Financial Services Authority Regulation Number 31/POJK.05/2014 Concerning the Conduct of Sharia Financing Business — OJK — ID

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 31/POJK.05/2014
CONCERNING
THE CONDUCT OF SHARIA FINANCING BUSINESS
BY THE GRACE OF THE ALMIGHTY GOD,
THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that the business of financing companies with Sharia principles must always fulfill Islamic Sharia principles, including fatwas established by the National Sharia Council of the Indonesian Ulema Council; b. that in order to fulfill the Islamic Sharia principles as referred to in letter a, legal certainty is needed in the conduct of the business of financing companies with Sharia principles for parties having an interest in the business of financing companies with Sharia principles;
c. that in order to increase the development of financing company businesses that conduct business with Sharia, it is necessary to issue regulations concerning the conduct of business by financing companies that conduct business with Sharia principles;
d. that based on the considerations as referred to in letter a, letter b, and letter c, it is necessary to establish a Financial Services Authority Regulation concerning the Conduct of Sharia Financing Business;

Recalling:
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);

DECIDES:
Establish: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE CONDUCT OF SHARIA FINANCING BUSINESS.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation, the following terms are defined as:
1. Sharia Company is a Sharia financing company and a Sharia Business Unit.
2. Financing Company is a business entity that conducts financing activities for the procurement of goods and/or services.
3. Sharia Financing Company is a Financing Company whose entire business activities conduct Sharia financing.
4. Sharia Business Unit, hereinafter abbreviated as UUS, is a work unit of the head office of a Financing Company that functions as the parent office of offices conducting Sharia financing.
5. Sharia Financing is the disbursement of financing conducted based on Sharia principles.
6. Sharia Principles are Islamic legal provisions based on fatwas and/or Sharia compliance statements from the National Sharia Council of the Indonesian Ulema Council.
7. Sales Financing is financing in the form of providing goods through sales transactions in accordance with ... with the Sharia financing agreement agreed upon by the parties.
8. Investment Financing is financing in the form of providing capital with a specific term for productive business activities with profit sharing in accordance with the Sharia financing agreement agreed upon by the parties.
9. Service Financing is the provision of services in the form of providing benefits over a good, providing loans (advances) and/or providing services with and/or without payment of remuneration (ujrah) in accordance with the Sharia financing agreement agreed upon by the parties.
10. Sharia Financing Agreement is a written agreement between the Sharia Company and other parties containing rights and obligations for each party in accordance with Sharia Principles.
11. Murabahah is the sale of a good by affirming the purchase price (acquisition cost) to the buyer and the buyer pays it with a higher price (margin) as profit in accordance with the agreement of the parties.
12. Salam is the sale of a good by ordering according to certain conditions and full payment of the price of the good in advance.
13. Istishna’ is the sale of a good by ordering the manufacture of the good according to specific criteria and requirements and payment of the price of the good in accordance with the agreement of the parties.
14. Mudharabah is a business cooperation contract between two parties where the first party (shahib mal) provides all the capital, while the second party (mudharib) acts as the manager, and business profits ... are shared among them in accordance with the agreement of the parties.
15. Musyarakah is financing based on a cooperation contract between two or more parties for a specific business, where each party provides capital contributions with the provision that profits and risks will be borne together in accordance with the agreement of the parties.
16. Mudharabah Musytarakah is a form of Mudharabah where the fund manager (mudharib) also contributes capital in the cooperation where profits and risks will be borne together in accordance with the agreement of the parties.
17. Musyarakah Mutanaqisah is Musyarakah or syirkah where the ownership of assets (goods) or capital of one party (syarik) decreases due to the purchase of ownership shares (hishshah) gradually by the other party.
18. Ijarah is the transfer of the right to use (benefit) over a good for a specific period with rent payment (ujrah), without being followed by the transfer of ownership of the good itself.
19. Ijarah Muntahiyah Bittamlik is Ijarah accompanied by a promise of transfer of ownership (wa’d) after the Ijarah period ends.
20. Hawalah is the transfer of debt from one party who owes to another party who is required to bear the payment.
21. Hawalah bil Ujrah is Hawalah with the imposition of remuneration (ujrah).
22. Wakalah is the granting of authority from the principal (muwakkil) to the agent (wakil) in matters that can be delegated, where the agent (wakil) does not bear risk for what is delegated, except due to negligence or breach of contract.
23. Wakalah Bil Ujrah is Wakalah with the imposition of remuneration (ujrah).
24. Kafalah is a guarantee provided by the guarantor (kafiil) to a third party to fulfill the obligation of the second party or the guaranteed party (makfuul ‘anhu, ashil).
25. Kafalah bil ujrah is Kafalah with the imposition of remuneration (ujrah).
26. Ju’alah is a promise or commitment (iltizam) to provide a specific compensation (reward/’iwadh/ju’l) for achieving a determined result (natijah) from a job.
27. Qardh is the lending of funds (advances) without compensation with the obligation of the borrower to return the principal loan amount in a lump sum or installments within a specific period.
28. Consumer is a company or individual who enters into a Sharia Financing Agreement with the relevant Sharia Company related to the business activities of the Sharia Company.
29. Sharia Financing Financial Health Level is the result of assessing the capital, liquidity, quality of productive assets, and financial performance of the Sharia Company.
30. Paid-up Capital:
a. for Sharia Financing Companies in the form of a limited liability company is paid-up capital; or b. for Sharia Financing Companies in the form of a cooperative legal entity is the principal deposit and mandatory deposit.
31. Equity:
a. for Sharia Financing Companies in the form of a limited liability company legal entity, is the sum of:
1. Paid-up Capital;
2. additional Paid-up Capital, consisting of:
a) share premium/discount; b) equity issuance costs; and c) others in accordance with accounting standards principles;
3. difference in value of transactions with entities under common control;
4. retained earnings/losses;
5. current year profit/loss;
6. treasury stock; and
7. other Equity components, consisting of:
a) changes in revaluation surplus; b) exchange differences due to translation of financial statements in foreign currency; c) gains and losses from re-measurement of available-for-sale financial assets; and d) 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 accounting standards principles; b. for Sharia Financing Companies in the form of a cooperative legal entity must be equal to the sum of principal deposits, mandatory deposits, reserve funds, grants, and undistributed surplus; or
c. for UUS must be equal to the difference between the amount of assets and the sum of liabilities and temporary funding.
32. Board of Directors:
a. for Sharia Financing Companies in the form of a limited liability company legal entity is the board of directors as referred to in ... in the law concerning limited liability companies; or b. for Sharia Financing Companies in the form of a cooperative legal entity is the management as referred to in the law concerning cooperatives.
33. Board of Commissioners:
a. for Sharia Financing Companies in the form of a limited liability company legal entity is the board of commissioners as referred to in the law concerning limited liability companies; or b. for Sharia Financing Companies in the form of a cooperative legal entity is the supervisors as referred to in the law concerning cooperatives.
34. Maximum Limit for Sharia Financing Disbursement, hereinafter referred to as BMPPS, is a specific limit in the disbursement of Sharia Financing permitted based on this Financial Services Authority Regulation.
35. Controller:
a. for limited liability company legal entities, is a legal entity, individual and/or business group that:
1. owns shares of 25% (twenty-five percent) or more of the issued shares and has voting rights; or
2. owns shares of less than 25% (twenty-five percent) of the issued shares and has voting rights but it can be proven that they 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.
36. Productive Assets are all assets owned by the Sharia Company with the intention of obtaining income in the form of Sharia Financing.
37. Financial Services Authority, hereinafter abbreviated as OJK, is an independent institution as referred to in the law concerning the Financial Services Authority.

CHAPTER II
SHARIA FINANCING ACTIVITIES
Article 2
The conduct of Sharia Financing activities must fulfill the principles of justice (‘adl), balance (tawazun), benefit (maslahah), and universalism (alamiyah) and must not contain gharar, maysir, riba, zhulm, risywah, and haram objects.
Article 3
Sharia Financing activities include:
a. Sales Financing; b. Investment Financing; and/or
c. Service Financing.
Article 4
(1) Sales Financing activities as referred to in Article 3 letter a are conducted using contracts:
a. Murabahah; b. Salam; and/or
c. Istishna’.
(2) Investment Financing activities as referred to in Article 3 letter b are conducted using contracts:
a. Mudharabah; b. Musyarakah;
c. Mudharabah Musytarakah; and/or
d. Musyarakah Mutanaqishoh;
(3) Service Financing activities as referred to in Article 3 letter c are conducted using contracts:
a. Ijarah; b. Ijarah Muntahiyah Bittamlik;
c. Hawalah or Hawalah bil Ujrah;
d. Wakalah or Wakalah bil Ujrah; e. Kafalah or Kafalah bil Ujrah; f. Ju’alah; and/or g. Qardh.
(4) Sharia Financing activities as referred to in Article 3 can be conducted using contracts other than those referred to in paragraph (1), paragraph (2) and paragraph (3), after first obtaining approval from OJK. (5) Regulations concerning the contracts used in Sharia Financing activities as referred to in paragraph (1), paragraph (2) and paragraph (3) as well as approval of other contracts as referred to in paragraph (4) are regulated in an OJK Circular Letter.
Article 5
(1) Sharia Financing activities can be conducted using single contracts and/or combined contracts from the contracts as referred to in Article 4 paragraph (1), paragraph (2), paragraph (3), and paragraph (4). (2) Combined contracts as referred to in paragraph (1) are conducted using several contracts as referred to in Article 4 paragraph (1), paragraph (2), paragraph (3), and paragraph (4) for a specific Sharia Financing activity. (3) Contracts as referred to in Article 4 paragraph (3) letter e, letter f, and letter g, can only be conducted by Sharia Companies through combined contracts.
Article 6
(1) Sharia Companies must first report every use of single contracts and/or combined contracts as referred to in Article 5 paragraph (1) to OJK.
(2) Regulations concerning reporting as referred to in paragraph (1) are regulated in an OJK Circular Letter.
Article 7
Sharia Financing Companies and Financing Companies that have a UUS must clearly state Sharia Financing activities as referred to in Article 3 in their articles of association.

CHAPTER III
SHARIA FINANCING AGREEMENTS
Article 8
(1) Sharia Financing Agreements between Sharia Companies and Consumers must be made in writing.
(2) Sharia Financing Agreements in Sharia Financing activities must fulfill agreement drafting regulations as regulated in Financial Services Authority Regulations concerning consumer protection in the financial services sector.
Article 9
Sharia Financing Agreements as regulated in this Financial Services Authority Regulation must fulfill the following provisions:
a. implemented without elements of coercion among the parties to the contract or transaction; and b. objects contained in the Sharia Financing Agreement are in accordance with Sharia Principles and legislation.
Article 10
Sharia Financing Agreements that have been agreed upon by the parties cannot be cancelled, except:
a. the parties agree to terminate it; b. the legal conditions as referred to in Article 9 are not met.
Article 11
(1) Sharia Financing Agreements in Sharia Financing must at least contain:
a. the title of the Sharia Financing Agreement describing the type of Sharia Financing contract used; b. the number and date of the Sharia Financing Agreement;
c. identity of the parties;
d. object of the Sharia Financing Agreement (capital, goods and/or services); e. purpose of financing; f. value of the object of the Sharia Financing Agreement (capital, goods and/or services); g. payment mechanism and method and its amount; h. exchange rate used, if necessary;
i. term of Sharia Financing;
j. nisbah, margin, and/or remuneration (ujrah) of Sharia Financing; k. collateral object (if any);
l. details of costs related to Sharia Financing provided, including:

survey costs;
insurance/guarantee/fiduciary costs;
provision fees; and
notary costs.
m. clear fiduciary burden clauses, if there is fiduciary security burden in Sharia Financing; n. mechanism in case of dispute and choice of dispute resolution venue; o. provisions concerning rights and obligations of the parties; and p. provisions concerning penalties (ta’jir) and/or compensation (ta`widh). (2) In the event that Sharia Companies conduct Sales Financing for motor vehicles, the Sharia Financing Agreement must state the down payment value (down payment/urbun).

CHAPTER IV
DOWN PAYMENT FOR SALES FINANCING OF MOTOR VEHICLES
Article 12
(1) Sharia Companies conducting Sales Financing for motor vehicles must apply down payment (down payment/urbun) provisions to Consumers as follows:
a. for two-wheeled or three-wheeled motor vehicles, at least 20% (twenty percent) of the selling price of the relevant vehicle; b. for four-wheeled or more motor vehicles used for productive purposes, at least 20% (twenty percent) of the selling price of the relevant vehicle; or
c. for four-wheeled or more motor vehicles used for non-productive purposes, at least 25% (twenty-five percent) of the selling price of the relevant 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 permit held. (3) Regulations concerning the amount of down payment (down payment/urbun) to Consumers as referred to in paragraph (1) can be reviewed and changes are regulated by OJK Circular Letter.

CHAPTER V
SHARIA FINANCING RISK MITIGATION
Article 13
(1) Sharia Companies must conduct Sharia Financing risk mitigation.
(2) Sharia Financing risk mitigation as referred to in paragraph (1) can be done by:
a. transferring Sharia Financing risk through Sharia guarantee mechanisms; b. transferring risk over financed goods or goods that are collateral from Sharia Financing activities through Sharia insurance mechanisms; and/or
c. imposing fiduciary security over financed goods or goods that are collateral from Sharia Financing activities.
Article 14
(1) Sharia Companies conducting risk transfer as referred to in Article 13 paragraph (2) letter a must use guarantee institutions that meet the following provisions:
a. have obtained business permits from OJK; and b. are not subject to business suspension sanctions from OJK.
(2) The term of Sharia guarantee as referred to in Article 13 paragraph (2) letter a must be at least equal to the term of Sharia Financing.
Article 15
(1) Sharia Companies conducting insurance as referred to in Article 13 paragraph (2) letter b must use insurance companies that meet the following provisions:
a. have obtained business permits from OJK; and b. are not subject to business restriction sanctions from OJK.
(2) The term of insurance coverage as referred to in Article 13 paragraph (2) letter b must be at least equal to the term of Sharia Financing.
Article 16
(1) Sharia Companies conducting Sharia Financing with fiduciary security burden must register the fiduciary security at the fiduciary registration office, in accordance with the law regulating fiduciary security. (2) The fiduciary security registration obligation as referred to in paragraph (1) also applies to Sharia Companies conducting Sales Financing with fiduciary security burden where the financing comes from channeling financing. (3) Fiduciary registration as referred to in paragraph (1) and paragraph (2) must be done at the latest 1 (one) month calculated from the date of the Sharia Financing Agreement.
Article 17
Sharia Companies are prohibited from executing goods that are the object of fiduciary security if the fiduciary registration office has not issued a fiduciary security certificate and handed it over to the Sharia Company.
Article 18
Execution of goods that are the object of fiduciary security must fulfill regulations and requirements as regulated in the law concerning fiduciary security and has been agreed upon by the parties in the Sharia Financing Agreement.

CHAPTER VI
SHARIA FINANCING FINANCIAL HEALTH LEVEL
First Section
General
Article 19
(1) Sharia Companies must at all times fulfill the Sharia Financing Financial Health Level requirements.
(2) Sharia Financing Financial Health Level as referred to in paragraph (1) includes:
a. capital ratio; b. Productive Asset quality;
c. profitability; and
d. liquidity.
Second Section
Capital Ratio
Article 20
(1) Sharia Companies must fulfill 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) Regulations concerning the capital ratio amount as referred to in paragraph (1) can be reviewed and changes are regulated in an OJK Circular Letter.
(3) Regulations concerning the method of calculating the ratio between adjusted capital and adjusted assets as referred to in paragraph (2) are regulated in an OJK Circular Letter. Third Section Productive Asset Quality Paragraph 1 Productive Asset Quality Assessment
Article 21
Sharia Companies must assess, monitor and take necessary steps to maintain the quality of Productive Assets.
Article 22
(1) Productive Asset quality assessment as referred to in Article 21 is established as:
a. good; b. special attention;
c. doubtful;
d. questionable; or e. non-performing.
(2) Productive Asset quality assessment as referred to in paragraph (1) is established based on the factors of timely payment of principal, margin, investment results/profit sharing, and/or remuneration (ujrah). (3) Productive Asset quality assessment as referred to in paragraph (2) is categorized as follows:
a. good if there is no delay in payment of principal, margin, investment results/profit sharing, and/or remuneration (ujrah) or there is a delay in payment of principal, margin, investment results/profit sharing, and/or remuneration (ujrah) up to 30 (thirty) calendar days; b. special attention if there is a delay in payment of principal, margin, investment results/profit sharing, and/or remuneration (ujrah) that has exceeded 30 (thirty) calendar days up to 90 (ninety) calendar days;
c. doubtful if there is a delay in payment of principal, margin, investment results/profit sharing, and/or remuneration (ujrah) that has exceeded 90 (ninety) calendar days up to 120 (one hundred twenty) calendar days;
d. questionable if there is a delay in payment of principal, margin, investment results/profit sharing, and/or remuneration (ujrah) 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 payment of principal, margin, investment results/profit sharing, and/or remuneration (ujrah) that has exceeded 180 (one hundred eighty) calendar days.
Article 23
(1) In addition to the factors of timely payment of principal and/or investment results/profit sharing as referred to in Article 22 paragraph (2), Productive Asset quality assessment for Investment Financing of Rp3,000,000,000.00 (three billion rupiah) or more can be established by considering factors:
a. Consumer's ability to pay; b. Consumer's financial performance; and
c. Consumer's business prospects.
(2) Assessment of Consumer's ability to pay as referred to in paragraph (1) letter a includes assessment of the following components:
a. availability ...

a. availability and accuracy of financial information; Consumer; b. completeness of Sharia Financing documentation;
c. compliance with the Sharia Financing Agreement;
d. appropriateness of the use of Sharia Financing funds; and e. fairness of the source of obligation payments.
(3) The assessment of the Consumer'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 Consumer'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 Consumer's position in competition;
c. management quality and labor issues;
d. support from the group or affiliation; and e. efforts made by the Consumer to maintain the living environment.
(5) In the event of a difference between the Productive Asset quality assessment by the Sharia Company and OJK, the Productive Asset quality determined by OJK shall prevail. (6) The Sharia Company is required to adjust the Productive Asset quality in accordance with the Productive Asset quality assessment determined by OJK as referred to in paragraph (5) in the report submitted to OJK. (7) Guidelines for the assessment of Productive Asset quality as referred to in paragraph (1), paragraph (2), paragraph (3), and paragraph (4) are further regulated in an OJK Circular.

Paragraph 2
Productive Asset Quality for Consumers with More Than One Sharia Financing Agreement

Article 24
(1) The Sharia Company is required to establish the same Productive Asset quality for 1 (one) Consumer with more than 1 (one) Sharia Financing Agreement.
(2) The Sharia Company may establish different Productive Asset qualities for more than 1 (one) Sharia Financing Agreement owned by 1 (one) Consumer as referred to in paragraph (1), in the event:
a. the Productive Asset with the lowest quality has been written off; and/or b. the value of the Sharia Financing is up to IDR 3,000,000,000.00 (three billion rupiah). (3) In the event of a difference in Productive Asset quality in the Sharia Financing Agreement as referred to in paragraph (1), the Sharia Company is required to use the lowest Productive Asset quality.

Paragraph 3
Problematic Productive Assets

Article 25
(1) The Sharia Company is required at all times to maintain the ratio of problematic Productive Assets after...

after being reduced by the provision for write-off of Productive Assets at a maximum of 5% (five percent) of total Productive Assets.
(2) Problematic Productive Assets as referred to in paragraph (1) consist of Productive Assets with fair, doubtful, and/or non-performing quality.
(3) Regulations regarding the size of the problematic Productive Asset ratio as referred to in paragraph (1) may be reviewed and changes are regulated in an OJK Circular.

Paragraph 4
Provision for Write-off of Productive Assets

Article 26
(1) The Sharia Company is required to calculate the provision for write-off of Productive Assets.
(2) The calculation of the provision for write-off of Productive Assets as referred to in paragraph (1) is determined at a minimum of:
a. 1% (one percent) of the balance of Productive Assets with fair quality after being reduced by collateral; b. 5% (five percent) of the balance of Productive Assets with special attention quality after being reduced by collateral;
c. 15% (fifteen percent) of the balance of Productive Assets with fair quality after being reduced by collateral;
d. 50% (fifty percent) of the balance of Productive Assets with doubtful quality after being reduced by collateral; and e. 100% (one hundred percent) of the balance of Productive Assets with non-performing quality after being reduced by collateral. (3) The Sharia Company is required to form a provision for write-off of Productive Assets at a minimum in accordance...

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 to the Productive Asset balance is determined at a maximum equal to its Productive Asset balance. (5) The calculation of the provision for write-off of Productive Assets as referred to in paragraph (1) is conducted by the Sharia Company for the purpose of calculating the capital adequacy ratio, gearing ratio, Equity to Paid-up Capital ratio, BMPPS, problematic Productive Asset ratio, and the ratio of Productive Assets 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.

Paragraph 5
Provision for Impairment Loss of Productive Assets

Article 27
(1) The Sharia Company is required to form a provision for impairment loss of Productive Assets in accordance with applicable financial accounting standards.
(2) The formation of the provision for impairment loss of Productive Assets 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
Profitability

Article 28
(1) Profitability as referred to in Article 19 paragraph (2) letter c is the ability of the Sharia Company to generate profit.
(2) The assessment of profitability factors as referred to in Article 19 paragraph (2) letter c includes an assessment of asset performance and operational efficiency. (3) Regulations regarding the method of assessment of profitability factors are regulated in an OJK Circular.

Part Five
Liquidity

Article 29
(1) Liquidity assessment as referred to in Article 19 paragraph (2) letter d is an assessment of the level of matching between current assets and current liabilities. (2) Regulations regarding the method of liquidity assessment are regulated in an OJK Circular.

CHAPTER VII
RATIO OF PRODUCTIVE ASSETS TO TOTAL ASSETS

Article 30
(1) The Sharia Company is required to have Net Productive Assets of at least 40% (forty percent) of total assets.
(2) Net Productive Assets as referred to in paragraph (1) must be obtained by subtracting Gross Productive Assets from unrecognized income and the provision for write-off of Productive Assets. (3) Compliance with the Net Productive Asset provisions as referred to in paragraph (1) must be fulfilled by the Sharia Company no later than 3 (three) years from the date the license is established. (4) In the event that a Sharia Financing Company increases Paid-up Capital for the purpose of meeting capital adequacy, gearing ratio, and Equity to Paid-up Capital ratios, the Sharia Financing Company...

Sharia is exempted from compliance with the provisions as referred to in paragraph (1) for a period of up to 1 (one) year from the date the increase in Paid-up Capital is recorded by the competent authority.

CHAPTER VIII
EQUITY

Article 31
(1) Sharia Financing Companies that are legal entities:
a. limited liability companies must have Equity of at least IDR 100,000,000,000.00 (one hundred billion rupiah); or b. cooperatives must have Equity of at least IDR 50,000,000,000.00 (fifty billion rupiah). (2) UUS must have Equity of at least IDR 25,000,000,000.00 (twenty-five billion rupiah). (3) Financing Companies that have carried out some business activities based on Sharia Principles before the implementation of this OJK Regulation must meet the Equity provisions for UUS as referred to in paragraph (2) in stages as follows:
a. at least IDR 5,000,000,000.00 (five billion rupiah) no later than December 31, 2015; b. at least IDR 15,000,000,000.00 (fifteen billion rupiah) no later than December 31, 2016; and
c. at least IDR 25,000,000,000.00 (twenty-five billion rupiah) no later than December 31, 2017.
(4) For Sharia Financing Companies resulting from conversion, the provisions as referred to in paragraph (1) shall apply 5 (five) years from the date the company in question...

in question obtains a business license as a Sharia Financing Company.

Article 32
Sharia Financing Companies are required to have an Equity to Paid-up Capital ratio of at least 50% (fifty percent).

CHAPTER IX
MAXIMUM LIMIT FOR PROVIDING SHARIA FINANCING

Article 33
(1) The Sharia Company is required to meet the BMPPS provisions to all related parties at a maximum of 50% (fifty percent) of the Sharia Company's Equity.
(2) Related parties as referred to in paragraph (1) include:
a. individuals or business entities that are Controllers of the Sharia Company; b. business entities where the Sharia 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 exercised 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 Sharia Company; f. parties having a family relationship up to the second degree, both horizontally and vertically:
1. from individuals who are controllers of the Sharia Company as referred to in letter a;
2. from the Board of Commissioners or Board of Directors of the Sharia Company as referred to in letter e.
g. the Board of Commissioners or Board of Directors of business entities as referred to in letter a, letter b, letter c, and/or letter d; h. business entities whose Board of Commissioners and/or Board of Directors are:
1. the Board of Commissioners or Board of Directors of the Sharia Company;
2. the Board of Commissioners or Board of Directors of business entities as referred to in letter a, letter b, letter c, and/or letter d;
i. business entities where:
1. the Board of Commissioners or Board of Directors of the Sharia Company as referred to in letter e act as Controllers;
2. the Board of Commissioners or Board of Directors of 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 Sharia 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) The Sharia Company is required to have and maintain a detailed list of related parties as referred to in paragraph (2).

Article 34
(1) The Sharia Company is required to meet the BMPPS provisions to 1 (one) Consumer who is not a related party as referred to in Article 33 paragraph (2) at a maximum of 20% (twenty percent) of the Sharia Company's Equity. (2) The Sharia Company is required to meet the BMPPS provisions to 1 (one) group of Consumers who are not related parties as referred to in Article 33 paragraph (2) at a maximum of 50% (fifty percent) of the Sharia Company's Equity. (3) Consumers are classified as members of a group of Consumers as referred to in paragraph (2) if the Consumers have a control relationship with other Consumers through ownership, management, and/or financial relationships, including:
a. the Consumer is a controller of another Consumer; b. 1 (one) same party is a Controller of several Consumers (common ownership);
c. the Consumer has financial interdependence with another Consumer;
d. the Consumer issues a guarantee to take over and/or pay off part or all of the obligations of another Consumer in the event that the other Consumer fails to meet its obligations (default) to the Sharia Company; and/or e. the Board of Commissioners and/or Board of Directors of the Consumer become commissioners and/or directors on another Consumer.

Article 35
The BMPPS provisions as referred to in Article 33 paragraph (1), Article 34 paragraph (1), and Article 34 paragraph (2) are exempted for...

for Sharia Financing for the procurement of goods and/or services in the context of government programs.

CHAPTER X
SHARIA FINANCING COOPERATION

Article 36
(1) The Sharia Company may cooperate with other parties through channeling financing and must be conducted in accordance with applicable legislation and is prohibited from contradicting Sharia Principles. (2) Other parties as referred to in paragraph (1) include:
a. banks; b. secondary housing financing companies;
c. microfinance institutions; and/or
d. Sharia Companies.
(3) Channeling financing as referred to in paragraph (1) must be conducted using the Wakalah bil Ujrah contract.
(4) In conducting channeling financing as referred to in paragraph (1), the Sharia Company may act as:
a. the party distributing (manager/agent) through Sharia Financing activities; and/or b. the provider of funds/capital/goods, i.e., the party delegating to another party. (5) In the event that the Sharia Company acts as the party distributing (manager/agent) as referred to in paragraph (4) letter a, the Sharia Company only acts as a manager and receives remuneration (ujrah) from the management of those funds. (6) Risks...

(6) Risks arising from channeling financing as referred to in paragraph (1) lie with the party providing funds/capital/goods.

CHAPTER XI
FINANCING

Article 37
(1) In order to obtain financing, the Sharia Company may:
a. receive financing from government institutions, banks, non-bank financial industries, institutions, and/or other business entities; b. receive subordinated loans (Qardh);
c. issue Sharia bonds (sukuk) in accordance with applicable legislation;
and/or d. conduct securitization in accordance with Sharia Principles and applicable legislation.
(2) The Sharia Company is required to conduct financing activities as referred to in paragraph (1) based on applicable legislation and must not contradict Sharia Principles.

Article 38
(1) Financing from institutions and/or other business entities as referred to in Article 37 paragraph (1) letter a may come from:
a. Indonesian institutions and/or business entities; and/or b. foreign institutions and/or business entities.
(2) Financing as referred to in paragraph (1) must be conducted using the following contracts:
a. Mudharabah; b. Mudharabah Musytarakah;
c. Musyarakah...

c. Musyarakah;
d. Ijarah; e. Qardh; and/or f. other financing contracts in accordance with Sharia Principles.
(3) The amount of financing from institutions and/or other business entities originating from Indonesian institutions and/or business entities as referred to in paragraph (1) letter a must meet the minimum provision of at least IDR 300,000,000.00 (three hundred million rupiah) for each provider of financing with a repayment period of at least 1 (one) year. (4) The amount of financing from institutions and/or other business entities originating from foreign institutions and/or business entities as referred to in paragraph (1) letter b must meet the minimum provision of at least IDR 1,000,000,000.00 (one billion rupiah) for each provider of financing with a repayment period of at least 1 (one) year.

Article 39
Subordinated loans (Qardh) as referred to in Article 37 paragraph (1) letter b must meet the following provisions:
a. with a minimum term of 5 (five) years; b. in the event of liquidation, the claim right applies last among all existing loans; and
c. documented in the form of a notarial agreement between the Sharia Company and the lender.

Article 40
(1) The Sharia Company is required to meet the gearing ratio provision of a maximum of 10 (ten) times.
(2) The gearing ratio as referred to in paragraph (1) must be obtained from the comparison between the amount of financing...

originating from the provisions as referred to in Article 37 paragraph (1) letter a, Article 37 paragraph (1) letter b, and Article 37 paragraph (1) letter c with the difference between the sum of Equity and subordinated loans (Qardh) with participation. (3) Subordinated loans (Qardh) that can be counted as the divisor in the calculation of the gearing ratio as referred to in paragraph (2) are at a maximum of 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.

Article 41
(1) Sharia Companies receiving financing as referred to in Article 37 in foreign currency must conduct full hedge.
(2) Full hedge as referred to in paragraph (1) must be implemented for the principal of financing, investment returns/profit sharing, margin, remuneration (ujrah), and/or payment term.

Article 42
Sharia Companies intending to receive financing as referred to in Article 37 in foreign currency must meet the Financial Health Ratio for Sharia Financing as regulated in this OJK Regulation.

CHAPTER XII
PARTICIPATION

Article 43
(1) Sharia Financing Companies may only conduct direct participation in:
a. companies in the financial services sector in Indonesia; and/or b. companies related to the activities of the Sharia Financing Company.
(2) The total amount of direct participation of Sharia Financing Companies in companies in the financial services sector in Indonesia as referred to in paragraph (1) is at a maximum of 40% (forty percent) of the total Equity of the Sharia Financing Company. (3) The amount of direct participation of Sharia Financing Companies in entities within 1 (one) group is at a maximum of 10% (ten percent) of the total Equity of the Sharia Financing Company. (4) Sharia Financing Companies are required to meet the participation amount provisions as referred to in paragraph (2) and paragraph (3) at the time of conducting participation.

CHAPTER XIII
CERTIFICATION

Article 44
(1) Employees of the Sharia Company holding managerial positions from the branch head level up to one level below the Board of Directors and UUS leadership must have a basic level certificate in financing and/or Sharia financing from an institution designated by the association, with notification submitted to OJK and accompanied by reasons for appointment. (2) The Board of Directors of the Sharia Financing Company must have an expertise certificate in financing and/or Sharia financing from an institution designated by the association, with notification submitted to OJK and accompanied by reasons for appointment. (3) The Board of Commissioners of the Sharia Financing Company must...

(3) The Board of Commissioners of the Sharia Financing Company must have a basic level certificate in financing and/or Sharia financing from an institution designated by the association, with notification submitted to OJK and accompanied by reasons for appointment. (4) The Board of Directors and officials 1 (one) level below the Board of Directors of the Sharia Financing Company who oversee the risk management function must have an expertise certificate in risk management from an institution designated by the association, with notification submitted to OJK and accompanied by reasons for appointment. (5) Employees and/or outsourced personnel of the Sharia Company handling the collection field must have a professional certificate in collection from an institution designated by the association, with notification submitted to OJK and accompanied by reasons for appointment.

CHAPTER XIV
PROHIBITIONS

Article 45
Sharia Companies are prohibited from:
a. directly collecting funds from the public in the form of checking accounts, savings, and/or other forms equivalent thereto; b. providing guarantees for the fulfillment of obligations of other parties;
c. issuing promissory notes, except as a guarantee for financing to parties providing financing;
d. taking actions that cause or force other financial institutions under OJK supervision to violate applicable legislation; and/or e. taking actions that cause or force other financial institutions under OJK supervision to evade applicable legislation.

Article 46
Sharia Companies are prohibited from providing cash funds to Consumers.

Article 47
Sharia Companies are prohibited in conducting their business activities from using incorrect information that can harm the interests of Consumers, creditors, and stakeholders including OJK.

CHAPTER XV
SUBMISSION OF PERIODIC REPORTS

Article 48
(1) The Sharia Company is required to submit monthly reports to OJK.
(2) Sharia Financing Companies are required to submit annual financial reports audited by public accountants to OJK.
(3) Regulations regarding monthly reports as referred to in paragraph (1) are regulated in an OJK Regulation regarding monthly reports.

Article 49
(1) Sharia Financing Companies are required to submit annual financial reports audited by public accountants as referred to in Article 48 paragraph (2) to OJK no later than 4 (four) months after the last fiscal year. (2) The...

(2) Sharia Financing Companies are required to submit annual financial reports audited by public accountants as referred to in paragraph (1) completely and correctly in hard copy and soft copy form. (3) Annual financial reports audited as referred to in Article 48 paragraph (2) must be prepared based on applicable financial accounting standards in Indonesia. (4) Annual financial reports as referred to in Article 48 paragraph (2) must include calculations of matters specifically regulated in this OJK Regulation. (5) Annual financial reports audited by public accountants as referred to in Article 48 paragraph (2) 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 OJK. (8) In the event that a Sharia 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) shall apply in the following calendar year.

Article 50
In the event that the deadline for submitting annual financial reports as referred to in Article 49 paragraph (1) falls on a holiday, the submission deadline is the first working day following.

Article 51
(1) Sharia Financing Companies are required to announce the financial position report and a brief comprehensive income statement no later than 4 (four) months after...

after the end of the fiscal year at least in 1 (one) daily newspaper in Indonesia with national circulation.
(2) Sharia Financing Companies are required to report the implementation of the announcement as referred to in paragraph (1) in writing to OJK no later than 20 (twenty) calendar days after the implementation of the announcement, attached with proof of announcement. (3) In the event that the deadline for submitting the report on the implementation of the announcement as referred to in paragraph (2) falls on a holiday, the submission deadline is the first working day following.

CHAPTER XVI
INFORMATION SYSTEM AND TECHNOLOGY

Article 52
(1) In order to support the conduct of healthy business, Sharia Financing Companies are required to have an integrated information and technology system.
(2) The obligation as referred to in paragraph (1) applies to Sharia Financing Companies that have more than 5 (five) branch offices.

CHAPTER XVII
SHARIA COMPANIES IN THE ELECTRICITY AND SHIPPING SECTORS

Article 53
Sharia Companies that specifically conduct Sharia Financing activities in the electricity sector are not required to meet the provisions as referred to in Article 20 paragraph (1), Article 30 paragraph (1), and Article 40 paragraph (1).

Article 54...

Article 54
Sharia Companies that specifically conduct Sharia Financing activities in the field of shipping are not required to meet the provisions as referred to in Article 43 paragraph (2), paragraph (3), and paragraph (4).

CHAPTER XVIII
COMPLIANCE ENFORCEMENT

First Section
Notification

Article 55
(1) Sharia Financing Companies and Financing Companies that have UUS which do not meet the provisions as referred to in Article 2, Article 6 paragraph (1), Article 7, Article 8, Article 9, Article 11, Article 12 paragraph (1), Article 13 paragraph (1), Article 14 paragraph (1), Article 15 paragraph (1), Article 33 paragraph (3), Article 36 paragraph (1), Article 36 paragraph (3), Article 37 paragraph (2), Article 38 paragraph (2), Article 41, Article 48 paragraph (2), Article 49 paragraph (1), Article 49 paragraph (2), Article 49 paragraph (3), Article 49 paragraph (4), Article 49 paragraph (5), Article 49 paragraph (6), and Article 51, paragraph (1), and/or Article 51 paragraph (2) of this OJK Regulation shall be issued a notification letter.

(2) Sharia Financing Companies and Financing Companies that have UUS must fulfill the provisions as referred to in paragraph (1) within a maximum of 30 (thirty) working days from the date of the notification letter.

Second Section
Compliance Plan

Article 56
(1) Sharia Financing Companies and Financing Companies that have UUS which do not meet the provisions as referred to in Article 19 paragraph (1), Article 20 paragraph (1), Article 21, Article 23 paragraph (6), Article 24 paragraph (1), Article 24 paragraph (3), Article 25 paragraph (1), Article 26 paragraph (1), Article 26 paragraph (3), Article 27 paragraph (1), Article 30 paragraph (1), Article 30 paragraph (3), Article 31 paragraph (1), Article 31 paragraph (2), Article 31 paragraph (3) letter a, Article 31 paragraph (3) letter b, Article 32, Article 33 paragraph (1), Article 34 paragraph (1), Article 34 paragraph (2), Article 40 paragraph (1), Article 44, and/or Article 52 paragraph (1) of this OJK Regulation must submit a compliance plan within a maximum of 1 (one) month from the date of the determination of the violation by OJK.

(2) The compliance plan as referred to in paragraph (1) must at least contain plans to be carried out by Sharia Financing Companies and Financing Companies that have UUS for the fulfillment of provisions accompanied by a specific time period required to fulfill the provisions as referred to in paragraph (1).

(3) Fulfillment steps as referred to in paragraph (1) include among others:
a. asset and/or liability restructuring; b. increase in Paid-up Capital;
c. restriction on accepting new loans;
d. acceptance of subordinated loans; e. transfer of part or all of assets; f. restriction on profit distribution; g. restriction on activities causing violations of provisions; h. restriction on opening new branch offices; and/or
i. merger of business entities.

(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 plans for increasing Paid-up Capital or plans for business and/or business entity mergers.

(6) The compliance plan as referred to in paragraph (1) must obtain a no-objection statement from OJK.

(7) In the event that the compliance plan as referred to in paragraph (1) is deemed by OJK to be insufficient to address the problems, Sharia Financing Companies and Financing Companies that have UUS must improve the compliance plan.

(8) OJK issues a no-objection statement regarding the compliance plan submitted by Sharia Financing Companies and Financing Companies that have UUS, considering the conditions of the problems faced by Sharia Financing Companies and Financing Companies that have UUS, within a maximum of 14 (fourteen) calendar days calculated from the date of receiving the complete compliance plan.

(9) In the event that within the time period as referred to in paragraph (8), OJK does not issue a no-objection statement or response, Sharia Financing Companies and Financing Companies that have UUS may implement the compliance plan as referred to in paragraph (1).

(10) Sharia Financing Companies and Financing Companies that have UUS must implement the compliance plan as referred to in paragraph (1).

CHAPTER XIX
SANCTIONS

Article 57
(1) In the event that by the end of the notification letter period as referred to in Article 55 paragraph (2), Sharia Financing Companies and Financing Companies that have UUS do not also fulfill the provisions as referred to in Article 55 paragraph (1), Sharia Financing Companies and Financing Companies that have UUS shall be subject to administrative sanctions in the form of:
a. warning; b. suspension of business activities;
c. suspension of UUS business activities;
d. revocation of business license; and/or e. revocation of UUS license.

(2) Sharia Financing Companies and Financing Companies that have UUS which 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 each validity period of a maximum of 2 (two) months.

(4) In the event that before the end of the warning sanction period as referred to in paragraph (2), Sharia Financing Companies and Financing Companies that have UUS have fulfilled the provisions as referred to in Article 55 paragraph (1), OJK revokes the warning sanction.

(5) In the event that the validity period of the third warning as referred to in paragraph (2) ends and Sharia Financing Companies and Financing Companies that have UUS still do not fulfill the provisions as referred to in Article 55 paragraph (1), OJK imposes:
a. business suspension sanctions for Sharia Financing Companies; or b. UUS business suspension sanctions for Financing Companies that have UUS.

(6) Business suspension sanctions as referred to in paragraph (5) are issued in writing and are valid for a period of 6 (six) months from:
a. the date of the business suspension sanction letter issued for Sharia Financing Companies; or b. the date of the UUS business suspension sanction letter issued for Financing Companies that have UUS.

(7) In the event that the validity period of warning and/or business suspension sanctions ends on a holiday, the warning and/or business suspension sanctions are valid until the first working day following.

(8) Sharia Financing Companies and Financing Companies that have UUS subject to business suspension sanctions as referred to in paragraph (5) are prohibited from conducting Sharia Financing activities.

(9) In the event that before the end of the business suspension period as referred to in paragraph (6), Sharia Financing Companies and Financing Companies that have UUS have fulfilled the provisions as referred to in Article 55 paragraph (1), OJK revokes:
a. business suspension sanctions for Sharia Financing Companies; or b. UUS business suspension sanctions for Financing Companies that have UUS.

(10) In the event that business suspension sanctions are still valid and Sharia Financing Companies and Financing Companies that have UUS continue to conduct Sharia Financing business activities, OJK may directly revoke:
a. business licenses for Sharia Financing Companies; or b. UUS licenses for Financing Companies that have UUS.

(11) In the event that by the end of the business suspension period as referred to in paragraph (6), Sharia Financing Companies and Financing Companies that have UUS do not also fulfill the provisions as referred to in Article 55 paragraph (1), OJK revokes:
a. business licenses for Sharia Financing Companies; or b. UUS licenses for Financing Companies that have UUS.

(12) OJK may announce to the public:
a. business suspension sanctions as referred to in paragraph (1) letter b; b. UUS business suspension sanctions as referred to in paragraph (1) letter c;
c. business license revocation sanctions as referred to in paragraph (1) letter d; and/or
d. UUS license revocation sanctions as referred to in paragraph (1) letter e.

Article 58
(1) Sharia Financing Companies and Financing Companies that have UUS which violate the provisions as referred to in Article 56 paragraph (1), paragraph (7), or paragraph (10) of this OJK Regulation, Sharia Financing Companies and Financing Companies that have UUS are subject to administrative sanctions in the form of:
a. warning; b. business suspension;
c. UUS business suspension;
d. business license revocation; and/or e. UUS license revocation.

(2) In addition to sanctions as referred to in paragraph (1), OJK may impose additional sanctions in the form of:
a. restriction on certain business activities; b. downgrade of health level;
c. cancellation of approval; and/or
d. reassessment of competence and propriety.

(3) Sharia Financing Companies and Financing Companies that have UUS which 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, are issued in writing at most 3 (three) times consecutively with each validity period of a maximum of 2 (two) months.

(5) In the event that before the end of the warning sanction period as referred to in paragraph (4), Sharia Financing Companies and Financing Companies that have UUS have fulfilled the provisions as referred to in Article 56 paragraph (1), paragraph (7), or paragraph (10), 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 Sharia Financing Companies and Financing Companies that have UUS still do not fulfill the provisions as referred to in Article 56 paragraph (1), paragraph (7), or paragraph (10), OJK imposes:
a. business suspension sanctions for Sharia Financing Companies; or b. UUS business suspension sanctions for Financing Companies that have UUS.

(7) In the event that Sharia Financing Companies and Financing Companies that have UUS commit violations as referred to in Article 30 paragraph (1) or paragraph (3) and do not fulfill the provisions as referred to in Article 56 paragraph (1), paragraph (7), or paragraph (10) until the end of the third warning period as referred to in paragraph (4), then:
a. the Sharia Financing Companies concerned are subject to business license revocation sanctions; or b. Financing Companies that have UUS concerned are subject to UUS license revocation sanctions, without prior business suspension sanctions or UUS business suspension sanctions as referred to in paragraph (6).

(8) Business suspension sanctions as referred to in paragraph (6) are issued in writing and are valid for a period of 6 (six) months from:
a. the date of the business suspension sanction letter issued for Sharia Financing Companies; or b. the date of the UUS business suspension sanction letter issued for Financing Companies that have UUS.

(9) In the event that the validity period of warning and/or business suspension sanctions ends on a holiday, the warning and/or business suspension sanctions are valid until the first working day following.

(10) Sharia Financing Companies and Financing Companies that have UUS subject to business suspension sanctions as referred to in paragraph (6) are prohibited from conducting Sharia Financing activities.

(11) In the event that before the end of the business suspension period as referred to in paragraph (8), Sharia Financing Companies and Financing Companies that have UUS have fulfilled the provisions as referred to in Article 56 paragraph (1), paragraph (7), or paragraph (10), OJK revokes:
a. business suspension sanctions for Sharia Financing Companies; or b. UUS business suspension sanctions for Financing Companies that have UUS.

(12) In the event that business suspension sanctions are still valid and Sharia Financing Companies and Financing Companies that have UUS continue to conduct Sharia Financing business activities, OJK may directly revoke:
a. business licenses for Sharia Financing Companies; or b. UUS licenses for Financing Companies that have UUS.

(13) In the event that by the end of the business suspension period as referred to in paragraph (8), Sharia Financing Companies and Financing Companies that have UUS do not also fulfill the provisions as referred to in Article 56 paragraph (1), paragraph (7), or paragraph (10), OJK revokes:
a. business licenses for Sharia Financing Companies; or b. UUS licenses for Financing Companies that have UUS.

(14) OJK may announce to the public:
a. sanctions restricting certain business activities as referred to in paragraph (2) letter a; b. business suspension sanctions as referred to in paragraph (1) letter b;
c. UUS business suspension sanctions as referred to in paragraph (1) letter c;
d. business license revocation sanctions as referred to in paragraph (1) letter d; and/or e. UUS license revocation sanctions as referred to in paragraph (1) letter e.

Article 59
(1) Sharia Financing Companies and Financing Companies that have UUS which violate the provisions as referred to in Article 16, Article 17, Article 18, Article 31 paragraph (3) letter c, Article 38 paragraph (3), Article 38 paragraph (4), Article 42, Article 43 paragraph (4), Article 45, Article 46, and/or Article 47 of this OJK Regulation are subject to administrative sanctions in the form of:
a. warning; b. business suspension;
c. UUS business suspension;
d. business license revocation; and/or e. UUS license revocation.

(3) Warning sanctions as referred to in paragraph (1) letter a, may be issued in writing at most 3 (three) times consecutively with each validity period of a maximum of 2 (two) months.

(5) In the event that the validity period of the third warning as referred to in paragraph (2) ends and Sharia Financing Companies and Financing Companies that have UUS still do not fulfill the provisions as referred to in paragraph (1), OJK imposes:
a. business suspension sanctions for Sharia Financing Companies; or b. UUS business suspension sanctions for Financing Companies that have UUS.

(6) Business suspension sanctions as referred to in paragraph (4) are issued in writing and are valid for a period of 6 (six) months from:
a. the date of the business suspension sanction letter issued for Sharia Financing Companies; or b. the date of the UUS business suspension sanction letter issued for Financing Companies that have UUS.

(8) Sharia Financing Companies and Financing Companies that have UUS subject to business suspension sanctions as referred to in paragraph (4) are prohibited from conducting Sharia Financing activities.

(9) In the event that before the end of the business suspension period as referred to in paragraph (5), Sharia Financing Companies and Financing Companies that have UUS have fulfilled the provisions as referred to in paragraph (1), OJK revokes:
a. business suspension sanctions for Sharia Financing Companies; or b. UUS business suspension sanctions for Financing Companies that have UUS.

(11) In the event that by the end of the business suspension period as referred to in paragraph (5), Sharia Financing Companies and Financing Companies that have UUS do not also fulfill the provisions as referred to in paragraph (1), OJK revokes:
a. business licenses for Sharia Financing Companies; or b. UUS licenses for Financing Companies that have UUS.

Article 60
(1) OJK may impose:
a. business suspension sanctions for Sharia Financing Companies; or b. UUS business suspension sanctions for Financing Companies that have UUS, without prior imposition of warning sanctions if Sharia Financing Companies and Financing Companies that have UUS commit violations of Article 45 letter a.

(2) Business suspension sanctions as referred to in paragraph (1) are issued in writing and are valid from the date of determination for a maximum period of 6 (six) months.

(3) In the event that the validity period of business suspension sanctions ends on a holiday, the business suspension sanctions are valid until the first working day following.

(4) Sharia Financing Companies and Financing Companies that have UUS subject to business suspension sanctions as referred to in paragraph (1) are prohibited from conducting business activities.

(5) In the event that before the end of the business suspension period as referred to in paragraph (2), Sharia Financing Companies and Financing Companies that have UUS have fulfilled the provisions as referred to in paragraph (1), OJK revokes business suspension sanctions.

(6) In the event that business suspension sanctions are still valid and Sharia Financing Companies and Financing Companies that have UUS continue to conduct Sharia Financing business activities, OJK may directly revoke:
a. business licenses for Sharia Financing Companies; or b. UUS licenses for Financing Companies that have UUS.

(7) In the event that by the end of the business suspension period as referred to in paragraph (2), Sharia Financing Companies and Financing Companies that have UUS do not also fulfill the provisions as referred to in paragraph (1), OJK revokes:
a. business licenses for Sharia Financing Companies; or b. UUS licenses for Financing Companies that have UUS.

(8) OJK may announce business suspension sanctions as referred to in paragraph (1) and business license revocation sanctions as referred to in paragraph (6) or paragraph (7) to the public.

Article 61
In the event that Sharia Financing Companies and Financing Companies that have UUS receive administrative sanctions in the form of warning sanctions as referred to in Article 57 paragraph (1) letter a, Article 58 paragraph (1) letter a, and/or Article 59 paragraph (1) letter a cumulatively 5 (five) times or more within a period of 2 (two) years, OJK may request the Board of Directors, Board of Commissioners, and/or Sharia Supervisory Board of Sharia Financing Companies and Financing Companies that have UUS to participate in a reassessment of competence and propriety.

CHAPTER XX
TRANSITIONAL PROVISIONS

Article 62
(1) Financing Companies that have conducted part or all of their business activities based on Sharia Principles before this OJK Regulation is established, may conduct Sharia Financing activities as referred to in Article 3 within a maximum period of 6 (six) months from the date this OJK Regulation is established.

(2) Sharia Financing Agreements that have been conducted by Sharia Companies before this OJK Regulation is established are declared to remain valid until the end of the respective Sharia Financing Agreements.

Article 63
For Financing Companies that have conducted part or all of their business activities based on Sharia Principles before this OJK Regulation is established, the provisions as referred to in Article 19, Article 20 paragraph (1), Article 21, Article 22, Article 23, Article 24, Article 25, and Article 26 are declared to be valid 1 (one) year from the date this OJK Regulation is established.

Article 64
(1) For Financing Companies that have conducted part or all of their business activities based on Sharia Principles before this OJK Regulation is established, the provisions as referred to in Article 33 paragraph (1), Article 34 paragraph (1), and Article 34 paragraph (2) are declared to be valid 2 (two) years from the date this OJK Regulation is established.

(2) Financing disbursements that exceed the BMPPS provisions as referred to in Article 33 paragraph (1), Article 34 paragraph (1), and Article 34 paragraph (2) before this OJK Regulation is established, may continue until the end of the financing agreement period and are not calculated as the basis for BMPPS calculation.

Article 65
The provisions as referred to in Article 41 are declared not to apply to funding in foreign currency that has been received by Sharia Companies before this OJK Regulation is established.

Article 66
For Financing Companies that have conducted part or all of their business activities based on Sharia Principles before this OJK Regulation is established, the provisions as referred to in Article 44 are declared to be valid 3 (three) years from the date this OJK Regulation is established.

Article 67
Sharia Financing Agreements related to Sharia Financing in the form of cash fund provision that have been conducted before this OJK Regulation is established, may continue until the end of the agreement period.

Article 68
The provisions and mechanisms for monthly reporting by Sharia Companies are declared to remain valid as long as there are no regulations regulating monthly reporting provisions...

monthly according to business activities in this OJK Regulation.

Article 69
For Sharia Financing Companies that have conducted part or all of their business activities based on Sharia Principles before this OJK Regulation was established, the provisions referred to in Article 52 paragraph (1) shall apply starting 2 (two) years from the date this OJK Regulation was established.

Article 70
(1) Every administrative sanction that has been imposed on Sharia Companies based on:
a. Regulation of the Minister of Finance Number 84/PMK.012/2006 concerning Financing Companies; b. Regulation of the Minister of Finance Number 30/PMK.010/2010 concerning the Application of Customer Due Diligence Principles for Non-Bank Financial Institutions;
c. Regulation of the Minister of Finance Number 43/PMK.010/2012 concerning Consumer Financing Down Payments for Motor Vehicles on Financing Companies as amended by Regulation of the Minister of Finance Number 220/PMK.010/2012; and/or
d. Regulation of the Minister of Finance Number 130/PMK.010/2012 concerning Fiduciary Guarantee Registration for Financing Companies Conducting Consumer Financing for Motor Vehicles with Fiduciary Guarantee Encumbrance, is declared valid and effective.

(2) Sharia Companies that have not been able to overcome the causes of administrative sanctions as referred to in paragraph (1) are subject to further sanctions in accordance with this OJK Regulation.

CHAPTER XXI ...

CHAPTER XXI
CLOSING PROVISIONS

Article 71
At the time this OJK Regulation comes into force, provisions concerning the conduct of Sharia Financing Company business are subject to this OJK Regulation.

Article 72
This OJK Regulation comes into force on the date of enactment.

To ensure that everyone knows it, ordering the enactment of this OJK Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta on 19 November 2014

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

Enacted 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 366 Copy in accordance with the original Legal Director 1 Legal Department, Signed, Tini Kustini

EXPLANATION
OF
FINANCIAL SERVICES AUTHABILITY REGULATION
NUMBER 31/POJK.05/2014
CONCERNING
THE CONDUCT OF SHARIA FINANCING BUSINESS

I. GENERAL
National development requires the contribution and participation of all elements of society. One form of tapping potential and manifesting society's contribution to the national economy is the development of an economic system based on Sharia Principles in Sharia financing.

The development of Sharia financing has experienced rapid growth in terms of asset growth as well as institutional or network growth. However, this rapid growth in Sharia financing is insufficient compared to the public's need for Sharia financing services.

With the increasing public preference for Sharia financing service services, it is necessary to establish regulations regarding the conduct of Sharia financing business that are comprehensive, transparent, and provide legal certainty, both for Sharia Financing Companies, Sharia Business Units, and Sharia financing consumers, including regulations on Sharia financing activities, Sharia financing agreements, down payments, financing risk mitigation, financial health levels, and funding sources. Meanwhile, in order to provide legal certainty, clear and transparent sanctions must be included for Sharia Financing Companies, Sharia Business Units, or other parties who violate these provisions.

Furthermore, with the implementation of Law Number 21 of 2011 concerning the Financial Services Authority, several improvements to regulations are necessary regarding the implementation of the supervision system by the Financial Services Authority over Sharia Financing Companies and Sharia Business Units.

In ...

In relation to the above, it is also necessary to pay attention to legislation that is relevant to these provisions, including legislation concerning limited liability companies, cooperatives, capital markets, and other provisions.

II. ARTICLE BY ARTICLE

Article 1
Sufficiently clear.

Article 2
What is meant by:
“Adl” is placing something only in its place, giving something only to those entitled, and treating something according to its position.
“Tawazun” includes the balance of material and spiritual aspects, private and public aspects, financial sector and real sector, business and social aspects, and the balance of utilization and sustainability aspects. “Maslahah” is all forms of goodness with worldly and hereafter dimensions, material and spiritual, individual and collective, and must meet 3 (three) elements, namely Sharia compliance (halal), beneficial, and bringing goodness (thoyib) in all aspects overall without causing harm. “Alamiyah” can be done by, with, and for all interested parties (stakeholders) without distinguishing ethnicity, religion, race, and class, in accordance with the spirit of universal mercy (rahmatan lil alamin). “Gharar” is a transaction where the object is unclear, not owned, not known to exist, or cannot be delivered at the time the transaction is made unless otherwise regulated in Sharia. “Maysir” is a speculative (gambling) transaction that is not directly related to productivity in the real sector. “Riba” is the assurance of illegal income addition (bathil), including in transactions of exchange of similar goods that are not equal in quality, quantity, and time of delivery (fadhl), or in loan transactions that require the recipient of the facility to return funds received exceeding the principal loan due to the passage of time (nasiah).

“Zhulm” is a transaction that causes injustice to other parties.
"Risywah" is bribery in the form of money, facilities, or other forms that violate the law as an effort to obtain facilities or ease in a transaction.
Haram Objects are goods or services prohibited in Sharia.

Article 3
Sufficiently clear.

Article 4
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Included in Sharia Financing Services that can be conducted by Sharia Companies are activities marketing financial service products such as mutual funds, micro insurance, or other products related to financial service activities. Paragraph (4) Sufficiently clear. Paragraph (5) Sufficiently clear.

Article 5
Paragraph (1)
Sharia Financing activities using a single contract include Sharia Financing Sales and Purchase using the Murabahah contract.
Sharia Financing activities using combined contracts include Sharia Financing services for intermediary business (wasathah) in ...

in property business, conducted using combined contracts as follows:
a. Combined intermediary contract (wakalah bil ujrah contract, ju'ah contract, or bai' al-samsarah contract) and bai' contract, and may be accompanied by ijarah contract. b. Combined sales contract (aqd al-bai'), ijarah contract, and intermediary contract (wakalah bil ujrah contract, ju'ah contract, or bai' al-samsarah contract).
c. Combined intermediary contract (wakalah bil ujrah contract, ju'ah contract, or bai' al-samsarahy; musyarakah contract, or mudharabah contract.
Paragraph (2)
What is meant by the use of combined contracts is done for “a specific Sharia Financing activity” including the use of combined sales contract (aqd al-bai'), ijarah contract, and intermediary contract (wakalah bil ujrah contract, ju'ah contract, or bai' al-samsarah contract) with the aim of conducting Sharia Financing services for intermediary business (wasathah) in property business. Paragraph (3) Sufficiently clear

Article 6
Sufficiently clear.

Article 7
Sufficiently clear.

Article 8
Sufficiently clear.

Article 9
Sufficiently clear.

Article 10
Sufficiently clear.

Article 11
Sufficiently clear.

Article 12 ...

Article 12
Sufficiently clear.

Article 13
Paragraph (1)
What is meant by Sharia Financing risk mitigation is efforts implemented by Sharia Companies to reduce risks borne by Sharia Companies due to the inability/failure of Consumers to fulfill payment obligations to Sharia Companies. Paragraph (2) Sharia Companies may conduct Sharia Financing risk mitigation through other means outside the provisions referred to in letters a, b, and/or c.

Article 14
Sufficiently clear.

Article 15
Sufficiently clear.

Article 16
Sufficiently clear.

Article 17
Sufficiently clear.

Article 18
Sufficiently clear.

Article 19
Sufficiently clear.

Article 20
Sufficiently clear.

Article 21
Productive Asset quality assessment is conducted on the balance of Productive Assets, not based on the amount of principal installments, margins, investment returns/profit sharing, and/or service fees (ujrah) that have matured. Steps ...

Steps that Sharia Companies can take to keep Productive Assets good include the application of adequate standard operating procedures and periodic monitoring of Productive Asset quality.

Article 22
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
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
What is meant by “license” is the business license for Sharia Financing Companies or UUS license.
Paragraph (4) ...

Paragraph (4)
What is meant by “since the date of capital increase” is calculated from:
a. the date of approval and/or recording by the competent authority regarding the increase in paid-up capital for Sharia Financing Companies in the form of limited liability companies; and b. the date of the members' meeting regarding the increase in principal savings and mandatory savings for Sharia Financing Companies in the form of cooperative legal entities; or
c. the date of the board of directors' decision of the Financing Company (or competent official) regarding the increase in working capital for UUS.

Article 31
Sufficiently clear.

Article 32
Sufficiently clear.

Article 33
Paragraph (1)
Sufficiently clear.
Paragraph (2)
In the case of UUS, the determination of related parties is based on the parent Financing Company.
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
Sufficiently clear.
Letter d
Sufficiently clear.
Letter e ...

Letter e
Sufficiently clear.
Letter f
What is meant by family relations up to the second degree, both horizontal and vertical, are the following parties:

biological/step/adopted parents;
biological/step/adopted siblings;
biological/step/adopted children;
biological/step/adopted grandparents;
biological/step/adopted grandchildren;
biological/step/adopted siblings of parents;
husband or wife;
in-laws or siblings-in-law;
husband or wife of biological/step/adopted children;
grandparents of husband or wife;
husband or wife of biological/step/adopted grandchildren;
biological/step/adopted siblings of husband or wife along with the husband or wife of the respective sibling.
Letter g
What is meant by the board of directors for business entities that are not limited liability companies or cooperatives is the party performing management functions as regulated in legislation. What is meant by the board of commissioners for business entities that are not limited liability companies or cooperatives is the party performing supervision and advisory functions as regulated in legislation. Letter h What is meant by the board of directors for business entities that are not limited liability companies or cooperatives is the party performing ...

performing management functions as regulated in legislation.
What is meant by the board of commissioners for business entities that are not limited liability companies or cooperatives is the party performing supervision and advisory functions as regulated in legislation. Letter i Number 1 Sufficiently clear Number 2 What is meant by the board of directors for business entities that are not limited liability companies or cooperatives is the party performing management functions as regulated in legislation. What is meant by the board of commissioners for business entities that are not limited liability companies or cooperatives is the party performing supervision and advisory functions as regulated in legislation. Letter j Financial interdependence as referred to in letter j is a condition where there is financial interdependence between financing companies and other parties, including loan transactions in amounts significantly larger than the value of the financing company's Equity, subordinated loans, and others. Paragraph (3) Sufficiently clear.

Article 34
Sufficiently clear.

Article 35 ...

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Article 35
What is meant by financing for the procurement of goods and/or services in the context of government programs is financing for:

food procurement;
very simple housing procurement;
procurement/provision/management of oil and gas and other equivalent alternative energy sources;
procurement/processing of export-oriented commodities;
procurement/provision/management of water;
procurement/provision/management of electricity; and/or
procurement of supporting transportation infrastructure, sea and air, including the construction of roads, bridges, railway tracks, seaports, and airports.

Article 36
Sufficiently clear.

Article 37
Sufficiently clear.

Article 38
Sufficiently clear.

Article 39
Sufficiently clear.

Article 40
Sufficiently clear.

Article 41
Paragraph (1)
Sufficiently clear.
Paragraph (2)
In the case of Sharia Companies that receive funding, disburse financing, and receive payments in the same foreign currency, they are categorized as having conducted natural hedge as one of the hedging efforts.

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Article 42
Sufficiently clear.

Article 43
Paragraph (1)
Letter a
Sufficiently clear.
Letter b
Companies related to Sharia Financing Company activities include: motor vehicle dealers, credit information bureau providers, outsourcing providers in the collection field, and/or surveyors. Paragraph (2) Sufficiently clear. Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear.

Article 44
Paragraph (1)
What is meant by association is the Indonesian financing company association recognized by OJK.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Sufficiently clear.
Paragraph (5) ...

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Paragraph (5)
Sufficiently clear.

Article 45
Sufficiently clear.

Article 46
What is meant by “provision of funds in cash” in this paragraph is the disbursement of financing not based on transactions for the procurement of goods or services. Not included in the definition of cash fund provision includes the provision of assistance (Qardh) in the context of financing paid using cards that function as credit cards in accordance with Sharia principles (sharia card) and assistance (Qardh) in the context of Sharia factoring.

Article 47
Sufficiently clear.

Article 48
Sufficiently clear.

Article 49
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
What is meant by specially regulated matters is calculations related to Financial Health Levels and ratios regulated in this OJK Regulation.
Paragraph (5)
Sufficiently clear.
Paragraph (6) ...

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Paragraph (6)
Sufficiently clear.
Paragraph (7)
Sufficiently clear.
Paragraph (8)
Sufficiently clear.

Article 50
Sufficiently clear.

Article 51
Sufficiently clear.

Article 52
Sufficiently clear.

Article 53
Sufficiently clear.

Article 54
Sufficiently clear.

Article 55
Sufficiently clear.

Article 56
Sufficiently clear.

Article 57
Sufficiently clear.

Article 58
Sufficiently clear.

Article 59
Sufficiently clear.

Article 60
Sufficiently clear.

Article 61 ...

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Article 61
Sufficiently clear.

Article 62
Paragraph (1)
The provision of a 6 (six) month time limit in these provisions is intended to give Sharia Financing Companies that have conducted part or all of their business activities based on Sharia Principles before this OJK Regulation was established the opportunity to continue conducting their business activities until the given deadline to apply for the business licensing process as regulated in the OJK Regulation concerning business licensing and financing company institutions. Paragraph (2) Sufficiently clear.

Article 63
Sufficiently clear.

Article 64
Sufficiently clear.

Article 65
Sufficiently clear.

Article 66
Sufficiently clear.

Article 67
Sufficiently clear.

Article 68
Sufficiently clear.

Article 69
Sufficiently clear.

Article 70
Sufficiently clear.

Article 71 ...

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Article 71
Sufficiently clear.

Article 72
Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5640 ---

Lineage: No known changes