The Financial Services Authority (OJK) has taken a significant step toward enhancing the development of innovative financial services by introducing Regulation OJK Number 29 of 2024 (POJK 29/2024) regarding Alternative Credit Rating (PKA), also known as Innovative Credit Scoring (ICS).

This regulation aims to support the growth of the Alternative Credit Rating model, a novel business model in Indonesia's digital financial ecosystem. The issuance of POJK 29/2024 is a strategic response to the rapid advancement of information technology, which provides opportunities to improve efficiency in financial services processes.

The primary goal of PKA is to complement traditional credit scores by utilizing alternative data sources, such as telecommunications, utilities, and e-commerce data. This approach is designed to enhance financial inclusion, especially by providing greater access to financing for Micro, Small, and Medium Enterprises (MSMEs) that often face challenges in obtaining credit from traditional financial institutions.

PKA services are expected to bring a new dimension to the financial sector by addressing the needs of unbanked and underbanked individuals and businesses. With the rise of alternative data sources, those with limited or no credit histories can now receive credit assessments, which will help expand their access to loans and other financial services.

OJK's commitment to fostering innovation while ensuring robust data protection and consumer rights is evident in the regulation's provisions. The new rules stipulate the establishment of licensed and regulated PKA service providers, ensuring the application of good governance and consumer protection principles.

As an integral part of the financial technology sector, PKA will also benefit financial service providers, credit information agencies, consumers, and other stakeholders. The OJK has emphasized the importance of compliance with these new standards to ensure the secure and efficient operation of PKA businesses.

In addition to expanding financial services access, the regulation aligns with the Financial Services Development and Strengthening Law (UU P2SK), particularly focusing on regulating and supervising digital assets and IT-based financial services. As part of this ongoing regulatory effort, PKA will play a pivotal role in supporting the financial inclusion agenda in Indonesia.

Through its detailed provisions, POJK 29/2024 lays out the governance, licensing, operational guidelines, and supervisory mechanisms for PKA activities. It provides legal clarity for companies involved in this space and ensures that the market can innovate responsibly while protecting consumers' personal data.

OJK has actively conducted outreach to various associations and fintech entities, including the Indonesian Fintech Association (AFTECH) and the Indonesian Islamic Fintech Association (AFSI), to communicate the implications of the new regulation. These efforts aim to educate stakeholders and promote compliance with the newly established framework.

The introduction of this regulation marks an important milestone in the ongoing transformation of Indonesia's financial services sector, with the potential to greatly impact MSMEs and other underserved segments of the population.

PHOTO: DISWAY