The Indonesian Financial Services Authority (OJK) is making strides to transform credit assessment practices with the introduction of the Innovative Credit Scoring (ICS) system. This initiative has gained the strong support of the Indonesian Fintech Lending Association (AFPI), which has hailed it as a groundbreaking innovation for the financial sector. The ICS model promises to revolutionize how credit scores are evaluated, incorporating non-financial data such as social media and e-commerce activity, as well as payments for utilities like electricity and health insurance.

AFPI's Chairman, Entjik S. Djafar, emphasized that the ICS approach, already employed in developed countries, will enable individuals to have personalized credit scores. This is expected to encourage better financial discipline across society. By utilizing a broader range of data, including social and digital footprints, the ICS system aims to provide a more comprehensive understanding of a person’s creditworthiness.

This shift towards alternative credit scoring methods comes as part of an effort to improve credit access, especially for underserved groups such as micro, small, and medium-sized enterprises (MSMEs). The traditional credit scoring model, which largely relies on financial histories, has often excluded individuals and businesses without formal credit records. With ICS, the ability to make credit assessments will expand to include diverse data points, potentially unlocking new opportunities for people previously deemed "credit invisible."

ICS is still under development, with the OJK expecting to finalize the regulation by the end of 2024. Currently, the regulation is undergoing harmonization with Indonesia's Ministry of Law and Human Rights. Hasan Fawzi, Head of the OJK’s Financial Technology and Digital Assets Supervisory Department, shared that the finalized rules are expected to be implemented shortly after this process is completed. He believes that the broader adoption of ICS will not only help lenders assess creditworthiness more accurately but also foster a culture of financial responsibility among borrowers.

The government has already begun testing ICS with several banks, including BRI and Mandiri. The initial trials have shown promising results, with data from utility payments such as electricity bills and BPJS health insurance contributions being incorporated into credit assessments. These tests, involving at least three major banks, are seen as a crucial step towards rolling out ICS more widely. They will inform the final system, which aims to be used by a broad consortium of financial and government institutions.

The inclusion of utility payments in credit scoring represents a significant shift from traditional models. It also reflects an increasing awareness of the challenges faced by MSMEs in accessing financing. Often, small business owners are unable to secure loans due to a lack of collateral, which is a key requirement in conventional lending systems. The ICS approach, by leveraging non-traditional data, can help fill this gap, providing a more inclusive and forward-thinking approach to credit evaluation.

The ultimate goal is to create a more accessible and accurate credit scoring ecosystem that benefits all segments of society. By using AI and machine learning to analyze a wide range of data, the ICS system aims to refine the process of credit assessment, reduce bias, and offer more equitable financial services. The Indonesian government, in collaboration with key stakeholders, is poised to drive this innovation forward with the hope that it will bring greater financial inclusion to the country.

As the regulatory framework around ICS continues to develop, it is clear that this new system holds the potential to reshape the future of credit scoring in Indonesia. By integrating non-financial data and embracing technological advancements, ICS could serve as a model for other countries looking to modernize their credit systems, fostering a more inclusive and sustainable financial landscape for all.

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