Financial Services Authority Regulation Number 16/POJK.05/2019 Concerning the Supervision of PT Permodalan Nasional Madani (Persero)

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 16/POJK.05/2019
CONCERNING
THE SUPERVISION OF PT PERMODALAN NASIONAL MADANI (PERSERO)

BY THE GRACE OF GOD ALMIGHTY,
THE COMMISSIONER COUNCIL OF THE FINANCIAL SERVICES AUTHORITY,

Considering: that it is necessary to provide a legal basis for the supervision of PT Permodalan Nasional Madani (Persero) in Indonesia and to create healthy business activities in order to provide financing access for micro, small, and medium enterprises to the community, it is necessary to establish a Financial Services Authority Regulation concerning the Supervision of PT Permodalan Nasional Madani (Persero);

Taking into account: Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);

DECIDES:

To Establish: A FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE SUPERVISION OF PT PERMODALAN NASIONAL MADANI (PERSERO).

CHAPTER I
GENERAL PROVISIONS

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

1. PT Permodalan Nasional Madani (Persero), hereinafter referred to as the Company, is a company established based on Government Regulation of the Republic of Indonesia Number 38 of 1999 concerning State Capital Participation for the Establishment of a Limited Liability Company (Persero) in the context of the Development of Cooperatives, Small, and Medium Enterprises.

2. Sharia Principles are Islamic legal provisions based on fatwas and/or Sharia compliance statements from the National Sharia Board of the Indonesian Ulema Council.

3. Sharia Business Unit, hereinafter abbreviated as UUS, is a work unit of the Company's headquarters that executes the Company's business activities based on Sharia Principles and/or functions as the head office of offices executing the Company's business activities based on Sharia Principles.

4. Financing Services are activities of distributing credit and/or business capital financing for the development of cooperatives, micro, small, and medium enterprises, including program credits.

5. Management Services are non-financial activities consisting of training, consultation, and business assistance aimed at the development of cooperatives, micro, small, and medium enterprises.

6. Customers are consumers, whether legal entities or individuals, who receive Financing Services or Management Services from the Company.

7. Board of Directors is the Board of Directors as referred to in Law Number 40 of 2007 concerning Limited Liability Companies.

8. Board of Commissioners is the Board of Commissioners as referred to in Law Number 40 of 2007 concerning Limited Liability Companies.

9. Sharia Supervisory Board, hereinafter abbreviated as DPS, is a part of the Company's organ that has the task and function of supervising the implementation of business activities to ensure compliance with Sharia Principles.

10. Financial Health Level is the result of the Company's assessment of the fulfillment of capital adequacy, liquidity, and financing receivables quality ratios.

11. Audit is a series of activities to search, collect, process, and evaluate data and/or information, and to assess and provide conclusions regarding the Company's business implementation.

CHAPTER II
INSTITUTIONAL STRUCTURE AND MANAGEMENT

Article 2
(1) The Company is domiciled and has its headquarters in Jakarta or as specified in the Company's Articles of Association.
(2) The Company may open offices outside the headquarters.

Article 3
(1) The Company is required to have an organizational structure that clearly describes at least the following functions:
a. accounting and finance; b. marketing;
c. financing services feasibility analysis;
d. risk management; e. compliance; f. internal supervision; g. service and complaint resolution; and h. customer information/database development.

(2) The organizational structure as referred to in paragraph (1) must be supplemented with written descriptions of duties, authorities, responsibilities, and work procedures, which are determined by the Board of Directors.

Article 4
(1) Members of the Board of Directors, members of the Board of Commissioners, and/or members of the DPS of the Company must meet the competency and propriety assessment requirements. (2) Candidates for members of the Board of Directors, candidates for members of the Board of Commissioners, and/or candidates for members of the DPS who do not yet meet the competency and propriety assessment requirements are prohibited from performing actions, tasks, and functions as members of the Board of Directors, members of the Board of Commissioners, or members of the DPS, even if they have received approval and been appointed by the General Meeting of Shareholders. (3) The competency and propriety assessment as referred to in paragraph (1) follows the provisions in Financial Services Authority Regulations concerning competency and propriety assessments and its implementing regulations.

Article 5
(1) The Company may conduct business activities based on Sharia Principles.
(2) In the event that the Company has conducted business activities based on Sharia Principles as referred to in paragraph (1), the Company is required to form a UUS. (3) The Company as referred to in paragraph (2) must submit the plan for forming a UUS to the Financial Services Authority no later than 1 (one) month since this Financial Services Authority Regulation was promulgated. (4) The formation of a UUS as referred to in paragraph (3) must be carried out no later than 3 (three) years since this Financial Services Authority Regulation was promulgated.

(5) Companies that have formed a UUS must fulfill the following provisions:
a. have working capital set aside for UUS activities; b. have a UUS leader who is responsible for the implementation of business activities conducted based on Sharia Principles, with a job level at least one level below the Board of Directors;
c. have at least 1 (one) DPS member who has obtained a recommendation from the National Sharia Board of the Indonesian Ulema Council; and
d. have separate bookkeeping.

(6) The formation of a UUS as referred to in paragraph (2) must first obtain permission from the Financial Services Authority.
(7) To obtain UUS permission as referred to in paragraph (6), the Board of Directors must submit a request for UUS opening permission to the Financial Services Authority, accompanied by:
a. Board of Directors decision letter regarding the allocation of working capital for the UUS; b. DPS documents including:

1. curriculum vitae;
2. appointment letter of the DPS by the General Meeting of Shareholders; and
3. recommendation letter from the National Sharia Board of the Indonesian Ulema Council;
   c. UUS leader documents including:
4. curriculum vitae; and
5. appointment letter of the UUS leader by the Board of Directors; and
   d. sample format of business activity agreements based on Sharia Principles according to the contract used.

CHAPTER III
BUSINESS IMPLEMENTATION

First Section
Company Business Activities

Article 6
(1) The Company's business activities include:
a. Financing Services; b. Management Services; and
c. other business activities to support the implementation of business activities as referred to in letters a and b based on approval from the Financial Services Authority.

(2) The Company's business activities as referred to in paragraph (1) may be conducted based on Sharia Principles.

Article 7
(1) All Financing Services business activities between the Company and Customers must be stipulated in a Financing Services agreement.
(2) The Financing Services agreement as referred to in paragraph (1) must be stipulated in writing.
(3) The Financing Services agreement as referred to in paragraph (1) must contain at least:
a. type of Financing Services; b. agreement number and date;
c. identity of the parties;
d. financing amount; e. payment date and financing installment value; f. duration and interest rate or profit-sharing rate; g. type of collateral (if collateral exists); h. clauses on the encumbrance of fiduciary rights, mortgage rights, or hypothecation clearly, in the event of collateral encumbrance in Financing Services activities;
i. mechanisms in the event of disputes and the choice of dispute resolution venue;
j. provisions regarding the rights and obligations of the parties; and k. provisions regarding fines/ta'zir (if fines/ta'zir exist).

(4) Financing Services agreements between the Company and Customers must fulfill the agreement drafting provisions as regulated in Financial Services Authority Regulations concerning consumer protection in the financial services sector and its implementing regulations.

Article 8
(1) The Company is required to mitigate Financing Services risks.
(2) Financing Services risk mitigation as referred to in paragraph (1) can be done by:
a. transferring Financing Services risks through credit insurance or credit guarantee mechanisms in accordance with applicable laws and regulations; b. transferring collateral risks from Financing Services activities through insurance mechanisms; and/or
c. encumbering fiduciary rights, mortgage rights, or hypothecation over collateral from Financing Services activities.

(3) In the event that the Company transfers risks as referred to in paragraph (2) letters a and b, the Company must use insurance companies/Sharia insurance companies or guarantee companies/Sharia guarantee companies that have obtained business licenses from the Financial Services Authority and are not subject to administrative sanctions in the form of business activity restrictions or suspension of business activities by the Financial Services Authority.

Second Section
Funding Sources

Article 9
(1) The Company's funding sources can only originate from:
a. state capital participation; b. loans from the government/public service agencies;
c. loans from financial institutions and/or other institutions;
d. issuance of debt-like instruments; e. subordinated loans; f. securitization of financing receivables in accordance with applicable laws and regulations; and/or g. grants.

(2) The Company's funding sources as referred to in paragraph (1) letters a through f must be in Rupiah denomination.

Third Section
Productivity Ratios

Article 10
(1) The Company is required to fulfill productivity ratios of business activities, namely:
a. financing receivables to total assets ratio (financing to asset ratio); and b. micro financing to total financing ratio (micro financing ratio).

(2) The Company is required to maintain the financing receivables to total assets ratio (financing to asset ratio) as referred to in paragraph (1) letter a at a minimum of 65% (sixty-five percent).

(3) The Company is required to maintain the micro financing to total financing ratio (micro financing ratio) as referred to in paragraph (1) letter b at a minimum of 50% (fifty percent) for financing values less than or equal to IDR 10,000,000.00 (ten million Rupiah).

Fourth Section
Financial Health Level

Article 11
(1) The Company is required to fulfill Financial Health Level requirements at all times.
(2) The measurement of Financial Health Level as referred to in paragraph (1) is conducted through:
a. liquidity ratio; b. capital adequacy ratio; and
c. financing receivables quality.

Article 12
(1) The Company is required to fulfill a minimum liquidity ratio of 120% (one hundred twenty percent).
(2) The liquidity ratio as referred to in paragraph (1) is calculated using the current ratio, which is the comparison between current assets and current liabilities.

Article 13
(1) The Company is required to fulfill the capital adequacy ratio through a gearing ratio calculation of a maximum of 10 (ten) times.
(2) The gearing ratio as referred to in paragraph (1) is the comparison between the amount of loans received minus cash and cash equivalents with the Company's equity.

Article 14
(1) The Company is required to assess the quality of financing receivables.
(2) The assessment of financing receivables quality as referred to in paragraph (1) is determined based on installment payment accuracy factors.

(3) The assessment of financing receivables quality as referred to in paragraph (1) is categorized as:
a. current; b. special attention;
c. doubtful;
d. questionable; or e. non-performing.

(4) The assessment of financing receivables quality as referred to in paragraph (1) is categorized as follows:
a. for financing with weekly installment types:

1. current if there is no delay or there is a payment delay of installments up to 30 (thirty) calendar days;
2. special attention if there is a payment delay of installments that has exceeded 30 (thirty) calendar days up to 60 (sixty) calendar days;
3. doubtful if there is a payment delay of installments that has exceeded 60 (sixty) calendar days up to 90 (ninety) calendar days;
4. questionable if there is a payment delay of installments that has exceeded 90 (ninety) calendar days up to 120 (one hundred twenty) calendar days; or
5. non-performing if there is a payment delay of installments that has exceeded 120 (one hundred twenty) calendar days; and

b. for financing with installment types of 1 (one) month or more:

1. current if there is no delay or there is a payment delay of installments up to 30 (thirty) calendar days;
2. special attention if there is a payment delay of installments that has exceeded 30 (thirty) calendar days up to 90 (ninety) calendar days;
3. doubtful if there is a payment delay of installments that has exceeded 90 (ninety) calendar days up to 120 (one hundred twenty) calendar days;
4. questionable if there is a payment delay of installments that has exceeded 120 (one hundred twenty) calendar days up to 180 (one hundred eighty) calendar days; or
5. non-performing if there is a payment delay of installments that has exceeded 180 (one hundred eighty) calendar days.

Article 15
(1) Financing receivables categorized as problematic financing receivables (non-performing loans) consist of financing receivables with doubtful, questionable, and non-performing quality. (2) The value of financing receivables with problematic financing receivables quality (non-performing loans) as referred to in paragraph (1), after being reduced by provisions for write-off allowances for financing receivables with doubtful, questionable, and non-performing quality, must be at a maximum of 5% (five percent) of total financing receivables.

Fifth Section
Good Corporate Governance

Article 16
(1) The Company is required to apply good corporate governance principles in all its business activities at all levels or tiers of the organization. (2) The application of good corporate governance principles as referred to in paragraph (1) must be stipulated in a written guideline. (3) The application of good corporate governance principles as referred to in paragraph (1) must be realized in:
a. the execution of duties and responsibilities of the Board of Directors, Board of Commissioners, and DPS; b. the execution of duties of work units that perform the Company's internal control functions;
c. policies and procedures for the application of compliance functions, internal auditors, and external auditors;
d. policies and procedures for the application of risk management, including internal control systems and the application of information technology governance; e. the application of remuneration policies; and f. policies on the transparency of the Company's financial and non-financial conditions.

(4) The Financial Services Authority conducts assessments of the written guidelines as referred to in paragraph (2).
(5) The Financial Services Authority may request the Company to make improvements to the written guidelines as referred to in paragraph (2).

Article 17
(1) The Company is required to assess the application of good corporate governance principles at least 1 (one) time per 1 (one) year for the year-end position. (2) The assessment as referred to in paragraph (1) can be conducted through self-assessment or by an independent party.

Sixth Section
Risk Management

Article 18
(1) The Company is required to apply risk management effectively.
(2) The effective application of risk management as referred to in paragraph (1) must at least include:
a. active supervision by the Board of Directors, Board of Commissioners, and DPS; b. adequacy of policies, procedures, and risk limit determinations;
c. adequacy of risk identification, measurement, monitoring, and control processes, as well as risk management information systems; and
d. comprehensive internal control systems.

(3) In applying risk management as referred to in paragraph (2), the Company must have guidelines for the application of risk management.
(4) The Financial Services Authority may request the Company to make improvements to the risk management application guidelines as referred to in paragraph (3).

Article 19
Risk management as referred to in Article 18 must be applied to:
a. credit risk; b. market risk;
c. liquidity risk;
d. operational risk; e. legal risk; f. reputation risk; g. strategic risk; and h. compliance risk.

Article 20
(1) The Company is required to assess risk levels at least 1 (one) time per 1 (one) year for the year-end position.
(2) If necessary, the Financial Services Authority may request the Company to assess risk levels at any time.

Seventh Section
Anti-Fraud

Article 21
(1) To control the risk of fraud occurring, the Company must execute fraud control functions and apply anti-fraud strategies stipulated in written guidelines. (2) The fraud control functions as referred to in paragraph (1) include the following aspects:
a. active management supervision; b. organization and accountability;
c. control and monitoring; and
d. education and training.

(3) The Company must compile annual reports on the application of anti-fraud strategies, including:
a. prevention; b. detection;
c. investigation, reporting, and sanctions; and
d. monitoring, evaluation, and follow-up.

(4) The Company must compile reports for each fraud that is estimated to have a significant negative impact on the Company, Customers, and/or other parties, including those that have the potential to become public attention, containing at least:
a. perpetrator's name; b. form or type of deviation;
c. location of the incident;
d. brief information regarding the modus operandi; and e. indication of losses.

Eighth Section
Business Plan

Article 22
(1) The Company is required to formulate policies for the implementation of business activities, stipulated in the Company's annual business plan. (2) The business plan as referred to in paragraph (1) must at least include:
a. policies and business activity plans; b. management policies and strategies;
c. application of risk management and compliance;
d. application of good corporate governance; e. the Company's financial performance of the previous period; f. projected financial statements along with the assumptions used; g. projected key financial ratios and Financial Health Level; h. business activity development and marketing plans;
i. office network development and/or change plans (if there is development and/or change in office networks);
j. capital plans; k. funding plans;
l. human resource development plans; and
m. other information.

(3) In the event that there are plans for capital additions and/or funding that will cause the fulfillment of the Company's obligations as referred to in Article 10 paragraph (2) not to be met, the business plan as referred to in paragraph (1) must contain targets for fulfilling such obligations.

(4) The business plan as referred to in paragraph (1) must:
a. be proposed by the Board of Directors; b. receive written responses from the Board of Commissioners;
c. receive approval from the General Meeting of Shareholders; and
d. be socialized to management and employees in relevant work units.

(5) Provisions regarding the form, structure, and procedures for submitting the business plan as referred to in paragraph (1) are determined by the Financial Services Authority.

Ninth Section
Reporting

Article 23
(1) The Company is required to submit annual financial reports that have been audited by public accountants, completely in printed and electronic data formats, to the Financial Services Authority no later than April 30 of the following year. (2) The public accountants as referred to in paragraph (1) must be registered with the Financial Services Authority. (3) Annual financial reports must be prepared based on applicable accounting standards and prepared in Rupiah currency.

Article 24
(1) The Company is required to submit monthly reports to the Financial Services Authority.
(2) Provisions regarding monthly reports as referred to in paragraph (1) follow the provisions in Financial Services Authority Regulations concerning monthly reports of non-bank financial service institutions.

Article 25
(1) The Company is required to compile reports on the application of good corporate governance as referred to in Article 16 at the end of each fiscal year. (2) The reports on the application of good corporate governance as referred to in paragraph (1) must at least consist of:
a. transparency of the application of good corporate governance, which at least includes the disclosure of all aspects of the implementation of good corporate governance principles; b. self-assessment of the application of good corporate governance; and
c. action plans, including corrective actions required and completion times and obstacles/hindrances to completion, in the event that there are still deficiencies in the application of good corporate governance.

(3) Reports on the application of good corporate governance as referred to in paragraph (1) must be submitted to the Financial Services Authority no later than April 30 of the following year.

Article 26
The Company is required to submit risk level assessment reports to the Financial Services Authority, with the following provisions:
a. for year-end position risk level assessments as referred to in Article 20 paragraph (1), submitted no later than April 30 of the following year; b. for ad-hoc risk level assessments as referred to in Article 20 paragraph (2), submitted according to the time limits determined by the Financial Services Authority.

Article 27
The Company is required to submit anti-fraud strategy reports as referred to in Article 21 to the Financial Services Authority, with the following provisions:
a. annual anti-fraud strategy implementation reports, submitted no later than April 30 of the following year; and b. reports for each fraud, submitted no later than 3 (three) working days since the Company's management signed the fraud reporting documents.

Article 28
(1) The Company is required to submit business plans as referred to in Article 22 to the Financial Services Authority no later than November 30. (2) The Company may only make 1 (one) change to the business plan during the reporting period in the current year after approval by the General Meeting of Shareholders. (3) Changes to the business plan as referred to in paragraph (2) can only be made no later than the end of June of the current year. (4) In the event that there are new assignments from the government that must be implemented immediately, the Company may make changes to the business plan outside of those referred to in paragraph (2) after approval by the General Meeting of Shareholders.

Article 29
The Company is required to report changes to the Articles of Association to the Financial Services Authority within a maximum of 15 (fifteen) working days since the date of receipt of proof of approval and/or proof of notification receipt from the competent agency.

Article 30
The Company is required to report changes to the members of the Board of Directors, members of the Board of Commissioners, and/or members of the Supervisory Board to the Financial Services Authority (OJK) within a maximum of 15 (fifteen) working days since:
a. the date of recording changes to the members of the Board of Directors and/or members of the Board of Commissioners in the company's register; or b. the date of appointment of members of the Supervisory Board.

Article 31
The Company is required to report in writing to the Financial Services Authority (OJK) the opening, closing, and changes of the address of the head office and/or offices other than the head office within a maximum of 10 (ten) working days since the date of opening, closing, or change of address.

Article 32
(1) In addition to annual financial reports audited by public accountants, all reports are submitted to the Financial Services Authority (OJK) online through the OJK data communication network system. (2) In the event that the OJK data communication network system referred to in paragraph (1) is not yet available or experiences technical disturbances, the Company submits reports in the form of electronic data via email designated by the Financial Services Authority (OJK). (3) If the final deadline for submitting reports as referred to in Article 23 paragraph (1), Article 25 paragraph (3), Article 26, and Article 27 letter a, and the final deadline for submitting the business plan as referred to in Article 28 paragraph (1) falls on a holiday, the final deadline for submitting reports or business plans is the next working day.

Tenth Section
Customer Trust Funds

Article 33
(1) To increase financial literacy, the Company may encourage Mekaar (Family Prosperous Economy Financing) Customers to set aside their funds to open savings accounts at banks and/or through pawnshop agents. (2) The setting aside of Customer funds as referred to in paragraph (1) must be coordinated by the Company until the Customer completes their financing obligations to the Company. (3) The Company may receive funds as referred to in paragraph (1) as trust funds in the event that there are no banks and/or pawnshop agents that can be easily reached by the Customer. (4) Trust funds as referred to in paragraph (3) must be placed in banks and/or pawnshop agents no later than 2 (two) working days since the funds were received by the Company. (5) Trust funds from Customers as referred to in paragraph (3) are voluntary and are entirely the right of the Customer and can be withdrawn at any time. (6) Trust funds as referred to in paragraph (3) must open accounts in the name of the Company at general banks or Sharia general banks. (7) Recording of trust funds from Customers as referred to in paragraph (3) must be done separately from other funds with different account names. (8) In the event that the Company receives interest or profit-sharing from funds entrusted by Customers, such interest or profit-sharing must be used to support the implementation of sustainable finance activities as regulated in applicable legislation. (9) Trust funds from Customers as referred to in paragraph (3) must be returned to the Customer no later than 5 (five) working days after the Customer completes their financing obligations.

Eleventh Section
Prohibitions

Article 34
The Company is prohibited from:
a. placing funds abroad; b. using customer trust funds as referred to in Article 33 paragraph (3) for financing purposes;
c. guaranteeing third-party debts;
d. taking actions that cause or force other financial institutions under the supervision of the Financial Services Authority (OJK) to violate applicable legislation; and/or e. raising retail funds from the public.

Twelfth Section
Examinations

Article 35
(1) The Financial Services Authority (OJK) conducts supervision over the Company.
(2) To implement supervision as referred to in paragraph (1), the Financial Services Authority (OJK) has the authority to conduct Examinations of the Company. (3) Examinations as referred to in paragraph (2) are conducted by an examination team which may consist of:
a. OJK employees assigned to conduct Examinations; b. other parties designated by the Financial Services Authority (OJK); or
c. a combination of OJK employees and other parties designated by the Financial Services Authority (OJK).
(4) The Company is prohibited from refusing Examinations conducted by the Financial Services Authority (OJK).
(5) The Company is required to submit information requested by the examination team during the implementation of Examinations.

CHAPTER IV
COMPLIANCE PLANS

Article 36
(1) Companies that violate regulations as referred to in Article 3, Article 7, Article 8 paragraph (1), Article 10, Article 11 paragraph (1), Article 12 paragraph (1), Article 13 paragraph (1), and Article 14 paragraph (1) of this Financial Services Authority Regulation are required to submit a compliance plan to the Financial Services Authority (OJK) no later than 1 (one) month since the date of determination of the violation and a copy must be sent to the shareholders. (2) The compliance plan as referred to in paragraph (1) must at least contain plans to be undertaken by the Company accompanied by a specific time frame required to comply with the regulations as referred to in paragraph (1). (3) The compliance plan as referred to in paragraph (1) must be signed by all members of the Board of Directors and the Board of Commissioners. (4) The compliance plan as referred to in paragraph (1) must obtain a statement of no objection from the Financial Services Authority (OJK). (5) In the event that the compliance plan as referred to in paragraph (1) is deemed by the Financial Services Authority (OJK) insufficient to address the problems, the Company is required to improve the compliance plan. (6) The Financial Services Authority (OJK) provides a statement of no objection for compliance plans submitted by the Company, considering the conditions of the problems faced by the Company, no later than 15 (fifteen) working days calculated from the date of receipt of the complete compliance plan. (7) If within the time frame as referred to in paragraph (6), the Financial Services Authority (OJK) does not provide a statement of no objection or comments, the Company may implement the compliance plan as referred to in paragraph (1). (8) The Company is required to implement the compliance plan as referred to in paragraph (1).

CHAPTER V
ADMINISTRATIVE SANCTIONS

Article 37
(1) In the event that the Company fails to comply with regulations as referred to in Article 4 paragraph (1) and (2), Article 5 paragraph (2), (3), (4), (5), and (6), Article 8 paragraph (3), Article 9, Article 15 paragraph (2), Article 16 paragraph (1), (2), and (3), Article 17 paragraph (1), Article 18 paragraph (1) and (3), Article 19, Article 20 paragraph (1), Article 21 paragraph (1), (3), and (4), Article 22 paragraph (1) and (4), Article 23 paragraph (1), Article 24 paragraph (1), Article 25 paragraph (1) and (3), Article 26, Article 27, Article 28 paragraph (1), (2), and (3), Article 29, Article 30, Article 31, Article 33 paragraph (4), (6), (7), (8), and (9), Article 34, Article 35 paragraph (4) and (5), Article 36 paragraph (1), (5), and (8) of this Financial Services Authority Regulation, administrative sanctions in the form of written warnings are imposed.

(2) Written warning sanctions as referred to in paragraph (1) are given by the Financial Services Authority (OJK) for a maximum of 3 (three) consecutive times, with each validity period being 2 (two) months. (3) In the event that before the end of the sanction period as referred to in paragraph (2), the Company has complied with the regulations as referred to in paragraph (1), the Financial Services Authority (OJK) revokes the written warning sanction. (4) The Financial Services Authority (OJK) informs the Ministry of State-Owned Enterprises regarding each imposition of written warning sanctions.

CHAPTER VI
TRANSITIONAL PROVISIONS

Article 38
Regulations regarding the obligation to fulfill competence and propriety assessments for members of the Board of Directors, members of the Board of Commissioners, and/or members of the Supervisory Board as referred to in Article 4 are effective in the event of changes to the composition of members of the Board of Directors, members of the Board of Commissioners, and/or members of the Supervisory Board.

CHAPTER VII
CLOSING PROVISIONS

Article 39
This Financial Services Authority Regulation comes into force on the date of enactment.

This copy is consistent with the original
Director of Law 1
Legal Department signed
Yuliana

To ensure that everyone knows it, ordering the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia. Established in Jakarta on May 27, 2019 CHAIRMAN OF THE COMMISSIONERS BOARD FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed WIMBOH SANTOSO

Enacted in Jakarta on June 12, 2019
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2019 NUMBER 107

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 16 /POJK.05/2019
ON
SUPERVISION OF PT PERMODALAN NASIONAL MADANI (PERSERO)

I. GENERAL
Micro, Small, and Medium Enterprises (MSMEs) including cooperatives have proven capable of expanding job opportunities, contributing to the economy for the broader community, and playing an important role in the process of income distribution to support economic growth in realizing national stability. Recognizing the important role of MSMEs, the government established and assigned special tasks to the Company to conduct the development and empowerment of the people's economy through capital assistance, management, and other activities related to the development of cooperatives, small, and medium enterprises. Business assistance implemented by the Company is primarily targeted at individuals categorized as economically active poor, with the main target being underprivileged female groups who have business potential but are constrained by access to financing to start and/or develop businesses so as to improve family living standards.

Business development for individuals categorized as economically active poor through direct financing programs accompanied by guidance to develop businesses is a financial service as part of national economic policy prioritizing weak economic entrepreneurs to become independent. This places the Company as a financial institution with financing business activities and special tasks not given to conventional financial industry industries such as banking, capital markets, or financing companies.

The financial services provided by the Company are increasingly developed and distributed throughout the territory of Indonesia. To optimize the task of MSME development, the Company acts as a bridge for conventional financial institutions through the expansion of funding sources via bank loans and the issuance of bonds in the capital market.

The Company's business development and diversification of funding sources are feared to have side effects on the stability of the financial system, directly impacting the interests of weak economic entrepreneurs and individuals categorized as economically active poor. Therefore, supervision of the Company's business activities is deemed very urgent. Based on the authority in Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253) and to implement state administrative tasks, the Financial Services Authority deems it necessary to create appropriate policies to supervise the Company in the form of a Financial Services Authority Regulation concerning the supervision of PT Permodalan Nasional Madani (Persero).

This Financial Services Authority Regulation serves as the legal basis for the supervision of the Company and guidelines for the implementation of the Company's business activities as a financial institution regulated and supervised by the Financial Services Authority. Regulations contained in this Financial Services Authority Regulation concerning the supervision of PT Permodalan Nasional Madani (Persero) include regulations on institutional administrative order, guidelines for business operations, examination procedures, and sanction provisions.

II. ARTICLE BY ARTICLE
Article 1
Sufficiently clear.

Article 2
Paragraph (1)
Sufficiently clear.
Paragraph (2)
What is meant by "offices other than the head office" are offices that function to assist the Company's operations which have a limited scope administratively according to the needs and complexity of the Company's business activities. Offices other than the head office can be branch offices or unit offices.

Article 3
Sufficiently clear.

Article 4
Sufficiently clear.

Article 5
Sufficiently clear.

Article 6
Paragraph (1)
Letter a
Sufficiently clear.
Letter b
Management Services are non-financial business activities aimed at improving the performance and added value of the MSME sector and microfinance institutions or Sharia microfinance institutions that are partners of the Company. Management Services include training services, consulting services, assistance services, MSME and microfinance institution or Sharia microfinance institution establishment services, and development and management of community economic activities related to the Company's corporate social responsibility (CSR) programs.

Letter c
What is meant by "other business activities" includes business activities carried out in implementing, supporting government policies and programs in the field of economy and national development in general, and in the field of empowerment and development of cooperatives, MSMEs applying the principles of limited liability companies, in particular. Paragraph (2) Sufficiently clear.

Article 7
Paragraph (1)
Sufficiently clear.
Paragraph (2)
What is meant by "put in writing" is agreements in printed form or agreements in digital form using information technology that meet the provisions of applicable legislation. Paragraph (3) Sufficiently clear. Paragraph (4) What is meant by Financial Services Authority Regulation concerning consumer protection in the financial services sector is Financial Services Authority Regulation Number 1/POJK.07/2013 concerning Consumer Protection in the Financial Services Sector and its amendments.

Article 8
Sufficiently clear.

Article 9
Paragraph (1)
Letter a
State capital participation includes participation from the parent Company (holding state-owned business entity).
Letter b
Sufficiently clear.
Letter c
Sufficiently clear.
Letter d
Sufficiently clear.
Letter e
Sufficiently clear.
Letter f
Sufficiently clear.
Letter g
Sufficiently clear.
Paragraph (2)
Sufficiently clear.

Article 10
Paragraph (1)
Sufficiently clear.
Paragraph (2)
The calculation of the financing receivables to total assets ratio (financing to asset ratio) is calculated from the comparison of the value of outstanding financing disbursed based on position balances with the Company's total assets. Paragraph (3) The calculation of the micro financing ratio to total financing (micro financing ratio) is calculated from the comparison of the value of new financing to micro business debtors compared to total new financing in the relevant year.

Article 11
Sufficiently clear.

Article 12
Paragraph (1)
Sufficiently clear.
Paragraph (2)
The current ratio calculation used is the current assets and current liabilities owned by the Company excluding the parent Company as a holding.

Article 13
Sufficiently clear.

Article 14
Paragraph (1)
Sufficiently clear.
Paragraph (2)
What is meant by "installments" is the total principal of financing and interest or profit-sharing or total principal of financing and other costs. Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear.

Article 15
Sufficiently clear.

Article 16
Paragraph (1)
Good corporate governance principles include:
a. transparency, namely openness in implementing decision-making processes and openness in disclosing material and relevant information regarding the Company; b. accountability, namely clarity of functions, implementation, and responsibility of organs so that Company management is carried out effectively;
c. responsibility, namely consistency in Company management with applicable legislation and healthy corporate principles;
d. independence, namely a state where the Company is managed professionally without conflicts of interest and influence/pressure from any party that is not in accordance with applicable legislation and healthy corporate principles; and e. fairness, namely justice and equality in fulfilling the rights of stakeholders arising from agreements and applicable legislation. Paragraph (2) Sufficiently clear. Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear. Paragraph (5) Sufficiently clear.

Article 17
Sufficiently clear.

Article 18
Sufficiently clear.

Article 19
Sufficiently clear.

Article 20
Sufficiently clear.

Article 21
Sufficiently clear.

Article 22
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
Sufficiently clear.
Letter d
Sufficiently clear.
Letter e
Sufficiently clear.
Letter f
Sufficiently clear.
Letter g
Sufficiently clear.
Letter h
Sufficiently clear.
Letter i
Sufficiently clear.
Letter j
Sufficiently clear.
Letter k
Sufficiently clear.
Letter l
Sufficiently clear.
Letter m
What is meant by "other information" includes special assignments from the Government.
Paragraph (3)
Plans for capital additions and/or financing with significant values are very likely to cause the financing receivables to total assets ratio (financing to asset ratio) not to be met when additional capital and/or financing occurs. The business plan needs to present among other things an estimate of when this will happen and how and when the Company will return to fulfilling the obligation to maintain the financing receivables to total assets ratio (financing to asset ratio). Paragraph (4) Sufficiently clear. Paragraph (5) Sufficiently clear.

Article 23
Sufficiently clear.

Article 24
Sufficiently clear.

Article 25
Sufficiently clear.

Article 26
Sufficiently clear.

Article 27
Sufficiently clear.

Article 28
Sufficiently clear.

Article 29
Sufficiently clear.

Article 30
Sufficiently clear.

Article 31
Sufficiently clear.

Article 32
Sufficiently clear.

Article 33
Sufficiently clear.

Article 34
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
Sufficiently clear.
Letter d
Sufficiently clear.
Letter e
What is meant by "raising retail funds from the public" is raising funds from the public in the form of deposits.

Article 35
Sufficiently clear.

Article 36
Sufficiently clear.

Article 37
Sufficiently clear.

Article 38
Sufficiently clear.

Article 39
Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6357