categories are based on three quantitative parameters: composite health rating, equity-to-paid-up capital ratio, and net non-performing financing or loan ratio.

Initially, the composite health rating and net non-performing loan parameters were set to take effect after a three-year transition, while the equity-to-paid-up capital ratio applied immediately.

However, slower economic growth has affected debtor repayment capacity and influenced the equity-to-paid-up capital ratios across MFIs.

Structural Challenges in Meeting Capital Requirements

OJK noted that solving capital issues takes longer due to limited access to funding, restricted capital sources, and the financial capacity of MFI shareholders.

These factors create structural challenges that make it difficult for MFIs to meet the required parameters within the original timeframe.

OJK Highlights Commitment to Proportional and Adaptive Supervision

By issuing Regulation No. 25 of 2025, OJK aims to provide sufficient adjustment time to ensure the strengthening of MFI institutions occurs gradually and in a measured way.

OJK emphasized its commitment to implementing supervision that is proportional, responsive, and adaptive to industry developments while ensuring MFIs continue to provide financial services with sound governance and adequate consumer protection.

PHOTO: FREEPIK

This article was created with AI assistance.