Fintech has experienced extremely fast development in the past 2 years. Especially Fintech online loans using a P2P (Peer To Peer) Lending platform. What are the risks of online loans that the public needs to know?
Since OJK issued POJK 77 on Information Technology-Based Lending and Borrowing Institutions (LPMUBTI), the Fintech P2P Lending business in Indonesia has grown very fast. Driven by the process of digitalization of finance and deepening internet penetration.
It can be seen that online offers with a fast liquidation process, KTP requirements, no need for BI checking, no need for salary slips, thrive. Offering online loan cash application products has appeared very aggressively in the community.
This online loan, which is a fast, direct liquid within 24 hours, is based on the P2P Lending platform. Therefore, if you want to understand about online lending, you should understand P2P because this P2P business model is regulated and supervised by the OJK.
What is P2P Lending?
P2P Lending is a loan service and borrow money directly between creditors / lenders / lenders and debtors / borrowers / loan recipients based on information technology.
P2P Lending is different from the lending and borrowing process at the bank. In the bank, borrowers and savers do not know each other and do not meet each other. In P2P, loan recipients and lenders have to meet directly through information technology.
How is the Online Lending and Borrowing Process in P2P
The Fintech Lending business process has 4 steps, starting from member registration, applying for loans, implementing loans, to repaying loans (from Borrowers to Lenders), which are as follows:
- Membership Registration. Users, namely borrowers and lenders, register online via a computer or cellphone.
- Loan submission. The loan recipient applies for a loan. The lender chooses the recipient of the loan to be funded.
- Loan Implementation. The lender and recipient of the loan sign a loan and loan agreement. The lender sends the loaned funds. The loan recipient receives funds.
- Loan Payment. The loan recipient pays the loan to the lender.
The four steps above must be done through information technology and using a digital signature.
The OJK has established several regulations governing the existence of this P2P online loan. that is:
First, POJK-77 / POJK.01 / 2016 concerning Information Technology-Based Lending and Borrowing Services (LPMUBTI). Arranging the provision of financial services to bring together lenders and loan recipients in the context of conducting a loan and loan agreement directly through an electronic system. The scope of this POJK includes institutions, registration, licensing, limits on lending funds, and information technology governance of operators, as well as fintech lending consumer protection.
Second, POJK-37 / POJK.04 / 2018 concerning Crowdfunding Services through Information Technology-Based Stock Offering (Equity Crowd Funding). Regulating the activities of offering shares by Issuers directly to Investors through an electronic system which includes business activities, institutional and licensing, and IT governance of ECF Operators, as well as requirements, rights, obligations and protection of ECF users. The POJK also regulates limits on the number and period of shares offering, the mechanism for transferring funds and shares, and trading shares on the secondary market.
Third, POJK-13 / POJK.02 / 2018 concerning Digital Financial Innovation in the Financial Services Sector. Regulates Digital Financial Innovation (IKD), namely the activity of updating processes, models or financial instruments that provide new added value in the financial services sector by utilizing technological advances. The scope of this POJK includes the IKD criteria, registration, regulatory sandbox, registration and monitoring of IKD Operators, as well as IKD consumer protection.
OJK Registration and Licensing
In order to be managed with banks, OJK establishes registration and licensing procedures for P2P.
- Providers are required to apply for registration and licensing to the OJK.
- The organizers who will carry out LPMUBTI activities submit an application
registration with OJK.
- Operators that operate before obtaining a registered proof from the OJK will be declared illegal fintech and the handling will then be submitted to the Investment Alert Task Force.
Application for a permit no later than 1 year from registration. If not, the registered proof will be declared null and void.
The public is strongly encouraged to only deal with P2P online loans that have been registered with the OJK. Please take a look Register for OJK Registered Online Loans.
According to POJK 77, P2P is prohibited from doing the following:
1. Conduct business activities other than information technology-based lending and borrowing services;
2. Facilitating lending and borrowing activities in foreign currencies;
3. Acting as a creditor (lender) or debtor (borrower);
4. Provide guarantees in any form;
5. Transfer / trade loans on behalf of the Provider;
6. Issuing debt securities;
7. Publish fictitious and / or misleading information;
8. Making offers through private means without the user’s permission; and
9. Charging a complaint fee.
One thing that became an issue that finally caught OJK’s attention was access to personal data through cellphone data retrieval.
OJK issued a regulation in the circular that leakage of personal data can be triggered by excessive access to smartphones of online loan users. Indonesia does not yet have a Law on Personal Data Protection.
OJK has been proactive in limiting access to Fintech Lending operators on smartphone users. For now, only access to the camera, microphone, & location (CEMILAN). If there is a violation by the Fintech Lending organizer, OJK will impose sanctions.
Illegal P2P Phenomenon
The regulation on P2P issues from OJK is very important because there are many illegal P2P networks that harm the public.
Illegal P2P is harmful and dangerous for several reasons:
Illegal Fintech Lending Operators charge very large fees and fines and are not transparent. Meanwhile, Fintech Lending that is registered / licensed by OJK is required to provide disclosure of information regarding interest, and the maximum fine that can be imposed on Users. AFPI sets a maximum interest rate of 0.8% per day and the total amount of all fees including penalties is 100% of the principal amount of the loan.
The illegal Fintech Lending application will request access to all persons on the User’s cellphone which is then misused for billing. Meanwhile, Fintech Lending that is registered / licensed by OJK is only allowed to access the camera, microphone, and location (CEMILAN) on the user’s cellphone.
P2P Online Loans present a new way of borrowing and lending. Present as an alternative to banking.
There are a number of provisions that must be considered for entrepreneurs who are interested in engaging in P2P businesses. For the public it is highly recommended to only use P2P registered with the OJK and to avoid as much as possible illegal P2P because it is very detrimental.