Financial Services Authority Regulation Number 29/POJK.05/2014 Concerning the Conduct of Financing Company Business

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 29/POJK.05/2014
CONCERNING
THE CONDUCT OF FINANCING COMPANY BUSINESS
BY THE GRACE OF GOD THE ALMIGHTY
THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that in order to support the development of dynamic financing companies and realize a strong, contributory, inclusive financing company industry, and contribute to maintaining a stable and sustainable financial system, it is necessary to improve the provisions regarding the conduct of business by Financing Companies; b. that based on the considerations as referred to in letter a, it is necessary to establish a Financial Services Authority Regulation concerning the Conduct of Financing Company Business;

Recalling:
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);

DECIDING:

To establish:
FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE CONDUCT OF FINANCING COMPANY BUSINESS.

CHAPTER I
GENERAL PROVISIONS

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

1. Financing Company is a business entity that conducts financing activities for the procurement of goods and/or services.
2. Investment Financing is financing for the procurement of capital goods and services required for business/investment activities, rehabilitation, modernization, expansion, or relocation of business/investment premises, provided to the debtor for a period of more than 2 (two) years.
3. Working Capital Financing is financing to meet expenditure needs that are consumed within one cycle of the debtor's business activity and is financing with a maximum term of 2 (two) years.
4. Multi-purpose Financing is financing for the procurement of goods and/or services required by the debtor for use/consumption and not for business needs (productive activities) for an agreed period.
5. Finance Lease is a financing activity in the form of the provision of goods by the Financing Company for use by the debtor for a certain period, which substantially transfers the benefits and risks of the financed goods.
6. Sale and Leaseback is a financing activity in the form of the sale of a good by the debtor to the Financing Company which is accompanied by leasing the good back to the same debtor.
7. Factoring is a financing activity in the form of the purchase of a company's business receivables along with the administration of those receivables.
8. Factoring With Recourse is a Factoring transaction where the seller of receivables bears the risk of non-collection of part or all of the receivables sold to the Financing Company.
9. Factoring Without Recourse is a Factoring transaction where the Financing Company bears the risk of non-collection of all receivables sold to the Financing Company.
10. Installment Purchase is a financing activity in the form of the procurement of goods and/or services purchased by the debtor from the provider of goods or services with installment payments.
11. Project Financing is financing provided in the framework of implementing a project that requires the procurement of several types of capital goods and/or services related to the implementation of the project procurement.
12. Infrastructure Financing is financing in the form of the procurement of goods and/or services for infrastructure development.
13. Business Capital Facility is Working Capital Financing that is paid directly by the Financing Company to the provider of goods and/or services.
14. Debtor is a business entity or individual who receives financing for the procurement of goods and/or services from the Financing Company.
15. Financial Health Level is the assessment result of the Financing Company's condition regarding capital, liquidity, assets, operational, and performance risks.
16. Paid-up Capital:
    a. for Financing Companies in the form of a limited liability company is paid-up capital; or b. for Financing Companies in the form of a cooperative is the principal savings and mandatory savings.
17. Equity:
    a. for Financing Companies in the form of a limited liability company is the sum of:
18. Paid-up Capital;
19. additional Paid-up Capital, consisting of:
    a) share premium/discount; b) equity issuance costs; and c) others in accordance with financial accounting standards principles;
20. difference in transaction value of restructuring entities under common control;
21. retained earnings/losses;
22. current year profit/loss;
23. treasury stock; and
24. other Equity components, consisting of:
    a) changes in revaluation surplus; b) exchange differences due to the translation of financial statements in foreign currency; c) gains and losses from the re-measurement of available-for-sale financial assets; d) the effective portion of gains and losses of hedging financial instruments in the context of cash flow hedging; and e) other equity components in accordance with financial accounting standards principles. b. for Financing Companies in the form of a cooperative must be equal to the sum of principal savings, mandatory savings, reserve funds, grants, and undistributed surplus.
25. Board of Directors:
    a. for Financing Companies in the form of a limited liability company is the board of directors as referred to in the law concerning limited liability companies; or b. for Financing Companies in the form of a cooperative is the management as referred to in the law concerning cooperatives.
26. Board of Commissioners:
    a. for Financing Companies in the form of a limited liability company is the board of commissioners as referred to in the law concerning limited liability companies; or b. for Financing Companies in the form of a cooperative is the supervisors as referred to in the law concerning cooperatives.
27. Maximum Limit for Financing Provision, hereinafter referred to as BMPP, is a specific limitation in the disbursement of financing permitted based on this Financial Services Authority Regulation.
28. Controller:
    a. for limited liability companies, is a legal entity, individual, and/or business group that:
29. holds shares of 25% (twenty-five percent) or more of the issued shares and has voting rights; or
30. holds shares of less than 25% (twenty-five percent) of the issued shares and has voting rights but can be proven to have controlled the company directly or indirectly.
    b. for other business entities is a party that directly or indirectly has the ability to determine the management, supervisors, or equivalents and/or influence the actions of the management, supervisors, or equivalents.
31. Financial Services Authority, hereinafter abbreviated as OJK, is an independent agency as referred to in the law concerning the Financial Services Authority.

CHAPTER II
BUSINESS ACTIVITIES

First Section
Types of Business Activities and Financing Methods

Article 2
(1) The business activities of Financing Companies include:
a. Investment Financing; b. Working Capital Financing;
c. Multi-purpose Financing; and/or
d. other financing business activities based on OJK approval.
(2) In addition to the business activities as referred to in paragraph (1), Financing Companies may conduct operating leases and/or fee-based activities as long as they do not contradict legislation in the financial services sector.

Article 3
Investment Financing activities as referred to in Article 2 paragraph (1) letter a and/or Working Capital Financing as referred to in Article 2 paragraph (1) letter b are directed at Debtors in the form of business entities or individuals:
a. who have productive businesses; and/or b. who have ideas for the development of productive businesses.

Article 4
(1) Investment Financing as referred to in Article 2 paragraph (1) letter a must be conducted by means of:
a. Finance Lease; b. Sale and Leaseback;
c. Factoring With Recourse;
d. Installment Purchase; e. Project Financing; f. Infrastructure Financing; and/or g. other financing after first obtaining approval from OJK.
(2) Working Capital Financing as referred to in Article 2 paragraph (1) letter b must be conducted by means of:
a. Sale and Leaseback; b. Factoring With Recourse;
c. Factoring Without Recourse;
d. Business Capital Facility; and/or e. other financing after first obtaining approval from OJK.
(3) Multi-purpose Financing as referred to in Article 2 paragraph (1) letter c must be conducted by means of:
a. Finance Lease; b. Installment Purchase; and/or
c. other financing after first obtaining approval from OJK.

Article 5
(1) Financing Companies that will conduct other financing business activities as referred to in Article 2 paragraph (1) letter d and other financing methods as referred to in Article 4 paragraph (1) letter g, paragraph (2) letter e, and paragraph (3) letter c, must have a Financial Health Level with a minimum healthy condition and are not currently subject to sanctions by OJK. (2) Financing Companies that will conduct other financing business activities and other financing methods as referred to in paragraph (1) must submit an application to OJK and must attach documents containing at least a description of:
a. the products to be marketed; b. business prospect analysis;
c. the mechanism or financing method to be conducted;
d. the rights and obligations of the parties; and e. examples of financing agreements to be used.
(3) OJK conducts an analysis of the documents as referred to in paragraph (2) and the feasibility of the other financing business submitted.
(4) OJK issues a letter of approval or rejection within a maximum of 30 (thirty) calendar days after the application is received completely and correctly.

Article 6
(1) Financing Companies that will conduct fee-based activities as referred to in Article 2 paragraph (2) must report to OJK by attaching at least:
a. the fee-based products to be marketed; b. the mechanism;
c. the rights and obligations of the parties;
d. cooperation agreements; and e. permits from the competent authority (if any).
(2) In the event that OJK has received the report completely as referred to in paragraph (1), OJK issues a letter recording fee-based activities in OJK administration within a maximum of 30 (thirty) calendar days after the report is received. (3) If within the period as referred to in paragraph (2), OJK does not issue a recording letter, the Financing Company may conduct fee-based activities as referred to in paragraph (1).

Article 7
Financing Companies must clearly state the business activities as referred to in Article 2 in their articles of association.

Second Section
Finance Lease

Article 8
(1) Finance Lease as referred to in Article 4 is conducted in the framework of the provision of goods by the Financing Company for use by the Debtor for a certain period, which substantially transfers the benefits and risks of the financed goods. (2) In the event that the Finance Lease agreement is still in effect, ownership of the transaction object goods of the Finance Lease remains with the Financing Company. (3) Financing Companies must ensure in the financing agreement that the Debtor is prohibited from sub-leasing the leased goods to other parties.

Article 9
During the Finance Lease period, Financing Companies must affix a plaque or label on the leased goods stating the name and address of the Financing Company and a statement that the goods are subject to a Finance Lease agreement.

Third Section
Factoring

Article 10
(1) Financing Companies are prohibited from conducting Factoring With Recourse transactions with other Financing Companies as the Debtor.
(2) Business receivables that can be transferred in Factoring are business receivables with a maturity date of a maximum of 10 (ten) years.

Fourth Section
Installment Purchase

Article 11
In the event of an Installment Purchase for the procurement of goods, ownership of the financing object in the agreement transfers from the provider of goods to the Debtor.

Fifth Section
Project Financing

Article 12
Investment Financing by means of Project Financing can be conducted using one or more financing methods as referred to in Article 4 paragraph (1) letters a, b, c, and d.

Sixth Section
Infrastructure Financing

Article 13
(1) Financing Companies conducting Investment Financing activities by means of Infrastructure Financing must meet the following requirements:
a. have a Financial Health Level with a minimum healthy condition; b. have Equity greater than Rp1,000,000,000,000.00 (one trillion rupiah); and
c. have standard operating procedures related to Infrastructure Financing.
(2) Investment Financing by means of Infrastructure Financing can be conducted using one or more financing methods as referred to in Article 4 paragraph (1) letters a, b, c, and d.

Seventh Section
Business Capital Facility

Article 14
Business Capital Facility as referred to in Article 4 paragraph (2) letter d must be conducted by providing financing based on proof of purchase invoices for goods or use of services received by the Debtor from the provider of goods or services.

CHAPTER III
FINANCING AGREEMENTS

Article 15
(1) All financing agreements between the Financing Company and the Debtor must be made in writing.
(2) Financing agreements between the Financing Company and the Debtor must meet the provisions for drafting agreements as regulated in the Financial Services Authority Regulation concerning consumer protection in the financial services sector.

Article 16
(1) Financing agreements as referred to in Article 15 must contain at least:
a. the type of business activity and financing method; b. the number and date of the agreement;
c. the identity of the parties;
d. the goods or services financed; e. the value of the goods or services financed; f. the amount of receivables and financing installments; g. the term and interest rate of the financing; h. the collateral object (if any);
i. details of costs related to the financing provided, containing at least:

1. survey costs;
2. insurance/guarantee/fiduciary costs;
3. commission costs; and
4. notary costs;
   j. clear clauses on fiduciary encumbrance, if there is fiduciary collateral encumbrance in the financing activity; k. the mechanism in the event of a dispute and the choice of dispute resolution venue;
   l. provisions regarding the rights and obligations of the parties; and
   m. provisions regarding penalties.
   (2) In the event that the Financing Company conducts financing for the procurement of motor vehicles by means of Installment Purchase, the financing agreement must state the down payment value. (3) In the event that the Financing Company conducts financing by means of Finance Lease, the financing agreement must state the security deposit value.

CHAPTER IV
DOWN PAYMENT FOR MOTOR VEHICLE FINANCING

Article 17
(1) Financing Companies conducting financing by means of Installment Purchase for motor vehicles must apply down payment provisions to the Debtor as follows:
a. for two-wheeled or three-wheeled motor vehicles, at least 20% (twenty percent) of the selling price of the respective vehicle; b. for four-wheeled or more motor vehicles used for Investment Financing (productive purpose), at least 20% (twenty percent) of the selling price of the respective vehicle; or
c. for four-wheeled or more motor vehicles used for Multi-purpose Financing (non-productive purpose), at least 25% (twenty-five percent) of the selling price of the respective vehicle.
(2) Four-wheeled or more motor vehicles used for productive purposes as referred to in paragraph (1) letter b must meet at least the following criteria:
a. are passenger or cargo transport vehicles that have permits issued by the competent authority to conduct specific business activities; or b. are submitted by individuals or legal entities that have specific business permits from the competent authority and are used for business activities relevant to the business permits held. (3) Provisions regarding the amount of down payment to the Debtor as referred to in paragraph (1) may be reviewed and changes are regulated by an OJK Circular.

CHAPTER V
FINANCING RISK MITIGATION

Article 18
(1) Financing Companies must conduct financing risk mitigation.
(2) Financing risk mitigation as referred to in paragraph (1) can be conducted by means of:
a. transferring financing risk through credit insurance or credit guarantee mechanisms; and/or b. transferring risk over financed goods or goods serving as collateral from Financing activities through insurance mechanisms; and/or
c. imposing fiduciary collateral on financed goods or goods serving as collateral from financing activities.

Article 19
(1) Financing Companies conducting risk transfer as referred to in Article 18 paragraph (2) letter a must use insurance companies or guarantee institutions that meet the following provisions:
a. have obtained business licenses from OJK; and b. are not subject to sanctions restricting business activities or suspending business activities by OJK.
(2) The term of credit insurance or credit guarantee coverage as referred to in Article 18 paragraph (2) letter a must be at least equal to the financing term.

Article 20
(1) Financing Companies conducting risk transfer as referred to in Article 18 paragraph (2) letter b must use insurance companies that meet the following provisions:
a. have obtained business licenses from OJK; and b. are not subject to sanctions restricting business activities by OJK.
(2) The term of insurance coverage as referred to in Article 18 paragraph (2) letter b must be at least equal to the financing term.

Article 21
(1) Financing Companies conducting financing with fiduciary collateral encumbrance must register the fiduciary collateral at the fiduciary registration office, in accordance with the law governing fiduciary collateral. (2) The obligation to register fiduciary collateral as referred to in paragraph (1) also applies to Financing Companies conducting financing with fiduciary collateral encumbrance where the financing originates from channeling financing or joint financing.

Article 22
Financing Companies must register fiduciary collateral at the fiduciary registration office no later than 1 (one) month calculated from the date of the financing agreement.

Article 23
Financing Companies are prohibited from executing collateral goods if the fiduciary registration office has not issued a fiduciary collateral certificate and delivered it to the Financing Company.

Article 24
The execution of fiduciary collateral goods by Financing Companies must meet the provisions and requirements as regulated in the law concerning fiduciary collateral and have been agreed upon by the parties in the financing agreement.

CHAPTER VI
FINANCIAL HEALTH LEVEL

First Section
General

Article 25
(1) Financing Companies must at all times meet Financial Health Level requirements with a minimum healthy condition.
(2) The measurement of Financial Health Level ratios as referred to in paragraph (1) includes:
a. capital ratio; b. quality of financing receivables;
c. profitability; and
d. liquidity.
(3) Provisions regarding the method of measuring Financial Health Level as referred to in paragraph (2) are regulated in an OJK Circular.

Second Section
Capital Ratio

Article 26
(1) Financing Companies must meet a capital ratio of at least 10% (ten percent).
(2) The capital ratio as referred to in paragraph (1) is the ratio between adjusted capital and adjusted assets.
(3) Provisions regarding the size of the capital ratio as referred to in paragraph (1) may be reviewed and changes are regulated in an OJK Circular.
(4) Provisions regarding the method of calculating the ratio between adjusted capital and adjusted assets as referred to in paragraph (2) are regulated in an OJK Circular.

Third Section
Quality of Financing Receivables

Paragraph 1
Assessment of Financing Receivables Quality

Article 27
Financing Companies must assess, monitor, and take necessary steps regarding financing receivables so that the quality of financing receivables remains good.

Article 28
(1) The assessment of financing receivables quality as referred to in Article 27 is established as:
a. performing; b. special attention;
c. doubtful;
d. questionable; or e. non-performing.
(2) The assessment of financing receivables quality as referred to in paragraph (1) is established based on the timeliness of principal and/or interest payments. (3) The assessment of financing receivables as referred to in paragraph (2) is categorized as follows:
a. performing if there is no delay or there is a delay in principal and/or interest payment of up to 30 (thirty) calendar days; b. special attention if there is a delay in principal and/or interest payment that has exceeded 30 (thirty) calendar days up to 90 (ninety) calendar days;
c. doubtful if there is a delay in principal and/or interest payment that has exceeded 90 (ninety) calendar days up to 120 (one hundred twenty) calendar days;
d. questionable if there is a delay in principal and/or interest payment that has exceeded 120 (one hundred twenty) calendar days up to 180 (one hundred eighty) calendar days; or e. non-performing if there is a delay in principal and/or interest payment that has exceeded 180 (one hundred eighty) calendar days.

c. substandard if there is a delay in the payment of principal and/or interest that has exceeded 90 (ninety) calendar days up to 120 (one hundred twenty) calendar days;
d. doubtful if there is a delay in the payment of principal and/or interest that has exceeded 120 (one hundred twenty) calendar days up to 180 (one hundred eighty) calendar days; or e. impaired if there is a delay in the payment of principal and/or interest that has exceeded 180 (one hundred eighty) calendar days.

Article 29
(1) In addition to the factor of the timeliness of the payment of principal and/or interest as referred to in Article 28 paragraph (2), the assessment of the quality of financing receivables for Investment Financing and Working Capital Financing with a financing value at the time of signing the agreement of IDR 3,000,000,000.00 (three billion rupiah) or more, may also be determined by considering the following factors:
a. the Debtor's ability to pay; b. the Debtor's financial performance; and
c. the Debtor's business prospects.

(2) The assessment of the Debtor's ability to pay as referred to in paragraph (1) letter a includes an assessment of the following components:
a. the availability and accuracy of the Debtor's financial information; b. the completeness of financing documentation;
c. compliance with the financing agreement;
d. the suitability of fund usage; and e. the fairness of the source of payment obligations.

(3) The assessment of the Debtor's financial performance as referred to in paragraph (1) letter b includes an assessment of the following components:
a. profit acquisition; b. capital structure;
c. cash flow; and
d. sensitivity to market risk.

(4) The assessment of the Debtor's business prospects as referred to in paragraph (1) letter c includes an assessment of the following components:
a. business growth potential; b. market conditions and the Debtor's position in competition;
c. management quality and labor issues;
d. support from the group or affiliates; and e. efforts made by the Debtor to maintain the environment.

(5) In the event of a difference between the financing receivables quality assessment by the Financing Company and the OJK, the financing receivables quality established by the OJK shall apply.

(6) Financing Companies are required to adjust the financing receivables quality with the financing receivables quality assessment established by the OJK as referred to in paragraph (5) in reports submitted to the OJK.

(7) Guidelines for the assessment of financing receivables quality as referred to in paragraph (1), paragraph (2), paragraph (3), and paragraph (4) are further regulated in an OJK Circular Letter.

Paragraph 2
Quality of Financing Receivables for Debtors with More Than One Financing Agreement

Article 30
(1) Financing Companies are required to establish the same financing receivables quality for 1 (one) Debtor with more than 1 (one) financing.

(2) Financing Companies may establish different financing receivables quality for more than 1 (one) financing owned by 1 (one) Debtor as referred to in paragraph (1), in the event:
a. the financing receivables with the lowest quality have been written off; and/or b. the value of financing receivables is up to IDR 3,000,000,000.00 (three billion rupiah).

(3) In the event of differences in quality in financing receivables as referred to in paragraph (1), the financing receivables quality that must be used is the lowest financing receivables quality.

Paragraph 3
Problematic Financing Receivables

Article 31
(1) Financing Companies are required to maintain the quality of financing receivables.

(2) Financing receivables categorized as problematic financing receivables (non-performing financing) consist of financing receivables with substandard, doubtful, and impaired quality.

(3) The value of financing receivables with the category of problematic financing receivables (non-performing financing) as referred to in paragraph (2), after being reduced by provisions for loan loss reserves, must be at most 5% (five percent) of total financing receivables.

(4) Regulations regarding the size of the ratio of problematic financing receivables as referred to in paragraph (3) may be reviewed and changes are regulated in an OJK Circular Letter.

Paragraph 4
Provisions for Loan Loss Reserves

Article 32
(1) Financing Companies are required to calculate provisions for loan loss reserves.

(2) The calculation of provisions for loan loss reserves as referred to in paragraph (1) is determined to be at least:
a. 1% (one percent) of the balance of financing receivables with standard quality after being reduced by collateral; b. 5% (five percent) of the balance of financing receivables with special attention quality after being reduced by collateral;
c. 15% (fifteen percent) of the balance of financing receivables with substandard quality after being reduced by collateral;
d. 50% (fifty percent) of the balance of financing receivables with doubtful quality after being reduced by collateral; e. 100% (one hundred percent) of the balance of financing receivables with impaired quality after being reduced by collateral.

(3) Financing Companies are required to form provisions for loan loss reserves at the lowest level in accordance with the provisions as referred to in paragraph (2) in monthly reports.

(4) The value of collateral as referred to in paragraph (2) that can be calculated as a reduction of the balance of financing receivables is determined to be at most equal to the balance of the receivables.

(5) The calculation of provisions for loan loss reserves as referred to in paragraph (1) is conducted by Financing Companies in the context of calculating the capital adequacy ratio, gearing ratio, Equity to Paid-up Capital ratio, BMPP, problematic financing receivables ratio, and the ratio of financing receivables to total assets.

(6) Regulations regarding the type, calculation method, and return of collateral, as well as the calculation method for provisions, are regulated in an OJK Circular Letter.

Paragraph 5
Provisions for Impairment Losses on Financing Receivables

Article 33
(1) Financing Companies are required to form provisions for impairment losses on financing receivables in accordance with applicable financial accounting standards.

(2) The formation of provisions for impairment losses on financing receivables as referred to in paragraph (1) is conducted in the preparation of financial reports that have been audited by a public accounting firm.

Part Four
Rentability

Article 34
(1) Rentability as referred to in Article 25 paragraph (2) letter c is the ability of the Financing Company to generate profit.

(2) The assessment of the rentability factor as referred to in paragraph (1) includes an assessment of asset performance and operational efficiency.

(3) Regulations regarding the method of assessment of the rentability factor are regulated in an OJK Circular Letter.

Part Five
Liquidity

Article 35
(1) The assessment of the liquidity factor as referred to in Article 25 paragraph (2) letter d is an assessment of the level of compatibility between current assets and current liabilities.

(2) Regulations regarding the method of liquidity assessment are regulated in an OJK Circular Letter.

CHAPTER VII
RATIO OF FINANCING RECEIVABLES TO TOTAL ASSETS

Article 36
(1) Financing Companies are required to have a net financing receivables to total assets ratio (financing to asset ratio) of at least 40% (forty percent).

(2) Net financing receivables as referred to in paragraph (1) must be obtained by subtracting gross financing receivables with unearned income and provisions for loan loss reserves.

(3) Financing Companies are required to comply with the provisions as referred to in paragraph (1) within a maximum period of 3 (three) years since obtaining the business license.

(4) In the event that a Financing Company increases Paid-up Capital in the context of fulfilling the capital adequacy ratio, gearing ratio, and the ratio of Equity to Paid-up Capital, the Financing Company is exempted from complying with the provisions as referred to in paragraph (1) for a maximum period of 1 (one) year since the date the increase in Paid-up Capital is recorded by the competent authority.

CHAPTER VIII
EQUITY

Article 37
(1) Financing Companies in the form of a legal entity:
a. limited liability companies are required to have Equity of at least IDR 100,000,000,000.00 (one hundred billion rupiah); or b. cooperatives are required to have Equity of at least IDR 50,000,000,000.00 (fifty billion rupiah).

(2) Limited liability company Financing Companies that have obtained a business license before this OJK Regulation was established and have Equity below the provisions as referred to in paragraph (1) letter a, are required to have Equity with the following stages:
a. at least IDR 40,000,000,000.00 (forty billion) by December 31, 2016 at the latest; and b. at least IDR 100,000,000,000.00 (one hundred billion) by December 31, 2019 at the latest.

(3) Cooperative legal entity Financing Companies that have obtained a business license before this OJK Regulation was established and have Equity below the provisions as referred to in paragraph (1) letter b, are required to have Equity with the following stages:
a. at least IDR 30,000,000,000.00 (thirty billion) by December 31, 2016 at the latest; and b. at least IDR 50,000,000,000.00 (fifty billion) by December 31, 2019 at the latest.

Article 38
Financing Companies are required to have an Equity to Paid-up Capital ratio of at least 50% (fifty percent).

CHAPTER IX
MAXIMUM LIMIT ON THE PROVISION OF FINANCING

Article 39
(1) Financing Companies are required to comply with the BMPP provisions to all related parties at most 50% (fifty percent) of the Financing Company's Equity.

(2) Related parties as referred to in paragraph (1) include:
a. individuals or business entities that are Controllers of the Financing Company; b. business entities where the Financing Company acts as a Controller;
c. individuals or business entities that act as Controllers of business entities as referred to in letter b;
d. business entities whose control is carried out by:

1. individuals and/or business entities as referred to in letter a;
2. individuals and/or business entities as referred to in letter c;
   e. the Board of Commissioners or Board of Directors of the Financing Company; f. parties having family relationships up to the second degree, both horizontally and vertically:
3. from individuals who are Controllers of the Financing Company as referred to in letter a;
4. from the Board of Commissioners or Board of Directors in the Financing Company as referred to in letter e.
   g. the board of commissioners or board of directors in business entities as referred to in letter a, letter b, letter c, and/or letter d; h. business entities whose board of commissioners or board of directors are:
5. the Board of Commissioners or Board of Directors in the Financing Company;
6. the board of commissioners or board of directors in business entities as referred to in letter a, letter b, letter c, and/or letter d;
   i. business entities where:
7. the Board of Commissioners or Board of Directors of the Financing Company as referred to in letter e acts as a Controller;
8. the board of commissioners or board of directors of the parties as referred to in letter a, letter b, letter c, and/or letter d, act as Controllers; and
   j. business entities that have financial interdependence with the Financing Company and/or parties as referred to in letter a, letter b, letter c, letter d, letter e, letter f, letter g, letter h, and/or letter i.

(3) Financing Companies are required to have and manage a detailed list of related parties as referred to in paragraph (2).

Article 40
(1) Financing Companies are required to comply with the BMPP provisions to 1 (one) Debtor who is not a related party as referred to in Article 39 paragraph (2) set at most 20% (twenty percent) of the Financing Company's Equity.

(2) Financing Companies are required to comply with the BMPP provisions to 1 (one) group of Debtors who are not related parties as referred to in Article 39 paragraph (2) set at most 50% (fifty percent) of the Financing Company's Equity.

(3) Debtors are classified as members of a group of Debtors as referred to in paragraph (2) if the Debtors have a control relationship with other Debtors through ownership, management, and/or financial relationships, including:
a. the Debtor is a Controller of other Debtors; b. 1 (one) party is a Controller of several Debtors (common ownership);
c. the Debtor has financial interdependence with other Debtors;
d. the Debtor issues a guarantee to take over and/or pay off part or all of the obligations of other Debtors in the event that the other Debtors fail to meet their obligations (default) to the Financing Company; and/or e. the board of commissioners and/or board of directors of the Debtor become the board of commissioners and/or board of directors in other Debtors.

Article 41
The BMPP provisions as referred to in Article 39 paragraph (1), Article 40 paragraph (1), and Article 40 paragraph (2) are exempted for financing for the procurement of goods and/or services in the context of government programs.

CHAPTER X
FINANCING COOPERATION

Article 42
(1) In carrying out their business, Financing Companies may cooperate with other parties through channeling financing or joint financing and are conducted in accordance with applicable regulations.

(2) Other parties as referred to in paragraph (1) include:
a. banks; b. secondary housing financing companies;
c. microfinance institutions; and/or
d. Financing Companies.

(3) In channeling financing as referred to in paragraph (1), the risks arising from this activity lie with the party that owns the funds.

(4) In channeling financing, the party receiving funds only acts as a manager and receives remuneration or fees from the management of such funds.

(5) In joint financing as referred to in paragraph (1), the source of funds for this financing must come from the Financing Company and other parties.

(6) The risks arising from joint financing as referred to in paragraph (1) become the burden of each party proportionally according to the amount of funds disbursed.

CHAPTER XI
FINANCING

Article 43
Financing Company funding sources may come from:
a. loans from banks, non-bank financial industries, and/or other business entities; b. the issuance of bonds;
c. the issuance of medium-term notes;
d. subordinated loans; e. the addition of Paid-up Capital including through public stock offerings; and/or f. asset securitization.

Article 44
The total amount of loans from other business entities as referred to in Article 43 letter a must meet the minimum provisions of IDR 1,000,000,000.00 (one billion rupiah) for each creditor with a repayment period of at least 1 (one) year.

Article 45
Subordinated loans received by Financing Companies as referred to in Article 43 letter d must meet the following provisions:
a. with a minimum term of 5 (five) years; b. in the event of liquidation, the claim rights apply last among all existing loans; and
c. stipulated in the form of a notarial agreement between the Financing Company and the lender.

Article 46
(1) Financing Companies are required to comply with the maximum gearing ratio of 10 (ten) times.

(2) The gearing ratio as referred to in paragraph (1) is the ratio between the total amount of loans and the difference between the sum of Equity and subordinated loans with investments.

(3) Subordinated loans that can be calculated as the denominator in the calculation of the gearing ratio as referred to in paragraph (2) are at most 50% (fifty percent) of Paid-up Capital.

(4) Regulations regarding the size of the gearing ratio as referred to in paragraph (1) may be reviewed and changes are regulated in an OJK Circular Letter.

Article 47
(1) Financing Companies that receive loans in foreign currency are required to conduct full hedging.

(2) Full hedging as referred to in paragraph (1) must be implemented for the loan principal, loan interest rates, and/or payment terms.

Article 48
Financing Companies that will receive loans in foreign currency must meet the Financial Health Status with a minimum healthy condition.

CHAPTER XII
INVESTMENTS

Article 49
(1) Financing Companies may only conduct direct investments in:
a. companies in the financial services sector in Indonesia; and b. companies related to the activities of the Financing Company.

(2) The total amount of direct investments by Financing Companies as referred to in paragraph (1) is at most 20% (twenty percent) of the Financing Company's Equity.

(3) The total amount of direct investments by Financing Companies in entities within 1 (one) group is at most 10% (ten percent) of the Financing Company's Equity.

(4) Financing Companies are required to comply with the provisions regarding the amount of direct investments as referred to in paragraph (1), paragraph (2), and paragraph (3) at the time of making the investment.

(5) The provisions as referred to in paragraph (2) and paragraph (3) are exempted for Financing Companies that conduct separation in the context of establishing Financing Companies whose entire business activities are conducted based on Sharia principles.

CHAPTER XIII
CERTIFICATION

Article 50
(1) Employees of Financing Companies holding managerial positions from the level of branch head up to one level below the Board of Directors are required to have a basic level certificate in financing from an institution designated by the association by submitting notification to the OJK and accompanied by reasons for appointment.

(2) The Board of Directors of Financing Companies are required to have expertise certificates in financing from an institution designated by the association by submitting notification to the OJK and accompanied by reasons for appointment.

(3) The Board of Commissioners of Financing Companies are required to have a basic level certificate in financing from an institution designated by the association by submitting notification to the OJK and accompanied by reasons for appointment.

(4) The Board of Directors and officials 1 (one) level below the Board of Directors who oversee the risk management function are required to have expertise certificates in risk management from an institution designated by the association by submitting notification to the OJK and accompanied by reasons for appointment.

(5) Employees and/or outsourced personnel of Financing Companies handling the collection field are required to have professional certificates in collection from an institution designated by the association by submitting notification to the OJK and accompanied by reasons for appointment.

CHAPTER XIV
PROHIBITIONS

Article 51
Financing Companies are prohibited from:
a. collecting funds directly from the public in the form of checking accounts, savings, and/or other forms equivalent thereto; b. providing guarantees in any form for the fulfillment of obligations of other parties;
c. issuing promissory notes, except as collateral for debts to banks that are their creditors;
d. taking actions that cause or force other financial institutions under the supervision of the OJK to violate applicable regulations; and/or e. taking actions that cause or force other financial institutions under the supervision of the OJK to avoid applicable regulations.

Article 52
(1) In carrying out business activities as referred to in Article 2 paragraph (1), Financing Companies are prohibited from providing financing using cash funds to Debtors.

(2) In disbursing financing, Financing Companies are prohibited from purchasing goods from Debtors or prospective Debtors except through Sale and Leaseback methods.

Article 53
Financing Companies are prohibited from using false information in carrying out their business activities that can harm the interests of Debtors, creditors, and stakeholders including the OJK.

CHAPTER XV
SUBMISSION OF PERIODIC REPORTS

Article 54
(1) Financing Companies are required to submit periodic reports to the OJK, namely:
a. monthly reports; and b. annual financial reports that have been audited by public accountants.

(2) Regulations regarding monthly reports as referred to in paragraph (1) are regulated in an OJK Regulation regarding monthly reports.

Article 55
(1) Financing Companies are required to submit annual financial reports that have been audited by public accountants as referred to in Article 54 paragraph (1) letter b to the OJK by December 31 of the following year, at the latest 4 (four) months after the last fiscal year.

(2) Financing Companies are required to submit annual financial reports that have been audited by public accountants as referred to in Article 54 paragraph (1) completely and correctly in both hard copy and soft copy forms.

(3) Annual financial reports that have been audited as referred to in Article 54 paragraph (1) must be prepared based on applicable financial accounting standards in Indonesia.

(4) Annual financial reports as referred to in Article 54 paragraph (1) must include calculations of matters specifically regulated in this OJK Regulation.

(5) Annual financial reports that have been audited by public accountants as referred to in Article 54 paragraph (1) must be prepared in Indonesian Rupiah.

(6) The fiscal year as referred to in paragraph (1) must be based on the calendar year.

(7) Public accountants as referred to in paragraph (1) must be registered with the OJK.

(8) In the event that a Financing Company obtains a business license less than 6 (six) months until the end of the calendar year, the obligation to submit annual financial reports as referred to in paragraph (1) takes effect in the following calendar year.

Article 56
In the event that the deadline for submitting annual financial reports as referred to in Article 55 paragraph (1) falls on a holiday, the submission deadline is the next working day.

Article 57

Article 57
(1) Financing Companies are required to announce their financial position reports and abbreviated comprehensive income statements no later than 4 (four) months after the end of the fiscal year in at least 1 (one) daily newspaper in Indonesia with national circulation. (2) Financing Companies are required to report the implementation of the announcement referred to in paragraph (1) in writing to the OJK no later than 20 (twenty) calendar days after the implementation of the announcement, accompanied by proof of announcement. (3) In the event that the deadline for submitting the announcement implementation report referred to in paragraph (2) falls on a holiday, the deadline for submitting the report is the first working day following it.

CHAPTER XVI
INFORMATION SYSTEM AND TECHNOLOGY

Article 58
(1) In order to support the conduct of healthy business, Financing Companies are required to have integrated information and technology systems.
(2) The obligations as referred to in paragraph (1) apply to Financing Companies that have more than 5 (five) branch offices.

CHAPTER XVII
FINANCING COMPANIES IN THE ELECTRICITY AND SHIPPING SECTORS

Article 59
(1) Financing Companies established specifically to conduct financing activities in the electricity sector may conduct business activities other than ... business activities as regulated in Article 2 of this OJK Regulation. (2) Other business activities as referred to in paragraph (1) are only conducted in order to support the fulfillment of national electricity needs. (3) Financing Companies as referred to in paragraph (1) are not required to meet the provisions regarding Article 26 paragraph (1), Article 36 paragraph (1), Article 46 paragraph (1).

Article 60
Financing Companies established specifically to conduct activities in the shipping sector are not required to meet the provisions of Article 49 paragraph (2) and paragraph (3).

CHAPTER XVIII
COMPLIANCE ENFORCEMENT

First Section
Notification

Article 61
(1) Financing Companies that do not meet the provisions as referred to in Article 6 paragraph (1), Article 7, Article 8 paragraph (3), Article 9, Article 15, Article 16, Article 17 paragraph (1), Article 18 paragraph (1), Article 19 paragraph (1), Article 20 paragraph (1), Article 39 paragraph (3), Article 47, Article 54 paragraph (1) letter b, Article 55 paragraph (1), Article 55 paragraph (2), Article 55 paragraph (3), Article 55 paragraph (4), Article 55 paragraph (5), Article 55 paragraph (6), Article 57 paragraph (1), and/or Article 57 paragraph (2) of this OJK Regulation shall be issued a notification letter. (2) Financing Companies are required to fulfill the provisions as referred to in paragraph (1) no later than 1 (one) month from the date of the notification letter.

Second Section
Compliance Plan

Article 62
(1) Financing Companies that do not meet the provisions as referred to in Article 25 paragraph (1), Article 26 paragraph (1), Article 27, Article 29 paragraph (6), Article 30 paragraph (1), Article 30 paragraph (3), Article 31 paragraph (1), Article 31 paragraph (3), Article 32 paragraph (1), Article 32 paragraph (3), Article 33 paragraph (1), Article 36 paragraph (1), Article 36 paragraph (3), Article 37 paragraph (1), Article 37 paragraph (2) letter a, Article 37 paragraph (3) letter a, Article 38, Article 39 paragraph (1), Article 40 paragraph (1), Article 40 paragraph (2), Article 46 paragraph (1), Article 50, and/or Article 58 paragraph (1) of this OJK Regulation are required to submit a compliance plan no later than 1 (one) month from the date of the determination of the violation by the OJK. (2) The compliance plan as referred to in paragraph (1) must at least contain plans to be carried out by the Financing Company for the fulfillment of the provisions, accompanied by a specific timeframe required to fulfill the provisions as referred to in paragraph (1). (3) The compliance plan as referred to in paragraph (1) contains among others:
a. asset and/or liability restructuring; b. increase in Paid-up Capital;
c. restriction on receiving new loans;
d. receipt of subordinated loans; e. transfer of part or all of the assets; f. restriction on profit distribution; g. restriction on activities causing violation of provisions; h. restriction on opening new branch offices; and/or
i. business entity merger.
(4) The compliance plan as referred to in paragraph (1) must be signed by all Directors and Commissioners.
(5) The compliance plan as referred to in paragraph (1) must first be approved by the General Meeting of Shareholders if the plan contains a plan for increasing Paid-up Capital or a business merger plan. (6) The compliance plan as referred to in paragraph (1) must obtain a statement of no objection from the OJK. (7) In the event that the compliance plan as referred to in paragraph (1) is assessed by the OJK as insufficient to address the problems, the Financing Company is required to improve the compliance plan. (8) The OJK provides a statement of no objection over the compliance plan submitted by the Financing Company by considering the conditions of the problems faced by the Financing Company no later than 14 (fourteen) days calculated from the date of receipt of the complete compliance plan. (9) If within the timeframe as referred to in paragraph (8), the OJK does not provide a statement of no objection or response, the Financing Company may implement the compliance plan as referred to in paragraph (1). (10) Financing Companies are required to implement the compliance plan as referred to in paragraph (1).

CHAPTER XIX
SANCTIONS

Article 63
(1) In the event that by the end of the notification letter timeframe as referred to in Article 61 paragraph (2), the Financing Company has not yet fulfilled the provisions as referred to in Article 61 paragraph (1), the Financing Company shall be subject to graduated administrative sanctions in the form of:
a. warning; b. suspension of business activities; and
c. revocation of business license.
(2) Companies that violate the provisions as referred to in paragraph (1) but the violation has been resolved, are still subject to the first warning sanction which ends automatically. (3) Warning sanctions as referred to in paragraph (1) letter a, may be issued in writing at most 3 (three) times consecutively with a validity period of each at most 2 (two) months. (4) In the event that before the end of the warning sanction timeframe as referred to in paragraph (3), the Financing Company has fulfilled the provisions as referred to in Article 61 paragraph (1), the OJK revokes the warning sanction. (5) In the event that the validity period of the third warning as referred to in paragraph (3) ends and the Financing Company still does not fulfill the provisions as referred to in Article 61 paragraph (1), the OJK imposes a suspension of business activities sanction. (6) Suspension of business activities sanctions are issued in writing and are valid from the date of determination for a period of at most 6 (six) months. (7) In the event that the validity period of the warning sanction and/or suspension of business activities sanction ends on a holiday, the warning sanction and/or suspension of business activities sanction are valid until the first working day following it. (8) Financing Companies subject to suspension of business activities sanctions as referred to in paragraph (5) are prohibited from conducting business activities. (9) In the event that before the end of the suspension of business activities timeframe as referred to in paragraph (6), the Financing Company has fulfilled the provisions as referred to in Article 61 paragraph (1), the OJK revokes the suspension of business activities sanction. (10) In the event that the business suspension sanction is still valid and the Financing Company continues to conduct financing business activities, the OJK may directly impose a license revocation sanction. (11) In the event that by the end of the suspension of business activities timeframe as referred to in paragraph (6), the Financing Company has not yet fulfilled the provisions as referred to in Article 61 paragraph (1), the OJK revokes the business license of the respective Financing Company. (12) The OJK may announce the suspension of business activities sanctions as referred to in paragraph (1) letter b and/or license revocation sanctions as referred to in paragraph (1) letter c to the public.

Article 64
(1) Financing Companies that violate the provisions as referred to in Article 62 paragraph (1), paragraph (7), or paragraph (10) of this OJK Regulation may be subject to administrative sanctions in the form of:
a. warning; b. suspension of business activities; and/or
c. revocation of business license.
(2) In addition to the sanctions as referred to in paragraph (1), the OJK may provide additional sanctions in the form of:
a. restriction on certain business activities; b. reduction of risk assessment results;
c. cancellation of approval; and/or
d. reassessment of competence and propriety.
(3) Companies that violate the provisions as referred to in paragraph (1) but the violation has been resolved, are still subject to the first warning sanction which ends automatically. (4) Warning sanctions as referred to in paragraph (1) letter a, may be issued in writing at most 3 (three) times consecutively with a validity period of each at most 2 (two) months. (5) In the event that before the end of the warning sanction timeframe as referred to in paragraph (4), the Financing Company has fulfilled the provisions as referred to in Article 62 paragraph (1), paragraph (7) or paragraph (10), the OJK revokes the warning sanction. (6) In the event that the validity period of the third warning as referred to in paragraph (4) ends and the Financing Company still does not fulfill the provisions as referred to in Article 62 paragraph (1), paragraph (7), or paragraph (10), the OJK imposes a suspension of business activities sanction. (7) In the event that the Financing Company commits a violation as referred to in Article 36 paragraph (1) or paragraph (3) and does not fulfill the provisions as referred to in Article 62 paragraph (1), paragraph (7), or paragraph (10) until the end of the third warning timeframe as referred to in paragraph (4), the respective Financing Company is subject to license revocation sanctions without prior suspension of business activities sanctions as referred to in paragraph (6). (8) Suspension of business activities sanctions are issued in writing and are valid from the date of determination for a period of at most 6 (six) months. (9) In the event that the validity period of the warning sanction and/or suspension of business activities sanction ends on a holiday, the warning sanction and/or suspension of business activities sanction are valid until the first working day following it. (10) Financing Companies subject to suspension of business activities sanctions as referred to in paragraph (6) are prohibited from conducting business activities. (11) In the event that before the end of the suspension of business activities timeframe as referred to in paragraph (8), the Financing Company has fulfilled the provisions as referred to in paragraph (1), the OJK revokes the suspension of business activities sanction. (12) In the event that the suspension of business activities sanction is still valid and the Financing Company continues to conduct financing business activities, the OJK may directly impose a license revocation sanction. (13) In the event that by the end of the suspension of business activities timeframe as referred to in paragraph (8), the Financing Company has not yet fulfilled the provisions as referred to in Article 62 paragraph (1), paragraph (7), or paragraph (10), the OJK revokes the business license of the respective Financing Company. (14) The OJK may announce the restriction on certain business activities sanctions as referred to in paragraph (2) letter a, suspension of business activities sanctions as
referred to in paragraph (1) letter b, and/or license revocation sanctions as referred to in paragraph (1) letter c to the public.

Article 65
(1) Financing Companies that violate the provisions as referred to in Article 4, Article 5 paragraph (2), Article 10 paragraph (1), Article 13 paragraph (1), Article 14, Article 21, Article 22, Article 23, Article 24, Article 37 paragraph (2) letter b, Article 37 paragraph (3) letter b, Article 44, Article 48, Article 49 paragraph (4), Article 51, Article 52, and/or Article 53 of this OJK Regulation are subject to graduated administrative sanctions in the form of:
a. warning; b. suspension of business activities; and
c. revocation of business license.
(2) Companies that violate the provisions as referred to in paragraph (1) but the violation has been resolved, are still subject to the first warning sanction which ends automatically. (3) Warning sanctions as referred to in paragraph (1) letter a, may be issued in writing at most 3 (three) times consecutively with a validity period of each at most 2 (two) months. (4) In the event that before the end of the warning sanction timeframe as referred to in paragraph (3), the Financing Company has fulfilled the provisions as referred to in paragraph (1), the OJK revokes the warning sanction. (5) In the event that the validity period of the third warning as referred to in paragraph (3) ends and the Financing Company still does not fulfill the provisions as referred to in paragraph (1), the OJK imposes a suspension of business activities sanction. (6) Suspension of business activities sanctions are issued in writing and are valid from the date of determination for a period of at most 6 (six) months. (7) In the event that the validity period of the warning sanction and/or suspension of business activities sanction ends on a holiday, the warning sanction and/or suspension of business activities sanction are valid until the first working day following it. (8) Financing Companies subject to suspension of business activities sanctions as referred to in paragraph (5) are prohibited from conducting business activities. (9) In the event that before the end of the suspension of business activities timeframe as referred to in paragraph (6), the Financing Company has fulfilled the provisions as referred to in paragraph (1), the OJK revokes the suspension of business activities sanction. (10) In the event that the suspension of business activities sanction is still valid and the Financing Company continues to conduct financing business activities, the OJK may directly impose a license revocation sanction. (11) In the event that by the end of the suspension of business activities timeframe as referred to in paragraph (6), the Financing Company has not yet fulfilled the provisions as referred to in paragraph (1), the OJK revokes the business license of the respective Financing Company. (12) The OJK may announce the suspension of business activities sanctions as referred to in paragraph (1) letter b and/or license revocation sanctions as referred to in paragraph (1) letter c to the public.

Article 66
(1) The OJK may impose suspension of business activities sanctions without prior imposition of warning sanctions if the Financing Company commits a violation of Article 51 letter a. (2) Suspension of business activities sanctions are issued in writing and are valid from the date of determination for a period of at most 6 (six) months. (3) In the event that the validity period of the suspension of business activities sanction ends on a holiday, the suspension of business activities sanction is valid until the first working day following it. (4) Financing Companies subject to suspension of business activities sanctions as referred to in paragraph (1) are prohibited from conducting business activities. (5) In the event that before the end of the suspension of business activities timeframe as referred to in paragraph (2), the Financing Company has fulfilled the provisions as referred to in paragraph (1), the OJK revokes the suspension of business activities sanction. (6) In the event that the suspension of business activities sanction is still valid and the Financing Company continues to conduct financing business activities, the OJK may directly impose a license revocation sanction. (7) In the event that by the end of the suspension of business activities timeframe as referred to in paragraph (2), the Financing Company has not yet fulfilled the provisions as referred to in paragraph (1), the OJK revokes the business license of the respective Financing Company. (8) The OJK may announce the suspension of business activities sanctions as referred to in paragraph (1) and license revocation sanctions as referred to in paragraph (6) or paragraph (7) to the public.

Article 67
In the event that the Financing Company receives administrative sanctions in the form of warning sanctions as referred to in Article 63 paragraph (1) letter a, Article 64 paragraph (1) letter a, and/or Article 65 paragraph (1) letter a cumulatively totaling 5 (five) times or more within a period of 2 (two) years, the OJK may request the Directors and/or Commissioners to undergo a reassessment of competence and propriety.

CHAPTER XX
TRANSITIONAL PROVISIONS

Article 68
(1) Financing Companies that have obtained business licenses before this OJK Regulation is established may conduct their business activities as referred to in Article 2 paragraph (1) letter a, letter b, and letter c, as well as Article 2 paragraph (2). (2) For Financing Companies that have obtained business licenses before this OJK Regulation is established, the provisions regarding the inclusion of business activities in the Articles of Association as referred to in Article 7, are declared to apply 1 (one) year from the establishment of this OJK Regulation. (3) Financing agreements that have been conducted by Financing Companies before this OJK Regulation is established are declared to remain valid until the end of the financing agreement.

Article 69
For Financing Companies that have obtained business licenses before this OJK Regulation is established, the provisions as referred to in Article 25, Article 26 paragraph (1), Article 27, Article 28, Article 29, Article 30, Article 31, Article 32, Article 34, and Article 35 are declared to apply 1 (one) year from the establishment of this OJK Regulation.

Article 70
(1) For Financing Companies that have obtained business licenses before this OJK Regulation is established, the provisions as referred to in Article 39 paragraph (1), Article 39 paragraph (3), Article 40 paragraph (1), and Article 40 paragraph (2), apply 2 (two) years from the establishment of this OJK Regulation. (2) Financing disbursements given before the BMPP provisions apply as referred to in paragraph (1), may continue until the end of the financing agreement timeframe and are not calculated as the basis for BMPP calculation.

Article 71
The provisions as referred to in Article 47 do not apply to foreign currency loans received by Financing Companies before this OJK Regulation is established.

Article 72
For Financing Companies that have obtained business licenses before this OJK Regulation is established, the provisions as referred to in Article 50 are declared to apply 3 (three) years from the establishment of this OJK Regulation.

Article 73
Financing agreements in the form of cash fund provision that have been conducted before this OJK Regulation is established may continue until the end of the financing agreement timeframe.

Article 74
The provisions and mechanisms for monthly reporting by Financing Companies are declared to remain valid as long as there are no regulations regulating monthly reporting provisions in accordance with business activities in this OJK Regulation.

Article 75
For Financing Companies that have obtained business licenses before this OJK Regulation is established, the provisions as referred to in Article 58 are declared to apply 2 (two) years from the establishment of this OJK Regulation.

Article 76
(1) Every administrative sanction that has been imposed on Financing Companies based on:
a. Minister of Finance Regulation Number 84/PMK.012/2006 concerning Financing Companies; b. Minister of Finance Regulation Number 30/PMK.010/2010 concerning the Application of Customer Due Diligence Principles for Non-Bank Financial Institutions;
c. Minister of Finance Regulation Number 43/PMK.010/2012 concerning Consumer Financing Down Payments for Motor Vehicles on Financing Companies as amended by Minister of Finance Regulation Number 220/PMK.010/2012;
d. Minister of Finance Regulation Number 130/PMK.010/2012 concerning Fiduciary Guarantee Registration for Financing Companies Conducting Consumer Financing for Motor Vehicles with Fiduciary Guarantee Collateral, are declared to remain valid and effective. (2) Financing Companies that have not been able to overcome the causes of the administrative sanctions as referred to in paragraph (1) are subject to further sanctions in accordance with this OJK Regulation.

CHAPTER XXI
CLOSING PROVISIONS

Article 77
At the time this OJK Regulation comes into force, provisions regarding the conduct of Financing Company business are subject to this OJK Regulation.

Article 78
This Otoritas Jasa Keuangan Regulation comes into force on the date of its promulgation.

To ensure that everyone knows it, it is ordered to promulgate this Otoritas Jasa Keuangan Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta on 19 November 2014

CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY,
Signed,
MULIAMAN D. HADAD

Promulgated in Jakarta on 19 November 2014

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
Signed,
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2014 NUMBER 364

Copy in accordance with the original
Director of Law 1
Ministry of Law,
Signed,
Tini Kustini

EXPLANATION
OF
OTORITAS JASA KEUANGAN REGULATION
NUMBER 29/POJK.05/2014
CONCERNING
THE CONDUCT OF FINANCING COMPANY BUSINESS

I. GENERAL

Financing Companies have proven to play an important role in the distribution and allocation of financial resources to business actors and the Indonesian public, both through the provision of financing for productive goods needed by business actors and consumer goods that are public needs, which ultimately will drive an increase in economic activity in the Indonesian public.

On the other hand, the realization of a strong, contributory, and inclusive Financing Company industry can also contribute to maintaining a stable and sustainable financial system, thereby helping to reduce the vulnerability of the Indonesian financial system stability to financial shocks that may occur in the future.

Furthermore, in order to increase the role of the Financing Company industry, there is a need for strategic breakthroughs that can expand alternative business activities that can be conducted by Financing Companies to provide financing access availability, especially for the public who still face limited access in financing choices. The expansion of financing business activities is expected to drive Financing Companies to become more efficient in allocating capital.

In order to face national economic developments that are experiencing rapid changes, dynamic and increasingly complex challenges, and integration with the global economy, various comprehensive policy adjustments are needed in the field of Financing Company business conduct, among others regarding business activities, health levels, funding sources, and financing cooperation. These policy adjustments are expected to create ...

to create clear regulations and provide legal certainty, which can increase the role of Financing Companies in the national economic system.

In addition, with the implementation of Law Number 21 of 2011 concerning the Financial Services Authority, several regulatory improvements are required regarding the implementation of the supervision system by the Financial Services Authority over Financing Companies.

In relation to the above matters, attention must also be paid to legislation that is relevant to these provisions, including legislation in force regarding limited liability companies, cooperatives, capital markets, and other provisions.

II. ARTICLE-BY-ARTICLE

Article 1
Clear enough.

Article 2
Paragraph (1)
Letter a
Clear enough.
Letter b
Clear enough.
Letter c
Clear enough.
Letter d
The term "other financing business activities" refers to financing activities that generate financing receivables in the Financing Company's balance sheet, but cannot be classified into the categories of Investment Financing, Working Capital Financing, and/or Multi-purpose Financing.

Paragraph (2) ...

Paragraph (2)
The term "operating lease" refers to a lease that does not substantially transfer the benefits and risks of the leased item.
The term "fee-based activities" in this paragraph refers to activities that can be conducted by Financing Companies to market financial service products, including but not limited to mutual funds, micro-insurance, or other products related to financial service activities.

Article 3
Letter a
The term "productive business" refers to business activities to produce goods or services, including businesses that add value and increase income for the Debtor. Letter b Clear enough.

Article 4
Paragraph (1)
Letter a
Clear enough.
Letter b
Financing by way of Sale and Leaseback that falls under the category of Investment Financing only includes Sale and Leaseback implemented via finance lease. Financing by way of Sale and Leaseback implemented via operating lease is not included in the category of Investment Financing. Letter c Clear enough. Letter d Clear enough. Letter e ...

Letter e
Clear enough.
Letter f
Clear enough.
Letter g
Clear enough.
Paragraph (2)
Letter a
Financing by way of Sale and Leaseback that falls under the category of Working Capital Financing only includes Sale and Leaseback implemented via Finance Lease. Financing by way of Sale and Leaseback implemented via operating lease is not included in the category of Working Capital Financing. Letter b Clear enough. Letter c Clear enough. Letter d Clear enough. Letter e Clear enough. Paragraph (3) Letter a Clear enough. Letter b Purchase with Installment Payments can be conducted by the Debtor using a credit card issued by the Financing Company. Purchase ...

Purchase with Installment Payments can be implemented for the procurement of services, including but not limited to health, education, religious, recreational, and other services. Letter c Clear enough.

Article 5
Paragraph (1)
Other financing business activities as referred to in this paragraph are financing business activities for the procurement of goods and/or services that generate financing receivables in the company's financial position report. Paragraph (2) Clear enough. Paragraph (3) Clear enough. Paragraph (4) Clear enough.

Article 6
Clear enough.

Article 7
In the company's articles of association, for the purposes and objectives of the company, it is to engage in the financing business.
To achieve these purposes and objectives, the company may conduct the following business activities:
a. Investment Financing; b. Working Capital Financing;
c. Multi-purpose Financing; and/or
d. other financing business activities based on OJK approval.

Article 8 ...

Article 8
Paragraph (1)
The term "substantial transfer" refers to financial accounting standards regarding leases.
Paragraph (2)
Clear enough.
Paragraph (3)
Clear enough.

Article 9
Clear enough.

Article 10
Clear enough.

Article 11
Clear enough.

Article 12
Clear enough.

Article 13
Paragraph (1)
Examples of Infrastructure Financing objects:
a. transportation, including sea, river, or lake ports, airports, rail networks, and railway stations; b. roads, including toll roads and toll bridges;
c. irrigation, including raw water conveyance channels;
d. drinking water, including raw water intake structures, transmission networks, distribution networks, and drinking water treatment plants; e. wastewater, including wastewater treatment plants, collection networks, and main networks, and waste facilities including transporters and disposal sites; f. telecommunications, including telecommunications networks; g. electricity, including power generation, transmission, or distribution of electricity; and/or oil and gas, including processing ...

processing, storage, transportation, transmission, or distribution of oil and gas.
Paragraph (2)
Clear enough.

Article 14
Included in Business Capital Facility Financing is funding for working capital paid directly by the Financing Company to the provider of goods and/or services based on the Debtor's needs. Example: a shoemaker needs short-term funding to finance the procurement of goods and/or services to support the production process, such as the purchase of raw materials, payment of salaries, payment of electricity costs, and so on.

Article 15
Clear enough.

Article 16
Clear enough.

Article 17
Clear enough.

Article 18
Paragraph (1)
The term "financing risk mitigation" refers to efforts carried out by the Financing Company to reduce the risks borne by the Financing Company due to the Debtor's inability/failure to fulfill payment obligations to the Financing Company. Paragraph (2) Financing Companies may conduct financing risk mitigation through other means outside the provisions as referred to in letters a, b, and/or c.

Article 19
Clear enough.

Article 20 ...

Article 20
Clear enough.

Article 21
Paragraph (1)
These provisions apply if the financing agreement contains a fiduciary security clause, either in the main financing agreement or in a separate document.
Paragraph (2)
Clear enough.

Article 22
Clear enough.

Article 23
Clear enough.

Article 24
Clear enough.

Article 25
Clear enough.

Article 26
Clear enough.

Article 27
The assessment of financing receivable quality is conducted on the financing receivable balance, not based on the amount of principal installments and/or interest that have become due. Steps that companies can take to keep financing receivables in good condition include the application of adequate standard operating procedures and periodic monitoring of receivable quality.

Article 28
Paragraph (1)
Clear enough.
Paragraph (2) ...

Paragraph (2)
The term "financing receivables" refers to outstanding principal, i.e., total charges minus undelivered revenue.
Paragraph (3)
Clear enough.

Article 29
Clear enough.

Article 30
Clear enough.

Article 31
Clear enough.

Article 32
Clear enough.

Article 33
Clear enough.

Article 34
Clear enough.

Article 35
Clear enough.

Article 36
Clear enough.

Article 37
Clear enough.

Article 38
Clear enough.

Article 39
Paragraph (1)
Clear enough.
Paragraph (2) ...

Paragraph (2)
Letter a
Clear enough.
Letter b
Clear enough.
Letter c
Clear enough.
Letter d
Clear enough.
Letter e
Clear enough.
Letter f
The term "family relationship up to the second degree, both horizontal and vertical" refers to the following parties:

1. biological/step/adopted parents;
2. biological/step/adopted siblings;
3. biological/step/adopted children;
4. biological/step/adopted grandparents;
5. biological/step/adopted grandchildren;
6. biological/step/adopted siblings of parents;
7. spouse;
8. in-laws;
9. spouse or child of biological/step/adopted children;
10. grandparents of the spouse;
11. spouse or child of biological/step/adopted grandchildren;
12. biological/step/adopted siblings of the spouse or the spouse of the relevant sibling.
    Letter g ...

Letter g
The term "directors" for business entities that are not limited liability companies or cooperatives refers to parties performing management functions as regulated in legislation. The term "board of commissioners" for business entities that are not limited liability companies or cooperatives refers to parties performing supervisory and advisory functions as regulated in legislation. Letter h Clear enough. Letter i Clear enough. Letter j Financial interdependence as referred to in letter j is a condition where there is financial interdependence between the financing company and other parties, including but not limited to significant lending transactions greater than the value of the Financing Company's Equity, subordinated loans, and so on. Paragraph (3) Clear enough.

Article 40
Clear enough.

Article 41
The term "financing for the procurement of goods and/or services in the context of government programs" refers to financing for:
a. food procurement; b. very simple housing procurement;
c. procurement/provision/management of oil and gas and other equivalent alternative energy sources;
d. procurement ...

d. procurement/processing of export-oriented commodities; e. procurement/provision/management of water; f. procurement/provision/management of electricity; g. procurement of supporting infrastructure for land, sea, and air transportation, including the construction of roads, bridges, railway tracks, sea ports, and airports.

Article 42
Clear enough.

Article 43
Clear enough.

Article 44
Clear enough.

Article 45
Clear enough.

Article 46
Paragraph (1)
Clear enough.
Paragraph (2)
The Gearing ratio is calculated using the following formula:
Gearing ratio = total loans
Equity + subordinated loans - investments
Total loans include subordinated loans.
Paragraph (3)
Clear enough.
Paragraph (4)
Clear enough.

Article 47
Paragraph (1)
Clear enough.
Paragraph (2) ...

Paragraph (2)
In the event that a Financing Company receives funding, disburses financing, and receives payments in the same foreign currency, it is categorized as having conducted a natural hedge as one of the hedging efforts.

Article 48
Clear enough.

Article 49
Paragraph (1)
Entities related to Financing Company activities include but are not limited to: vehicle dealers, credit information bureaus, outsourcing providers in the collection field, and/or surveyors. Paragraph (2) Clear enough Paragraph (3) Clear enough. Paragraph (4) Clear enough. Paragraph (5) Clear enough.

Article 50
Paragraph (1)
The term "association" refers to the Indonesian Financing Company Association recognized by the OJK.
The term "reasons for appointing an institution" in these provisions refers to the association's determination of the certification organizing institution, considering among other things that the institution has:

1. certification organization license;

2. experience in providing certification;

3. curriculum ...

4. curriculum appropriate for financing activities;

5. competent teaching resources;
   Paragraph (2)
   Clear enough.
   Paragraph (3)
   Clear enough.
   Paragraph (4)
   Clear enough.
   Paragraph (5)
   Clear enough.

Article 51
Clear enough.

Article 52
Paragraph (1)
The term "cash financing" in this paragraph refers to the disbursement of financing not based on transactions for the procurement of goods and/or services from providers of goods and/or services, including refinancing of products already owned by the Debtor without the procurement of new products, as well as cash financing originating from joint financing or channeling financing. Paragraph (2) Clear enough.

Article 53
Clear enough.

Article 54
Clear enough.

Article 55
Paragraph (1)
Clear enough.
Paragraph (2) ...

Paragraph (2)
Clear enough.
Paragraph (3)
Clear enough.
Paragraph (4)
The term "specifically regulated matters" refers to calculations related to Financial Health Level and ratios regulated in this OJK Regulation.
Paragraph (5)
Clear enough.
Paragraph (6)
Clear enough.
Paragraph (7)
Clear enough.
Paragraph (8)
Clear enough.

Article 56
Clear enough.

Article 57
Clear enough.

Article 58
Clear enough.

Article 59
Clear enough.

Article 60
Clear enough.

Article 61
Clear enough.

Article 62
Clear enough.

Article 63
Clear enough.

Article 64 ...

Article 64
Clear enough.

Article 65
Clear enough.

Article 66
Clear enough.

Article 67
Clear enough.

Article 68
Clear enough.

Article 69
Clear enough.

Article 70
Clear enough.

Article 71
Clear enough.

Article 72
Clear enough.

Article 73
Clear enough.

Article 74
Clear enough.

Article 75
Clear enough.

Article 76
Clear enough.

Article 77
Clear enough.

Article 78
Clear enough.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5638 ---