Regulatory AlertsOJK Regulation No. 39 of 2024 on Pawnshops
The Indonesian Financial Services Authority (OJK) issued Regulation No. 39 of 2024 to establish a comprehensive legal framework for the pawnshop industry, aligning it with the Financial Sector Development and Strengthening Law. The regulation mandates minimum paid-up capital based on operational scope, requires at least one appraiser per branch, and sets a minimum 51% loan-to-goods ratio for traditional pawn activities. It also introduces provisions for converting to Sharia-compliant operations, establishes minimum equity and health standards, and repeals the previous 2016 regulation effective December 27, 2024.
Financial Services Authority Regulation 39 of 2024 on Pawnshops
Abstract: The Law Number 4 of 2023 on the Development and Strengthening of the Financial Sector provides the legal basis for the pawnshop industry to conduct pawnshop business activities. In order to implement these provisions and in line with industry developments, it is necessary to amend the regulations so that the pawnshop industry becomes healthier, more competitive, and sustainable. The legal basis for this Financial Services Authority Regulation (POJK) is: Law No. 21 of 2011 as amended by Law No. 4 of 2023; and Law No. 4 of 2023.
Paid-up capital is determined based on the scope of business operations at the district/city, provincial, or national level. Companies are required to appoint at least 1 (one) Appraiser. Pawnshop companies may convert into Sharia-compliant Pawnshop companies. Pawnshop companies may establish a Sharia Business Unit (UUS). Companies may change the scope of their business operations. The main business activities of the Company are conducted through the provision of Loans with Collateral based on the Law of Pledge. Companies may conduct other business activities: a. provision of Loans with Collateral based on fiduciary law; b. provision of goods deposit services; c. provision of appraisal services; d. activities that generate income based on commissions; and/or e. other activities after obtaining approval from the Financial Services Authority.
Companies are required to maintain a ratio of Loans with Collateral based on the Law of Pledge of at least 51% (fifty-one percent) of total Loans. All agreements between the Company and Customers must be documented in written agreements: a. Pledge Certificate; b. Loan agreement with Collateral based on fiduciary law; and c. deposit agreement, and must meet the minimum information coverage that must be included in the agreement.
Companies are required to have at least 1 (one) Appraiser at each Branch Office. Appraisers are prohibited from holding concurrent positions at other Branch Offices. Companies are required to comply with the Maximum Limit for Loan Provision regulations. Companies are required to conduct loan quality assessments: a. Loans with Collateral based on the Law of Pledge; and/or b. Loans with Collateral based on fiduciary law.
Companies are required to comply with minimum Equity regulations. Companies are required to meet the Minimum Health Level requirements of at least Composite Rating 3. Companies are required to submit periodic reports in the form of: a. monthly reports; and b. annual financial reports audited by a public accountant registered with the OJK.
Note: This Financial Services Authority Regulation takes effect on the date of its promulgation. This Financial Services Authority Regulation was promulgated on December 27, 2024, and was established on December 24, 2024. Upon the commencement of this Financial Services Authority Regulation, the implementation provisions of Financial Services Authority Regulation Number 31/POJK.05/2016 concerning Pawnshop Business remain in force insofar as they do not conflict with the provisions in this Financial Services Authority Regulation. Upon the commencement of this Financial Services Authority Regulation, Financial Services Authority Regulation Number 31/POJK.05/2016 concerning Pawnshop Business is repealed and declared invalid.