Financial Services Sector Cooperatives

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FINANCIAL SERVICES SECTOR COOPERATIVES

CHAPTER I
GENERAL PROVISIONS

Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

1. Cooperative is a business entity composed of individuals or legal entity Cooperatives that bases its activities on Cooperative principles while simultaneously serving as a people's economic movement based on the principle of kinship.

2. Financial Service Institution, hereinafter abbreviated as FSI, is an institution that conducts activities in the banking, capital market, insurance, pension fund, venture capital, microfinance institution, financing institution, and other financial service institutions sectors in accordance with applicable legislation in the financial services sector.

3. Rural Bank, hereinafter abbreviated as BPR, is a bank that conducts conventional business activities without directly providing services in giro transactions.

4. Sharia Rural Bank, hereinafter referred to as BPR Syariah, is a type of Sharia bank that does not directly provide services in giro transactions in its activities.

5. Crowdfunding Service Provider is an Indonesian legal entity that provides, manages, and operates crowdfunding services.

6. Insurance Company includes insurance companies, Sharia insurance companies, reinsurance companies, Sharia reinsurance companies, insurance brokerage companies, reinsurance brokerage companies, and insurance loss adjusters.

7. Guarantee Institution includes guarantee companies, Sharia guarantee companies, reinsurance guarantee companies, and Sharia reinsurance guarantee companies that conduct guarantee activities.

8. Financing Company is a legal entity that conducts financing activities for goods and/or services to the public, including those conducting business activities based on Sharia principles.

9. Infrastructure Financing Company is a legal entity specifically established to conduct financing activities in the form of providing funds for infrastructure projects and/or carrying out other activities or facilities to support infrastructure financing, including those conducting business activities based on Sharia principles.

10. Venture Capital Company, hereinafter abbreviated as PMV, is a legal entity that conducts venture capital business activities.

11. Sharia Venture Capital Company, hereinafter abbreviated as PMVS, is a legal entity that conducts Sharia venture capital business activities.

12. Microfinance Institution, hereinafter abbreviated as LKM, is a financial institution specifically established to provide business development services and community empowerment, either through loans or financing for micro-scale businesses to members and the public, savings management, or providing business development consulting services that are not solely profit-oriented, including those conducting business activities based on Sharia principles.

13. Pawnshop Company is a legal entity that conducts business activities providing loans secured by movable assets, including those conducting all business activities based on Sharia principles.

14. Technology-Based Joint Financing Service Provider, hereinafter referred to as Penyelenggara LPBBTI, is an Indonesian legal entity that provides, manages, and operates the provision of financial service services to match fund providers with fund recipients to conduct financing, either conventionally or based on Sharia principles, directly through electronic systems using the internet.

15. Sharia Principles are Islamic legal principles based on fatwas and/or Sharia compliance statements issued by institutions authorized to issue fatwas in the Sharia field.

16. Sharia Supervisory Board, hereinafter abbreviated as DPS, is a party that has the task and function of supervising the implementation of company/legal entity activities to ensure compliance with Sharia Principles.

17. Management is the organizational apparatus of the Cooperative that is fully responsible for the administration of the Cooperative for the benefit and purposes of the Cooperative.

18. Supervisor is the organizational apparatus of the Cooperative tasked with supervising and providing advice to the Management.

19. Manager is a Cooperative member and/or a third party appointed by the Management and given authority to manage the Cooperative's business.

20. Own Capital is the amount of basic savings, mandatory savings, reserves set aside from the surplus of business results, grants, and other savings having characteristics similar to mandatory savings, including fixed capital from the parent cooperative for savings and loan cooperatives/Sharia savings and loan and financing cooperatives resulting from separation or restructuring.

21. Minister is the minister in charge of government affairs in the field of Cooperatives.

CHAPTER II
SCOPE AND CAPITAL

First Section
General

Article 2
(1) Cooperatives may conduct activities within the financial services sector in accordance with applicable legislation.

(2) Cooperatives conducting activities in the financial services sector as referred to in paragraph (1) must meet the following criteria:
a. raising funds from parties other than the relevant Cooperative members; b. raising funds from other Cooperatives;
c. distributing loans to parties other than the relevant Cooperative members and/or distributing loans to other Cooperative members;
d. receiving funding sources from banks and/or other financial institutions exceeding the maximum limit set by the minister in charge of government affairs in the field of cooperatives; and/or e. providing financial services outside of savings and loan businesses, such as banking, insurance, pension programs, capital markets, financing institution businesses, and other business activities established in laws regarding the financial services sector.

(3) Cooperatives conducting activities in the financial services sector as referred to in paragraph (1) may choose their scope as an FSI as follows:
a. BPR; b. BPR Syariah;
c. Crowdfunding Service Provider;
d. Insurance Company; e. Guarantee Institution; f. Financing Company; g. Infrastructure Financing Company; h. PMV;
i. PMVS;
j. LKM; k. Pawnshop Company; and
l. Penyelenggara LPBBTI.

(4) Cooperatives choosing to become an FSI must conduct their business activities in accordance with the business activity principles previously implemented, as follows:
a. Cooperatives conducting conventional businesses choose to become conventional FSIs; and b. Cooperatives conducting businesses based on Sharia Principles choose to become FSIs based on Sharia Principles.

Second Section
Application for License for Cooperatives as Financial Service Institutions

Article 3
For Cooperatives applying for business licenses as FSIs from the inception of their establishment, the license application mechanism as an FSI follows the applicable legislation in the financial services sector.

Third Section
Transition of Cooperatives Choosing to Become Financial Service Institutions

Article 4
(1) Cooperatives that have conducted business activities and meet the criteria for Cooperatives conducting activities in the financial services sector as referred to in Article 2 paragraph (2) may choose to become an FSI.

(2) Cooperatives as referred to in paragraph (1) choose their scope as an FSI as referred to in Article 2 paragraph (3).

(3) Cooperatives choosing to become an FSI as referred to in Article 2 paragraph (3) must at least meet the following criteria:
a. having Own Capital of at least the minimum paid-up capital required at the establishment of each respective FSI; b. having a ratio of problematic loan or financing receivables compared to the total loan or financing receivables after deducting collateral and provisions (net non-performing financing) of at most 5% (five percent); and
c. having adequate financial capability.

(4) The procedure for calculating the ratio of problematic loan or financing receivables as referred to in paragraph (3) letter b is implemented in accordance with applicable legislation for Cooperatives conducting savings and loan businesses.

Fourth Section
Capital

Article 5
(1) The Own Capital requirements for Cooperatives choosing to become an FSI as referred to in Article 4 paragraph (3) letter a are as follows:
a. BPR is set at a minimum of:

1. Rp100,000,000,000.00 (one hundred billion rupiah), for BPRs located in Zone 1 (one);

2. Rp50,000,000,000.00 (fifty billion rupiah), for BPRs located in Zone 2 (two); and

3. Rp25,000,000,000.00 (twenty-five billion rupiah), for BPRs located in Zone 3 (three);
   b. BPR Syariah is set at a minimum of:

4. Rp75,000,000,000.00 (seventy-five billion rupiah), for BPR Syarias located in Zone 1 (one);

5. Rp35,000,000,000.00 (thirty-five billion rupiah), for BPR Syarias located in Zone 2 (two); and

6. Rp15,000,000,000.00 (fifteen billion rupiah), for BPR Syarias located in Zone 3 (three);
   c. Crowdfunding Service Provider is set at a minimum of Rp2,500,000,000.00 (two billion five hundred million rupiah);
   d. Insurance Company is set at a minimum of:

7. Rp1,000,000,000,000.00 (one trillion rupiah), for insurance companies;

8. Rp500,000,000,000.00 (five hundred billion rupiah), for Sharia insurance companies;

9. Rp2,000,000,000,000.00 (two trillion rupiah), for reinsurance companies;

10. Rp1,000,000,000,000.00 (one trillion rupiah), for Sharia reinsurance companies;

11. Rp5,000,000,000.00 (five billion rupiah), for insurance brokerage companies;

12. Rp5,000,000,000.00 (five billion rupiah), for reinsurance brokerage companies; and

13. Rp1,500,000,000.00 (one billion five hundred million rupiah), for insurance loss adjuster companies;
    e. Guarantee Institution is set at a minimum of:

14. Rp100,000,000,000.00 (one hundred billion rupiah), for guarantee companies and Sharia guarantee companies with a national business scope;

15. Rp25,000,000,000.00 (twenty-five billion rupiah), for guarantee companies and Sharia guarantee companies with a provincial business scope;

16. Rp10,000,000,000.00 (ten billion rupiah), for guarantee companies and Sharia guarantee companies with a regency/city business scope; and

17. Rp200,000,000,000.00 (two hundred billion rupiah), for reinsurance guarantee companies and Sharia reinsurance guarantee companies;
    f. Financing Company is set at a minimum of Rp250,000,000,000.00 (two hundred fifty billion rupiah); g. Infrastructure Financing Company is set at a minimum of Rp1,000,000,000,000.00 (one trillion rupiah);

h. PMV is set at a minimum of Rp25,000,000,000.00 (twenty-five billion rupiah);
i. PMVS is set at a minimum of Rp10,000,000,000.00 (ten billion rupiah);
j. LKM and LKM conducting business activities based on Sharia Principles are set at a minimum of:

1. Rp300,000,000.00 (three hundred million rupiah), for LKMs and LKMs conducting business activities based on Sharia Principles with a village/sub-district business scope;
2. Rp500,000,000.00 (five hundred million rupiah), for LKMs and LKMs conducting business activities based on Sharia Principles with a district business scope; and
3. Rp1,000,000,000.00 (one billion rupiah), for LKMs and LKMs conducting business activities based on Sharia Principles with a regency/city business scope;
   k. Pawnshop Company is set at a minimum of:
4. Rp2,000,000,000.00 (two billion rupiah), for Pawnshop Companies with a regency/city business scope;
5. Rp8,000,000,000.00 (eight billion rupiah), for Pawnshop Companies with a provincial business scope; and
6. Rp100,000,000,000.00 (one hundred billion rupiah), for Pawnshop Companies with a national business scope; and
   l. Penyelenggara LPBBTI is set at a minimum of Rp25,000,000,000.00 (twenty-five billion rupiah).

(2) The Financial Services Authority conducts an analysis of the fulfillment of the Own Capital requirements as referred to in paragraph (1) through an assessment of the Cooperative's Own Capital, based on financial reports audited by a public accountant or prepared by an accounting firm.

(3) The division of establishment zones for BPRs and BPR Syarias as referred to in paragraph (1) letters a and b follows the list of BPR and BPR Syariah locations by zone contained in Appendix I, which is an integral part of this Financial Services Authority Regulation.

(4) In the event of changes to the minimum paid-up capital requirements based on provisions in Financial Services Authority Regulations regarding FSIs, the Own Capital requirements as referred to in paragraph (1) are implemented in accordance with the minimum paid-up capital provisions in the relevant Financial Services Authority Regulations regarding FSIs.

CHAPTER III
BUSINESS LICENSING FOR COOPERATIVES CHOOSING TO BECOME FINANCIAL SERVICE INSTITUTIONS

First Section
General

Article 6
(1) The Minister submits a list of Cooperatives that have conducted business activities and meet the criteria for Cooperatives conducting activities in the financial services sector as referred to in Article 2 paragraph (2) to the Financial Services Authority for follow-up in accordance with applicable legislation in the financial service institutions sector.

(2) To follow up on the list of Cooperatives submitted by the Minister as referred to in paragraph (1), the Financial Services Authority sends a notification letter to the Cooperatives listed to submit a business license application as an FSI no later than 20 (twenty) working days after the date of the notification letter from the Financial Services Authority.

(3) If within 20 (twenty) working days after the date of the notification letter from the Financial Services Authority, the Cooperative as referred to in paragraph (2) has not submitted a business license application as an FSI, the Financial Services Authority may extend the submission period by a maximum of 20 (twenty) working days after the date of the notification letter from the Financial Services Authority.

(4) If by the deadline as referred to in paragraph (2) and paragraph (3) the Cooperative has not submitted a business license application as an FSI, the Financial Services Authority informs the Minister in writing regarding the list of Cooperatives that did not submit a business license application as an FSI.

(5) The Financial Services Authority processes business license applications submitted by Cooperatives as referred to in paragraph (2) and paragraph (3) for a maximum of 1 (one) year from the date the list of Cooperatives is received, provided that applicable legislation regarding the financial services sector has been met.

Second Section
Requirements and Procedures for License Applications

Article 7
(1) Licenses for Cooperatives choosing to become an FSI are issued in the form of business licenses as an FSI as referred to in Article 2 paragraph (3).

(2) Cooperatives choosing to become an FSI must meet:
a. criteria as referred to in Article 4 paragraph (3);

b. provisions regarding Management, Supervisors, and/or Managers;
c. provisions regarding the DPS for Cooperatives conducting business activities based on Sharia Principles;
d. operational readiness requirements; e. provisions regarding the preparation of business plans or work plans; and f. other requirements based on the consideration of the Financial Services Authority in accordance with sectoral applicable legislation for each respective FSI.

(3) In obtaining the business license as referred to in paragraph (1), the Management must submit a business license application to the Financial Services Authority by attaching documents according to the list of requirements for the business license attachment contained in Appendix II, which is an integral part of this Financial Services Authority Regulation.

(4) The business license application for Cooperatives choosing to become an FSI as referred to in paragraph (1) is contained in Appendix III in format 2, which is an integral part of this Financial Services Authority Regulation.

(5) The submission of the business license application as referred to in paragraph (3) is addressed to:
Head of Executive Supervisor for Financing Institutions, Venture Capital Companies, Microfinance Institutions, and Other Financial Service Institutions Attention: Head of Licensing, Special Examination, and Supervisory Quality Control Department for Financing Institutions, Venture Capital Companies, Microfinance Institutions, and Other Financial Service Institutions, submitted through the Financial Services Authority Office according to the location of the Cooperative choosing to become an FSI, contained in Appendix III in format 3, which is an integral part of this Financial Services Authority Regulation.

(6) The business license application as referred to in paragraph (3) is conducted simultaneously with the application for competency and propriety assessment.

Second Section
Approval of Business License Applications

Article 8
(1) To grant approval or rejection of the business license application as referred to in Article 7, the Financial Services Authority conducts:
a. analysis and examination of document completeness as referred to in Article 7 paragraph (3); b. analysis of the fulfillment of the ratio of problematic loan or financing receivables as referred to in Article 4 paragraph (3) letter b;

c. analysis of the fulfillment of adequate financial capability as referred to in Article 4 paragraph (3) letter c;
d. analysis of the fulfillment of Own Capital as referred to in Article 5 paragraph (1); e. feasibility analysis of the business plan or work plan as referred to in Article 7 paragraph (2) letter e; f. competency and propriety assessment of key parties for FSIs required to meet competency and propriety assessments for key parties based on applicable legislation governing competency and propriety assessments for key parties of FSIs; and g. analysis of the fulfillment of applicable legislation in the relevant FSI.

(2) In the event that a Cooperative choosing to become an FSI has a Manager, the Manager must meet the competency and propriety assessment using assessment parameters as prospective board members based on applicable legislation governing competency and propriety assessments for key parties of FSIs.

(3) The Financial Services Authority may conduct inspections at the office of the Cooperative choosing to become an FSI to ensure the Cooperative's operational readiness.

(4) In the event that the examination of document completeness as referred to in Article 7 paragraph (3) is incomplete, the Financial Services Authority notifies the Cooperative choosing to become an FSI to complete the missing documents and resubmit them to the Financial Services Authority no later than 20 (twenty) working days from the date of notification from the Financial Services Authority.

(5) In the event that the Cooperative choosing to become an FSI does not complete, repair, and/or update the missing documents within the time limit as referred to in paragraph (4), the Cooperative choosing to become an FSI is deemed to have canceled the business license application.

(6) The Financial Services Authority grants approval or rejection of the business license application no later than 20 (twenty) working days from the date the business license application and documents are received in complete form.

(7) In the event that the business license application is approved, the Financial Services Authority establishes a decision on the granting of the business license.

(8) In the event that the business license application is rejected, the rejection is conducted in writing and accompanied by the reasons for rejection.

(9) The Financial Services Authority informs the Minister regarding the decision on the business license application as referred to in paragraph (7) and paragraph (8).

Article 9
(1) In the event that the business license application submitted by a Cooperative choosing to become an FSI does not meet the requirements as an FSI as referred to in Article 8 paragraph (8), the Cooperative must:
a. dissolve the legal entity in accordance with applicable legislation governing the dissolution of Cooperatives; or b. adjust business activities to become a savings and loan Cooperative in accordance with applicable legislation in the field of cooperatives.

(2) The Financial Services Authority transmits information regarding Cooperatives that do not meet the requirements as an FSI as referred to in paragraph (1) to the Minister for follow-up in accordance with authority based on applicable legislation.

(3) Cooperatives that do not meet the requirements as an FSI remain under the supervisory authority of the Minister.

Article 10
(1) In processing business license applications for LKMs submitted by Cooperatives choosing to become an FSI, the Financial Services Authority has the authority to grant temporary exemptions from the fulfillment of requirements as referred to in Article 7 paragraph (2) as follows:
a. having a ratio of problematic loan or financing receivables compared to the total loan or financing receivables after deducting collateral and provisions (net non-performing financing) of at most 5% (five percent); b. having adequate financial capability;
c. competency and propriety assessment requirements for key parties based on applicable legislation governing competency and propriety assessments for key parties of FSIs, in the event the Cooperative obtains a business license as an LKM with a large business scale;
d. adjustment of operational coverage or business activities based on applicable legislation regarding LKMs; and/or

e. obligation to implement provisions in the field of

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