Financial Services Sector Cooperatives

Regulation / Regulation Search / Cooperatives in the Financial Services Sector

Sector: PVML

Sub-Sector: Cooperatives

Type of Regulation: Financial Services Authority Regulation (POJK)

Regulation Number: 47 of 2024

Effective Date: 12/31/2024

Appendix 1 POJK 47 of 2024 Cooperatives in the Financial Services Sector.pdf Abstract of POJK 47 of 2024 Cooperatives in the Financial Services Sector.pdf FAQ of POJK 47 of 2024 Cooperatives in the Financial Services Sector.pdf

Page Content Financial Services Authority Regulation Number 47 of 2024 concerning Cooperatives in the Financial Services Sector

Abstract:

Article 44B paragraph (1) of Law Number 25 of 1992 concerning Cooperatives, as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (UU P2SK), stipulates that Cooperatives may conduct activities within the financial services sector in accordance with applicable legislation. Furthermore, as mandated in Article 44B paragraph (3) of the UU P2SK, the licensing, regulation, and supervision of Cooperatives operating in the financial services sector that meet the requirements specified in Article 44B paragraph (2) of the UU P2SK are carried out by the Financial Services Authority (OJK).

The designation of the Financial Services Authority as the entity responsible for processing licensing, while simultaneously serving as an independent regulator and supervisor of the legal entity Cooperatives conducting activities in the financial services sector, aligns with the regulatory and supervisory duties of the Financial Services Authority as outlined in Article 6 of Law Number 21 of 2011 concerning the Financial Services Authority (UU OJK). These provisions clarify that the Financial Services Authority executes regulatory and supervisory duties over financial services activities in the banking, capital market, insurance, pension fund, financing institution, and other financial services sectors.

Furthermore, Article 321 of the UU P2SK regulates the transition of Cooperatives previously under the authority of the Ministry of Cooperatives and Small and Medium Enterprises (Kemenkop UKM) to become Licensed Financial Institutions (LJKs) under the supervision of the Financial Services Authority. This article mandates the Financial Services Authority to process business licenses submitted by cooperatives listed in a list resulting from the assessment by Kemenkop UKM according to the criteria in Article 44B paragraph (2) of Article 202 of the UU P2SK, within a maximum period of 1 (one) year from the receipt of the Cooperative list from Kemenkop UKM, provided that all applicable financial services sector regulations are met.

This Financial Services Authority Regulation governs the main aspects regarding the stages and mechanisms of the licensing process for Cooperatives conducting activities in the financial services sector, including scope and capital, business licensing, as well as transitional and closing provisions. With the issuance of this Financial Services Authority Regulation, it is expected that the licensing process conducted by the Financial Services Authority for Cooperatives operating in the financial services sector can proceed effectively and efficiently.

The legal basis for this Financial Services Authority Regulation (POJK) is: Law No. 25 of 1992 as last amended by Law No. 4 of 2023; and Law No. 21 of 2011 as amended by Law No. 4 of 2023.

The Financial Services Authority Regulation concerning Cooperatives in the Financial Services Sector regulates the scope and capital, application for cooperative licenses as Licensed Financial Institutions, the transition of cooperatives choosing to become Licensed Financial Institutions, capital requirements, business licensing for cooperatives choosing to become Licensed Financial Institutions, requirements and procedures for license applications, approval of license applications, announcement of cooperatives in the financial services sector, supervision of cooperatives choosing to become Licensed Financial Institutions, consumer protection, as well as transitional and closing provisions.

Note: This Financial Services Authority Regulation takes effect on the date of its promulgation. This Financial Services Authority Regulation was promulgated on December 31, 2024, and established on December 30, 2024.

Cooperatives may conduct activities within the financial services sector by meeting the following criteria: a. collecting funds from parties other than the respective Cooperative's members; b. collecting funds from other Cooperatives' members; c. distributing loans to parties other than the respective Cooperative's members and/or distributing loans to other Cooperatives' members; d. receiving funding sources from banks and/or other financial institutions exceeding the maximum limit set by the minister responsible for government affairs in the cooperative sector; and/or e. providing financial services outside of savings and loan businesses, such as banking, insurance, pension programs, capital markets, financing institutions, and other business activities designated in laws regarding the financial services sector.

Cooperatives conducting activities in the financial services sector may choose their scope as Licensed Financial Institutions (LJKs), including but not limited to: Rural Banks (BPR), Sharia Rural Banks (BPR Syariah), Crowdfunding Service Providers, Insurance Companies, Guarantee Institutions, Financing Companies, Infrastructure Financing Companies, Venture Capital Companies (PMV), Sharia Venture Capital Companies (PMVS), Microfinance Institutions (LKM), Pawnshop Companies; and Information Technology-Based Joint Financing Service Providers (LPBBTI).

For Cooperatives applying for a business license as an LJK from the time of establishment, the business license application mechanism as an LJK follows the provisions of applicable legislation in the financial services sector.

Cooperatives that have already conducted business activities and meet the criteria for Cooperatives conducting activities in the financial services sector may choose to become LJKs. Cooperatives intending to choose to become LJKs 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 LJK; b. having a ratio of problematic loans or financing receivables compared to the total amount of loans or financing receivables after deducting collateral and provisions (net non-performing financing) of no more than 5% (five percent); and c. having adequate financial capability.

Licenses for Cooperatives choosing to become LJKs are issued in the form of business licenses as LJKs.

In the event that the business license application submitted by a Cooperative choosing to become an LJK does not meet the requirements as an LJK, the Cooperative is required to: 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 based on applicable legislation in the cooperative field.

Cooperatives that do not meet the requirements as LJKs remain under the supervisory authority of the Minister.

The Financial Services Authority conducts supervision over Cooperatives choosing to become LJKs in accordance with sectoral applicable legislation for each respective LJK, including supervision of the conduct of financial services business actors (market conduct), which is executed in accordance with applicable legislation regarding consumer and public protection in the financial services sector.