COPY
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 29/POJK.03/2019
CONCERNING
PRODUCTIVE ASSET QUALITY AND FORMATION OF PRODUCTIVE ASSET WRITE-DOWN PROVISIONS FOR SHARIA MICROFINANCE BANKS

BY THE GRACE OF THE ALMIGHTY GOD,
THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that the continuity of business of Sharia microfinance banks is influenced by the quality of productive assets, so that Sharia microfinance banks must always pay attention to the principles of prudence and the principles of healthy financing; b. that it is necessary to harmonize regulations regarding the quality of productive assets and the formation of write-down provisions for productive assets of Sharia microfinance banks with several related regulations to create a productive, healthy, and competitive Sharia microfinance bank industry;
c. that in connection with the dynamic and challenging development of the Sharia microfinance bank industry in facing asset management risks, it is necessary to improve regulations regarding the quality of productive assets and the formation of write-down provisions for productive assets of Sharia microfinance banks;
d. that based on the considerations referred to in letters a, b, and c, it is necessary to establish a Financial Services Authority Regulation on Productive Asset Quality and Formation of Productive Asset Write-down Provisions for Sharia Microfinance Banks;

Recalling:

Law Number 21 of 2008 concerning Sharia Banking (State Gazette of the Republic of Indonesia Year 2008 Number 94, Supplement to the State Gazette of the Republic of Indonesia Number 4867);
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:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION ON PRODUCTIVE ASSET QUALITY AND FORMATION OF PRODUCTIVE ASSET WRITE-DOWN PROVISIONS FOR SHARIA MICROFINANCE BANKS.

CHAPTER I
GENERAL PROVISIONS

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

Sharia Microfinance Bank, hereinafter abbreviated as BPRS, is a Sharia bank that does not provide payment circulation services in its activities.
Productive Asset is the provision of funds by BPRS in Indonesian Rupiah to generate income, including in the form of financing, placement with Bank Indonesia, and placement with other banks in accordance with Sharia principles.
Financing is the provision of funds or claims equivalent thereto in the form of profit-sharing transactions, leasing transactions including service leasing, sales transactions, and borrowing transactions based on agreements or consensus between BPRS and other parties, which obligate the financed party and/or the party receiving financial facilities to repay the funds after a certain period with a fee (ujrah), without a fee, margin, or profit-sharing.
Financing based on the Mudharabah contract, hereinafter referred to as Mudharabah Financing, is Financing in the form of a business cooperation between BPRS, which provides all capital, and customers who act as fund managers, sharing business profits according to agreements stipulated in the contract, while losses are borne entirely by BPRS unless the customer commits intentional misconduct, negligence, or violates the agreement.
Financing based on the Musyarakah contract, hereinafter referred to as Musyarakah Financing, is Financing in the form of cooperation between BPRS and customers for a specific business where each party provides a portion of funds, with the provision that profits will be shared according to the agreement, while losses are borne according to each party's capital portion.
Financing based on the Murabahah contract, hereinafter referred to as Murabahah Financing, is Financing of goods by stating the purchase price to the buyer, and the buyer pays it at a higher price as agreed profit.
Financing based on the Istishna contract, hereinafter referred to as Istishna Financing, is Financing of goods in the form of ordering the manufacture of specific goods with agreed criteria and requirements between the customer and the seller or manufacturer, with payment according to the agreement.
Financing based on the Ijarah contract, hereinafter referred to as Ijarah Financing, is Financing to transfer the right to use or benefit of goods or services based on leasing transactions, without following the transfer of ownership of the goods themselves.
Financing based on the Ijarah Muntahiyah Bittamlik contract, hereinafter referred to as IMBT Financing, is Financing to transfer the right to use or benefit of goods or services based on leasing transactions with an option to transfer ownership of the goods.
Financing based on the Qardh contract, hereinafter referred to as Qardh Financing, is Financing in the form of fund loans to customers, with the provision that customers must repay the funds they received at an agreed time.
Placement with Other Banks is the placement of funds in Sharia commercial banks, Sharia business units, or other BPRS based on Sharia principles in the form of current accounts, savings, deposits, certificates of deposit, and/or other fund placements in accordance with Sharia principles.
Projected Profit Sharing, hereinafter abbreviated as PBH, is the estimated income to be received by BPRS from customers for Mudharabah Financing and Musyarakah Financing after calculating the profit-sharing ratio, with amounts and maturity dates agreed upon between BPRS and customers.
Realized Profit Sharing, hereinafter abbreviated as RBH, is the income received by BPRS from customers for Mudharabah Financing and Musyarakah Financing after calculating the profit-sharing ratio.
Foreclosed Collateral, hereinafter abbreviated as AYDA, is assets purchased by BPRS to settle Financing, either through auction, or outside auction based on voluntary surrender by the collateral owner or based on a power of attorney to sell outside auction from the collateral owner, in cases where customers are declared non-performing.
Productive Asset Write-down Provisions, hereinafter abbreviated as PPAP, are reserves that must be formed at a certain percentage based on the quality of Productive Assets.
Board of Directors is the BPRS organ authorized and fully responsible for managing BPRS for the benefit of BPRS, in accordance with the purpose and objectives of BPRS, and representing BPRS, both inside and outside the court, in accordance with the articles of association.
Board of Commissioners is the BPRS organ tasked with conducting general and/or specific supervision in accordance with the articles of association and providing advice to the Board of Directors.
Customer is an individual, company, or party that receives financial facility facilities from BPRS.
Financing Restructuring is an improvement effort made by BPRS in Financing activities for Customers experiencing difficulties in fulfilling obligations.
Sharia Principles are Islamic legal principles in banking activities based on fatwas issued by institutions having authority in determining fatwas in the field of Sharia.

CHAPTER II
PRODUCTIVE ASSET QUALITY

First Section
General

Article 2
(1) BPRS is required to provide funds in Productive Assets based on the principles of prudence and Sharia Principles.
(2) To implement the principles of prudence as referred to in paragraph (1), the BPRS Board of Directors is required to assess, monitor, and take necessary steps to ensure that the quality of Productive Assets remains performing.

Article 3
(1) For the provision of funds in the form of Financing, BPRS is required to have and apply written Financing policies and Financing procedures referring to the BPRS Financing Policy Guidelines. (2) Regulations regarding the BPRS Financing Policy Guidelines as referred to in paragraph (1) are contained in Appendix I, which is an integral part of this Financial Services Authority Regulation. (3) Financing policies as referred to in paragraph (1) must be approved by the Board of Commissioners. (4) Financing procedures as referred to in paragraph (1) must be approved by the Board of Directors. (5) Any changes to Financing policies as referred to in paragraph (1) must be reported to the Financial Services Authority no later than 30 (thirty) working days from the occurrence of the change. (6) BPRS that obtain business licenses after the implementation of this Financial Services Authority Regulation is required to have and apply Financing policies and Financing procedures since commencing business activities. (7) BPRS that have obtained business licenses before the implementation of this Financial Services Authority Regulation is required to submit Financing policies as referred to in paragraph (1) no later than December 31, 2020.

Article 4
(1) The Board of Commissioners is required to conduct effective supervision over the implementation of Financing policies as referred to in Article 3 paragraph (1). (2) Effective supervision conducted by the Board of Commissioners as referred to in paragraph (1) includes at least:
a. reviewing and approving Financing policies proposed by the Board of Directors; b. supervising the implementation of the Board of Directors' responsibilities regarding the application of Financing policies and Financing procedures; and
c. reporting the results of supervision over the implementation of Financing policies and Financing procedures by the Board of Directors to the Financial Services Authority in the business plan supervision report as regulated in Financial Services Authority Regulations regarding business plans for rural credit banks and Sharia microfinance banks.
(3) Supervision result reports as referred to in paragraph (2) letter c must contain at least:
a. the application of prudence principles in providing Financing, including:

assessment of the application of Financing policies and Financing procedures;
fulfillment of PPAP;
maximum limit of fund disbursement;
Financing to related parties, group customers, and/or specific large customers; and
handling of problematic Financing, consisting of Financing Restructuring, collateral takeover, write-off, and/or write-down;
b. assessment of the implementation of handling problematic Financing, accompanied by an explanation of the causes of problematic Financing and efforts made to resolve it; and
c. recommendations and suggestions from the Board of Commissioners regarding the implementation of Financing policies.

Article 5
(1) BPRS is required to assess and determine the quality of Productive Assets in accordance with this Financial Services Authority Regulation.
(2) In the event of a difference in the determination of Productive Asset quality between BPRS and the Financial Services Authority, the Productive Asset quality determined by the Financial Services Authority shall apply. (3) BPRS is required to adjust the quality of Productive Assets in accordance with that determined by the Financial Services Authority as referred to in paragraph (2) in reports submitted to the Financial Services Authority as regulated in Financial Services Authority Regulations regarding reporting for rural credit banks and Sharia microfinance banks through the Financial Services Authority reporting system.

Second Section
Financing

Article 6
(1) BPRS is required to determine the quality of Productive Assets in the form of Financing equally for several Financing accounts:
a. used to finance 1 (one) Customer or 1 (one) project or the same business at the same BPRS; and/or b. provided by more than 1 (one) BPRS jointly used to finance 1 (one) Customer or 1 (one) project or the same business based on joint Financing agreements. (2) In the event of differences in the quality of Productive Assets in the form of Financing as referred to in paragraph (1), BPRS is required to determine the quality of each Financing following the lowest Financing quality. (3) BPRS may determine unequal quality for Financing provided to 1 (one) same Customer as referred to in paragraph (1) as long as the Customer meets at least the following requirements:
a. Financing for different projects or businesses; and b. there is a clear separation of cash flows from each project or business that serves as the source of repayment of principal and/or margin/profit-sharing/ujrah. (4) BPRS that determine unequal quality for Financing provided to 1 (one) Customer as referred to in paragraph (3) must document a list containing the Customer's name along with details including the financed project, financing ceiling and outstanding balance, quality determined by BPRS and/or other BPRS, and reasons for determining different qualities. (5) In the event that the results of Financial Services Authority supervision reveal that the assessment conducted by BPRS does not meet the requirements as referred to in paragraph (3), the assessment used shall be as referred to in paragraph (1).

Article 7
(1) The quality of Productive Assets in the form of Financing provided by each BPRS to 1 (one) Customer or 1 (one) project or business with an amount of at most IDR 5,000,000,000.00 (five billion Rupiah) is assessed based on the timeliness of repayment of principal and/or margin/profit-sharing/ujrah. (2) The quality of Productive Assets in the form of Financing provided by each BPRS to 1 (one) Customer or 1 (one) project or business with an amount exceeding IDR 5,000,000,000.00 (five billion Rupiah) is assessed based on assessment factors:
a. business prospects; b. customer performance; and
c. repayment ability.
(3) The determination of Productive Asset quality in the form of Financing as referred to in paragraph (1) and paragraph (2) is contained in Appendix II, which is an integral part of this Financial Services Authority Regulation.

Article 8
(1) Assessment of business prospects as referred to in Article 7 paragraph (2) letter a includes assessment of components:
a. business growth potential; b. market conditions and customer's position in competition;
c. management quality and labor issues;
d. support from owners, groups, or affiliates; and e. efforts made by customers to maintain environmental sustainability.
(2) Assessment of customer performance as referred to in Article 7 paragraph (2) letter b includes assessment of components:
a. profit acquisition; b. capital conditions; and
c. cash flow.
(3) Assessment of repayment ability as referred to in Article 7 paragraph (2) letter c includes assessment of components:
a. timeliness of repayment of principal and/or margin/profit-sharing/ujrah; b. availability and accuracy of customer financial information;
c. completeness of Financing documentation;
d. compliance with Financing agreements; e. appropriateness of fund usage; and f. fairness of the source of obligation repayment.

Article 9
(1) Financing quality assessments conducted based on assessment factors as referred to in Article 7 paragraph (2) consider components as referred to in Article 8. (2) Financing quality assessments as referred to in paragraph (1) are conducted by considering:
a. the significance and materiality of each assessment factor and component; and b. the relevance of assessment factors and components to the relevant customer.

Article 10
In the event of conditions causing customers to be unable to repay principal and/or margin/profit-sharing/ujrah according to Financing agreements with BPRS, the Financial Services Authority has the authority to downgrade the Productive Asset quality determined by BPRS as referred to in Article 7 paragraph (1).

Article 11
Based on assessments as referred to in Article 7, the quality of Productive Assets in the form of Financing is determined as:
a. performing; b. special attention;
c. substandard;
d. doubtful; or e. loss.

Article 12
In the event of deviations in the provision of Financing, BPRS is required to downgrade Financing quality to loss.

Article 13
(1) BPRS that provide Financing with a grace period for payment, installment arrears of principal and/or margin/profit-sharing/ujrah are calculated after the payment grace period ends. (2) The final limit of Financing with a payment grace period as referred to in paragraph (1) is stipulated in the Financing agreement between BPRS and Customers.

Article 14
(1) The timeliness of profit sharing as referred to in Article 7 paragraph (1) for Productive Asset quality in the form of Mudharabah Financing and Musyarakah Financing is assessed based on the calculation of the ratio of RBH to PBH achievement. (2) The calculation of the achievement ratio of RBH to PBH as referred to in paragraph (1) is conducted based on accumulation during the period of ongoing Mudharabah Financing or Musyarakah Financing. (3) PBH is calculated based on the analysis of business feasibility and customer cash inflows during the term of Mudharabah Financing or Musyarakah Financing. (4) In the event of changes in macroeconomic, market, and political conditions affecting customer business, BPRS may change PBH based on agreements with Customers. (5) BPRS is required to include PBH and/or changes to PBH in Mudharabah Financing or Musyarakah Financing agreements between BPRS and Customers.

Article 15
(1) In Mudharabah Financing and Musyarakah Financing, principal installments can be paid periodically or at the end of Financing.
(2) BPRS is required to take steps to reduce the risk of non-payment of principal at maturity if in Mudharabah Financing and Musyarakah Financing it is agreed that there is no periodic principal installment payment. (3) For Mudharabah Financing and Musyarakah Financing with a term of more than 1 (one) year, BPRS is required to establish periodic principal installment payments in accordance with the projection of customer business cash inflows. (4) Principal installment payments or settlement of principal for Mudharabah and Musyarakah Financing must be stipulated in Financing agreements between BPRS and Customers.

Third Section
Placement with Bank Indonesia

Article 16
The quality of Productive Assets in the form of placements with Bank Indonesia based on Sharia Principles is determined as performing.

Fourth Section
Placement with Other Banks

Article 17
The quality of Productive Assets in the form of Placement with Other Banks is classified as follows:
a. performing, if there are no arrears in repayment of principal and/or margin/profit-sharing/ujrah; b. substandard, if there are arrears in repayment of principal and/or margin/profit-sharing/ujrah up to 5 (five) working days; or
c. loss, if:

there are arrears in repayment of principal and/or margin/profit-sharing/ujrah exceeding 5 (five) working days; and/or
BPRS, Sharia commercial banks, or conventional commercial banks with Sharia business units have been designated under special supervision, have been subject to sanctions suspending all business activities, have had their business licenses revoked, or have been liquidated.

Article 18
(1) BPRS that do not meet the provisions as referred to in Article 2, Article 3, Article 4 paragraph (1), Article 5 paragraph (1) and paragraph (3), Article 6 paragraph (1) and paragraph (2), Article 12, Article 14 paragraph (5), and Article 15 paragraph (2), paragraph (3), and paragraph (4) are subject to administrative sanctions in the form of written reprimands. (2) In the event that BPRS do not meet written reprimands as referred to in paragraph (1), BPRS may be subject to administrative sanctions in the form of:
a. reduction in health level in accordance with Financial Services Authority Regulations regarding the health level assessment system for Sharia microfinance banks; and/or b. prohibition as a main party of financial service institutions in accordance with Financial Services Authority Regulations regarding the re-evaluation of main parties of financial service institutions.

CHAPTER III
PRODUCTIVE ASSET WRITE-DOWN PROVISIONS

Article 19
(1) BPRS is required to form general PPAP and specific PPAP for each Productive Asset.
(2) General PPAP as referred to in paragraph (1) is determined at least 0.5% (zero point five percent) of Productive Assets with performing quality.
(3) Specific PPAP as referred to in paragraph (1) is determined at least:
a. 3% (three percent) of Productive Assets with special attention quality after deducting collateral value; b. 10% (ten percent) of Productive Assets with substandard quality after deducting collateral value;
c. 50% (fifty percent) of Productive Assets with doubtful quality after deducting collateral value; and/or
d. 100% (one hundred percent) of Productive Assets with loss quality after deducting collateral value.
(4) The formation of general PPAP as referred to in paragraph (2) is excluded for Productive Assets in the form of:
a. placements with Bank Indonesia; b. portions of Financing guaranteed by the Government of the Republic of Indonesia; and
c. portions of Financing guaranteed by liquid collateral in the form of securities issued by Bank Indonesia, securities issued by the Government of the Republic of Indonesia, foreign currency notes, and/or blocked savings and/or deposits at the relevant BPRS accompanied by a withdrawal power of attorney, and/or precious metals.
(5) The application of specific PPAP formation for Productive Assets with special attention quality as referred to in paragraph (3) letter a is implemented in phases, namely:
a. 0.5% (zero point five percent) applies from December 1, 2019 to December 31, 2020. b. 1% (one percent) applies from January 1, 2021 to December 31, 2021.
c. 3% (three percent) applies from January 1, 2022.

Article 20
The formation of PPAP for Productive Assets in the form of Financing is determined as follows:
a. Murabahah Financing, Istishna Financing, and multi-service Financing are calculated based on principal price balances; b. Mudharabah Financing, Musyarakah Financing, and Qardh Financing are calculated based on outstanding balances; and
c. Ijarah Financing and IMBT Financing are calculated based on leasing principal arrears.

Article 21
BPRS is required to form depreciation or amortization of Productive Assets in the form of:
a. Ijarah Financing in accordance with BPRS's depreciation or amortization policies for similar assets; and b. IMBT Financing in accordance with the lease term.

Article 22
(1) The value of collateral considered as a deduction in the formation of specific PPAP as referred to in Article 18 paragraph (3) is determined at a maximum of:

a. 100% (one hundred percent) of the value of liquid collateral in the form of securities issued by Bank Indonesia, securities issued by the Central Government of the Republic of Indonesia, guarantees by the Central Government of the Republic of Indonesia, foreign currency banknotes, blocked savings and/or deposits at the relevant BPRS accompanied by a withdrawal power of attorney, and/or precious metals; b. 85% (eighty-five percent) of the market value for collateral in the form of jewelry gold;
c. 80% (eighty percent) of the value of the mortgage right or fiduciary right for collateral in the form of land and/or buildings holding certificates encumbered with a mortgage right or fiduciary right, securities issued by local governments, and/or guarantees by local governments;
d. 70% (seventy percent) of the value of collateral in the form of warehouse receipts whose assessment is conducted within the last 12 (twelve) months and in accordance with statutory regulations regarding warehouse receipts; e. 60% (sixty percent) of the Taxable Object Value or market value based on assessment by an independent appraiser for collateral in the form of land and/or buildings holding certificates not encumbered with a mortgage right or fiduciary right; f. 50% (fifty percent) of the Taxable Object Value based on the Tax Payment Notification Letter or the latest Taxable Object Value Information Letter from the competent authority, or from the market value based on assessment by an independent appraiser or competent authority, for collateral in the form of land and/or buildings with ownership in the form of customary land acknowledgment letters; g. 50% (fifty percent) of the market price, rental price, or transfer price, for collateral in the form of business premises accompanied by proof of ownership or usage permit letters or usage rights issued by the competent authority and accompanied by a power of attorney to sell or transfer rights made or authenticated by a notary or made by other competent officials; h. 50% (fifty percent) of the value of mortgages or fiduciary rights in the form of motor vehicles, ships, motorboats, heavy equipment, and/or machinery that are integral to the land, accompanied by proof of ownership and have been subject to mortgage or fiduciary rights in accordance with statutory regulations;
i. 50% (fifty percent) of the value of collateral in the form of warehouse receipts whose assessment is conducted more than 12 (twelve) months but within the last 18 (eighteen) months and in accordance with statutory regulations regarding warehouse receipts;
j. 50% (fifty percent) for the portion of Financing guaranteed by State-Owned Enterprises/Local Government-Owned Enterprises conducting business as Financing guarantors, including Sharia guarantee institutions that are subsidiaries of guarantee institutions with the status of State-Owned Enterprises/Local Government-Owned Enterprises, meeting the criteria as regulated in the Financial Services Authority Regulation regarding minimum capital provision requirements and minimum core capital fulfillment for Sharia microfinance banks; or k. 30% (thirty percent) of the value of collateral in the form of warehouse receipts whose assessment is conducted more than 18 (eighteen) months but not exceeding 24 (twenty-four) months in the last period and in accordance with statutory regulations regarding warehouse receipts. (2) Collateral other than that referred to in paragraph (1) is not counted as a reduction factor in the formation of PPAP. (3) The value of collateral counted as a reduction factor in the formation of PPAP for Financing with distressed quality for collateral as referred to in paragraph (1) letters c, e through g:
a. is determined at a maximum of 50% (fifty percent) of the value of the collateral counted after a period of 2 (two) years to 4 (four) years since the determination of the Financing quality becoming distressed; and b. cannot be counted as a reduction factor in the formation of PPAP after a period of 4 (four) years since the determination of the Financing quality becoming distressed. (4) The value of collateral counted as a reduction factor in the formation of PPAP for Financing with distressed quality for collateral as referred to in paragraph (1) letter h:
a. is determined at a maximum of 50% (fifty percent) of the value of the collateral counted after a period of 1 (one) year to 2 (two) years since the determination of the Financing quality becoming distressed; and b. cannot be counted as a reduction factor in the formation of PPAP after a period of 2 (two) years since the determination of the Financing quality becoming distressed. (5) The application of the value of collateral counted as a reduction factor in the formation of PPAP for Financing with distressed quality as referred to in paragraph (3) applies since January 1, 2024. (6) The Financial Services Authority may determine a longer period than the period referred to in paragraph (3) based on an analysis of the local and surrounding economic conditions.

Pasal 23
(1) BPRS is required to assess collateral to determine the economic value of the collateral.
(2) Collateral is not counted as a reduction factor in the formation of PPAP if:
a. no assessment is conducted by the BPRS as referred to in paragraph (1); b. its existence cannot be known; and/or
c. it cannot be executed.
(3) BPRS is required to adjust the value of collateral as a reduction factor in the formation of PPAP if there is a significant decrease in the value of the collateral.

Pasal 24
(1) In the event that BPRS does not meet the provisions as referred to in Article 22 and Article 23, the Financial Services Authority may recalculate or not recognize the value of collateral that has been counted as a reduction factor in the formation of PPAP. (2) BPRS is required to adjust the PPAP calculation in accordance with the calculation determined by the Financial Services Authority as referred to in paragraph (1) in reports submitted to the Financial Services Authority as regulated in the Financial Services Authority Regulation regarding reporting of rural credit banks and Sharia microfinance banks through the Financial Services Authority reporting system.

Pasal 25
(1) BPRS that does not meet the provisions as referred to in Article 19 paragraph (1), Article 21, and Article 23 paragraph (1) and paragraph (3) is subject to administrative sanctions in the form of written reprimands. (2) In the event that BPRS does not comply with the written reprimand as referred to in paragraph (1), BPRS may be subject to administrative sanctions in the form of:
a. a downgrade in health level in accordance with the Financial Services Authority Regulation regarding the health level assessment system for Sharia microfinance banks; and/or b. a prohibition as a main party of a financial service institution in accordance with the Financial Services Authority Regulation regarding the re-assessment of main parties of financial service institutions. (3) BPRS that violates the provisions in Article 24 paragraph (2) is subject to administrative sanctions as regulated in the Financial Services Authority Regulation regarding reporting of rural credit banks and Sharia microfinance banks through the Financial Services Authority reporting system.

BAB IV
PLACEMENT OF FUNDS IN CONVENTIONAL BANKS

Pasal 26
(1) BPRS is prohibited from placing funds in conventional banks.
(2) BPRS may only place funds in conventional commercial banks in the form of checking accounts and/or savings for the purpose of fund transfers for BPRS and BPRS customers. (3) In the event that BPRS places funds in conventional commercial banks as referred to in paragraph (2):
a. the placement of funds in conventional commercial banks is not included in the category of Productive Assets; and b. BPRS is required to form a provision for write-off of assets for the placement of funds in conventional commercial banks in accordance with the formation of PPAP as referred to in Article 19 paragraph (1).

Pasal 27
The quality of assets in the form of placement of funds in conventional commercial banks as referred to in Article 26 paragraph (2) is classified as follows:
a. current, if there are no outstanding principal payments; b. substandard, if there are outstanding principal payments of up to 5 (five) working days;
c. distressed, if:

there are outstanding principal payments for more than 5 (five) working days; and/or
the conventional commercial bank has been placed under special supervision, has been subject to sanctions suspending all business activities, has had its business license revoked, or has been liquidated.

Pasal 28
(1) BPRS that does not meet the provisions as referred to in Article 26 paragraph (1), paragraph (2), and paragraph (3) letter b is subject to administrative sanctions in the form of written reprimands. (2) In the event that BPRS does not comply with the written reprimand as referred to in paragraph (1), BPRS may be subject to administrative sanctions in the form of:
a. a downgrade in health level in accordance with the Financial Services Authority Regulation regarding the health level assessment system for Sharia microfinance banks; and/or b. a prohibition as a main party of a financial service institution in accordance with the Financial Services Authority Regulation regarding the re-assessment of main parties of financial service institutions.

BAB V
PLACEMENT IN BANKS MEETING THE CRITERIA FOR THE DEPOSIT INSURANCE AGENCY GUARANTEE

Pasal 29
The portion of Placement in Other Banks and placement in conventional commercial banks that meet the guarantee criteria of the Deposit Insurance Agency may be used as a reduction factor in the formation of general PPAP and specific PPAP.

BAB VI
FINANCING RESTRUCTURING

Part One
General Provisions

Pasal 30
Financing Restructuring must meet the principle of prudence and Sharia Principles.

Pasal 31
(1) BPRS may conduct Financing Restructuring for Customers who meet the criteria:
a. experiencing difficulties in paying principal and/or margin/profit share/ujrah; and b. having good business prospects and assessed to be able to fulfill obligations after the Financing is restructured. (2) BPRS is required to document the Financing Restructuring conducted in the Financing agreement. (3) The Financing agreement as referred to in paragraph (2) must refer to the previous Financing agreement.

Pasal 32
BPRS is prohibited from conducting Financing Restructuring for the purpose of avoiding:
a. a downgrade in Financing quality; b. an increase in PPAP formation; and/or
c. the cessation of accrual recognition of margin/profit share/ujrah revenue.

Part Two
Procedure for Financing Restructuring

Pasal 33
(1) Financing Restructuring as referred to in Article 31 paragraph (1) is conducted through:
a. rescheduling; b. renegotiation; and/or
c. restructuring.
(2) The procedure for Financing Restructuring as referred to in paragraph (1) is contained in Appendix III, which is an integral part of this Financial Services Authority Regulation.

Pasal 34
BPRS is required to apply accounting treatment for Financing Restructuring in accordance with financial accounting standards and accounting guidelines for BPRS, including the recognition of losses resulting from Financing Restructuring.

Part Three
Determination of Quality of Restructured Financing

Pasal 35
(1) The quality of restructured financing as referred to in Article 31 is determined:
a. at most substandard for Financing that had doubtful or distressed quality before restructuring; or b. unchanged, for Financing that had current, special attention, or substandard quality before restructuring. (2) The determination of Financing quality as referred to in paragraph (1) may become:
a. current, in the event that there are no outstanding principal installments and/or margin/profit share/ujrah for 3 (three) consecutive payment periods; or b. the same as the Financing quality before Financing Restructuring was conducted, in the event that the Customer cannot meet the conditions as referred to in letter a. (3) The subsequent determination of Financing quality as referred to in paragraph (2) is further determined based on assessment factors as referred to in Article 7. (4) BPRS is required to charge losses arising from Financing Restructuring, after being offset by excess PPAP due to the improvement of Financing quality after Financing Restructuring. (5) Excess PPAP due to the improvement of restructured Financing quality after being offset by losses arising from Financing Restructuring as referred to in paragraph (4) may only be recognized as revenue if there have been 3 (three) principal installment receipts for the restructured Financing.

Pasal 36
The quality of restructured financing with the provision of a payment grace period as referred to in Article 13 paragraph (1) is determined:
a. during the payment grace period, the quality of Financing follows the quality determination before Financing Restructuring was conducted; and b. after the payment grace period ends, the quality of Financing follows the quality determination as referred to in Article 35 paragraph (1) through paragraph (3).

Pasal 37
The determination of Productive Asset quality as referred to in Article 6 applies to restructured Financing.

Pasal 38
Corrections to the determination of quality of restructured Financing, formation of PPAP, and accrual-recognized margin/profit share/ujrah revenue may be conducted by the Financial Services Authority in the event that:
a. based on the Financial Services Authority's assessment, Financing Restructuring is conducted for the purpose as referred to in Article 32; b. the Customer does not execute the Financing agreement as referred to in Article 31 paragraph (2);
c. Financing Restructuring is conducted repeatedly for the purpose of improving Financing quality without considering the Customer's business prospects; and/or
d. Financing Restructuring is not supported by complete documents and adequate analysis regarding the Customer's repayment ability and business prospects.

Pasal 39
(1) BPRS that does not meet the provisions as referred to in Article 30, Article 31 paragraph (2) and paragraph (3), Article 32, Article 34, and Article 35 paragraph (4) and paragraph (5) is subject to administrative sanctions in the form of written reprimands. (2) In the event that BPRS does not comply with the written reprimand as referred to in paragraph (1), BPRS may be subject to administrative sanctions in the form of:
a. a downgrade in health level in accordance with the Financial Services Authority Regulation regarding the health level assessment system for Sharia microfinance banks; and/or b. a prohibition as a main party of a financial service institution in accordance with the Financial Services Authority Regulation regarding the re-assessment of main parties of financial service institutions.

BAB VII
ACQUIRED COLLATERAL

Pasal 40
(1) BPRS may take over collateral to accelerate the settlement of Financing with distressed quality.
(2) The takeover of collateral as referred to in paragraph (1) is temporary.
(3) The takeover of collateral as referred to in paragraph (1) must be accompanied by a statement of collateral transfer or a power of attorney to sell from the Customer. (4) BPRS is required to assess Acquired Collateral (AYDA) at the time of takeover to determine the net realizable value. (5) The assessment of AYDA as referred to in paragraph (4) is conducted:
a. for AYDA with a value up to Rp500,000,000.00 (five hundred million rupiah) may be conducted by the BPRS's internal appraiser; and b. for AYDA with a value exceeding Rp500,000,000.00 (five hundred million rupiah) must be conducted by an independent appraiser. (6) The assessment of AYDA as referred to in paragraph (4) is conducted for each collateral. (7) BPRS is required to conduct periodic re-assessments of AYDA in accordance with financial accounting standards and BPRS accounting guidelines, with the provisions:
a. in the event that the value of AYDA decreases, BPRS recognizes the decrease in value as a loss; b. in the event that the value of AYDA recovers from a decrease in value, BPRS recognizes the recovery of the decrease in value at most equal to the recognized decrease in value loss; and
c. in the event that the value of AYDA increases, BPRS cannot recognize the increase in value as revenue.

Pasal 41
(1) BPRS is required to liquidate AYDA as referred to in Article 40 paragraph (1) within a maximum period of 1 (one) year since the takeover of collateral.
(2) If BPRS cannot liquidate AYDA as referred to in paragraph (1), the value of AYDA for collateral types as referred to in Article 22 paragraph (1) letters c, e through g recorded in BPRS's financial position reports must be counted as a reduction factor to BPRS's Core Capital in the calculation of Core Capital Adequacy Ratio (KPMM) by:
a. 50% (fifty percent) of the value of AYDA for AYDA held for more than 1 (one) year up to 3 (three) years; b. 75% (seventy-five percent) of the value of AYDA for AYDA held for more than 3 (three) years up to 5 (five) years; and/or
c. 100% (one hundred percent) of the value of AYDA for AYDA held for more than 5 (five) years.
(3) If BPRS cannot liquidate AYDA as referred to in paragraph (1), the value of AYDA for collateral types as referred to in Article 22 paragraph (1) letter h recorded in BPRS's financial position reports must be counted as a reduction factor to BPRS's Core Capital in the calculation of KPMM by:
a. 50% (fifty percent) of the value of AYDA for AYDA held for more than 1 (one) year up to 2 (two) years; and/or b. 100% (one hundred percent) of the value of AYDA for AYDA held for more than 2 (two) years. (4) BPRS is required to document efforts to liquidate AYDA as referred to in paragraph (1). (5) BPRS is required to apply accounting treatment for the takeover of AYDA in accordance with financial accounting standards and accounting guidelines for BPRS.

Pasal 42
(1) BPRS that does not meet the provisions as referred to in Article 40 paragraph (4), paragraph (5) letter b, and paragraph (7), and Article 41 is subject to administrative sanctions in the form of written reprimands. (2) In the event that BPRS does not comply with the written reprimand as referred to in paragraph (1), BPRS may be subject to administrative sanctions in the form of:
a. a downgrade in health level in accordance with the Financial Services Authority Regulation regarding the health level assessment system for Sharia microfinance banks; and/or b. a prohibition as a main party of a financial service institution in accordance with the Financial Services Authority Regulation regarding the re-assessment of main parties of financial service institutions.

BAB VIII
BOOK WRITE-OFF AND DEBT WRITE-OFF

Pasal 43
(1) Book write-off and/or debt write-off may only be conducted against fund disbursements with distressed quality.
(2) Book write-off is prohibited against partial fund disbursements.
(3) Debt write-off may be conducted against partial or all fund disbursements.
(4) Debt write-off against partial fund disbursements as referred to in paragraph (3) may only be conducted for Financing Restructuring or Financing settlement.

Pasal 44
(1) Book write-off and/or debt write-off as referred to in Article 43 may only be conducted after BPRS has made efforts to recover the Productive Assets provided. (2) BPRS is required to document efforts to recover the Productive Assets provided as referred to in paragraph (1) and the basis for consideration for the implementation of book write-off and/or debt write-off. (3) BPRS is required to administer data and information regarding Productive Assets that have undergone book write-off and/or debt write-off.

Pasal 45
(1) BPRS that does not meet the provisions as referred to in Article 43 paragraph (1), paragraph (2), and paragraph (4), and Article 44 is subject to administrative sanctions in the form of written reprimands. (2) In the event that BPRS does not comply with the written reprimand as referred to in paragraph (1), BPRS may be subject to administrative sanctions in the form of:
a. a downgrade in health level in accordance with the Financial Services Authority Regulation regarding the health level assessment system for Sharia microfinance banks; and/or b. a prohibition as a main party of a financial service institution in accordance with the Financial Services Authority Regulation regarding the re-assessment of main parties of financial service institutions.

BAB IX
OTHER PROVISIONS

Pasal 46
(1) BPRS that disburses Financing to project locations or business locations in specific areas affected by natural disasters designated by the Financial Services Authority as areas requiring special treatment for bank financing, is exempt from the application of accounting treatment for Financing Restructuring as referred to in Article 34. (2) The exemption as referred to in paragraph (1) applies to Financing disbursed before and after the natural disaster occurs for the duration determined by the Financial Services Authority since the occurrence of the natural disaster.

BAB X
TRANSITIONAL PROVISIONS

Pasal 47
Violations of the provisions regarding the submission of Financing Restructuring reports up to the report position of November 2019 are subject to sanctions based on Bank Indonesia Regulation Number 13/9/PBI/2011 concerning Amendments to Bank Indonesia Regulation Number 10/18/PBI/2008 concerning Financing Restructuring for Sharia Banks and Sharia Business Units (State Gazette of the Republic of Indonesia Year 2011 Number 19, Supplement to the State Gazette of the Republic of Indonesia Number 5198).

BAB XI
CLOSING PROVISIONS

Pasal 48
The provisions as referred to in Article 47 remain in effect if violations are discovered based on audits and/or examinations by the Financial Services Authority since this Financial Services Authority Regulation takes effect until December 31, 2020.

Pasal 49
Upon the commencement of this Financial Services Authority Regulation, the following provisions:
a. Article 22 of Bank Indonesia Regulation Number 13/9/PBI/2011 concerning Amendments to Bank Indonesia Regulation Number 10/18/PBI/2008 concerning Financing Restructuring for Sharia Banks and Sharia Business Units (State Gazette of the Republic of Indonesia Year 2011 Number 19, Supplement to the State Gazette of the Republic of Indonesia Number 5198); and b. Article 24 of Bank Indonesia Regulation Number 10/18/PBI/2008 concerning Financing Restructuring for Sharia Banks and Sharia Business Units (State Gazette of the Republic of Indonesia Year 2008 Number 138, Supplement to the State Gazette of the Republic of Indonesia Number 4898), are declared to remain in effect regarding violations in Financing Restructuring reports up to the report position of November 2019 discovered until December 31, 2020.

Pasal 50
Upon the commencement of this Financial Services Authority Regulation:
a. Bank Indonesia Regulation Number 10/18/PBI/2008 concerning Financing Restructuring for Sharia Banks and Sharia Business Units (State Gazette of the Republic of Indonesia Year 2008 Number 138, Supplement to the State Gazette of the Republic of Indonesia Number 4898); b. Bank Indonesia Regulation Number 13/9/PBI/2011 concerning Amendments to Bank Indonesia Regulation Number 10/18/PBI/2008 concerning Financing Restructuring for Sharia Banks and Sharia Business Units (State Gazette of the Republic of Indonesia Year 2011 Number 19, Supplement to the State Gazette of the Republic of Indonesia Number 5198);
c. Bank Indonesia Regulation Number 13/14/PBI/2011 concerning the Assessment of Asset Quality for Sharia Microfinance Banks (State Gazette of the Republic of Indonesia Year 2011 Number 41, Supplement to the State Gazette of the Republic of Indonesia Number 5206);
d. Bank Indonesia Circular Letter Number 10/35/DPbS regarding Financing Restructuring for Sharia Microfinance Banks; e. Bank Indonesia Circular Letter Number 13/11/DPbS regarding the Assessment of Asset Quality for Sharia Microfinance Banks; f. Bank Indonesia Circular Letter Number 13/16/DPbS concerning Amendments to Bank Indonesia Circular Letter Number 10/35/DPbS regarding Financing Restructuring for Sharia Microfinance Banks, are revoked and declared invalid.

Pasal 51
This Financial Services Authority Regulation takes effect on December 1, 2019.

This copy is consistent with the original
Legal Director 1
Legal Department signed
Yuliana
To ensure everyone is aware, ordering the promulgation of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia. Determined in Jakarta on 27 November 2019 CHAIRMAN OF THE COMMISSIONERS BOARD FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed WIMBOH SANTOSO Promulgated in Jakarta on 29 November 2019 MINISTER OF LAW AND HUMAN RIGHTS REPUBLIC OF INDONESIA, signed YASONNA H. LAOLY STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2019 NUMBER 228

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 29 /POJK.03/2019
ON
QUALITY OF PRODUCTIVE ASSETS AND FORMATION OF PROVISION FOR WRITE-OFF OF PRODUCTIVE ASSETS OF SHARIA PEOPLE'S FINANCING BANKS

I. GENERAL
BPRS as an intermediary institution that conducts business activities to gather and channel funds from and to the public, must always pay attention to the principle of prudence and the principle of healthy Financing, including policies in granting Financing, assessment of Financing quality, as well as professionalism and integrity of the Board of Directors, Board of Commissioners, and BPRS employees in the field of Financing so that Financing quality remains smooth. Considering that there are several provisions and regulations related to BPRS prudence principles, it is necessary to harmonize the provisions so that the implementation of the aforementioned provisions can be carried out well, thereby creating a productive, healthy, and competitive BPR industry. In relation to this matter and reflecting the dynamic and challenging development of the BPRS industry in facing productive asset management risks, it is necessary to refine regulations regarding the quality assessment of assets for BPRS, including among others adjusting the classification of Financing quality from 4 (four) to 5 (five) categories and setting Financing quality based on assessment of business prospects, borrower performance, and repayment capacity for Financing with an amount of more than IDR 5,000,000,000.00 (five billion rupiah).

II. ARTICLE BY ARTICLE
Article 1
Is clear enough.

Article 2
Paragraph (1)
The principle of prudence in the provision of funds is among others carried out based on business feasibility analysis by paying attention to at least the 5C's factors, namely character, capacity, capital, collateral, and borrower's business prospects (condition of economy); Paragraph (2) Included in the steps required to keep the quality of Productive Assets smooth is for the BPRS Board of Directors to take preventive actions and efforts against the possibility of failure in the provision of funds.

Article 3
Paragraph (1)
Is clear enough.
Paragraph (2)
Is clear enough.
Paragraph (3)
Is clear enough.
Paragraph (4)
Is clear enough.
Paragraph (5)
Changes in Financing policy are reported to the Financial Services Authority c/o Regional Office or Financial Services Authority Office covering the BPRS head office. Paragraph (6) Is clear enough.

Paragraph (7)
Is clear enough.

Article 4
Is clear enough.

Article 5
Paragraph (1)
Is clear enough.
Paragraph (2)
The determination of Productive Asset quality by the Financial Services Authority is among others based on assessment and information regarding the condition of the Borrower. Paragraph (3) Is clear enough.

Article 6
Paragraph (1)
Letter a
The same project or business includes projects or businesses that are the source of repayment for principal and margin/profit share/ujrah.
Letter b
Is clear enough.
Paragraph (2)
Example 1:
BPRS "EQ" provides Mudharabah Financing and Murabahah Financing facilities to Borrower "Aldo". The assessment results conducted by BPRS "EQ" for each of these facilities are as follows:
a. smooth, for Mudharabah Financing; and b. less smooth, for Murabahah Financing.
Considering that both aforementioned Financings are used to finance 1 (one) same Borrower, the Productive Asset quality determined by BPRS "EQ" for the Financing given to Borrower "Aldo" follows the lower Productive Asset quality, namely less smooth.

Example 2:
BPRS "EQ" provides Financing facilities to Borrower "Sasmi" and Borrower "Sulis" which are used to finance the same project, namely project "D". The main source of repayment for Financing, both by Borrower "Sasmi" and Borrower "Sulis", comes from the cash flow to be obtained from project "D". The assessment results conducted by BPRS "EQ" for the Financing given to Borrower "Sasmi" and Borrower "Sulis" are as follows:
a. smooth, for Borrower "Sasmi"; and b. less smooth, for Borrower "Sulis".
Considering that both aforementioned Financings are used to finance the same project and the source of repayment for Financing obligations comes from the same project, the Productive Asset quality determined by BPRS "EQ" for the Financing given to Borrower "Sasmi" and Borrower "Sulis" follows the lower Productive Asset quality, namely less smooth.

Example 3:
BPRS "EQ" and BPRS "CB" have a joint Financing agreement (syndication) to provide Financing facilities to Borrower "Ardhy".
The assessment results conducted by BPRS "EQ" and BPRS "CB" for the Financing given to Borrower "Ardhy" are as follows:
a. smooth, at BPRS "EQ"; and b. less smooth, at BPRS "CB".
Considering that the facility is given to the same Borrower and the source of repayment for obligations comes from the same business and there is no clear separation of cash flows, the quality determined for the Financing facility to Borrower "Ardhy" by both BPRS "EQ" and BPRS "CB" is the same following the lower Productive Asset quality, namely less smooth. Paragraph (3) Letter a Is clear enough.

Letter b
The term "clear separation between cash flows from each project or business" means there is no significant correlation in cash flows between projects or businesses. Cash flow correlation is considered significant among others in the event that the continuity of cash flow of a project or business will be disrupted if the cash flow of another project or business experiences disruption. Paragraph (4) Is clear enough. Paragraph (5) Is clear enough.

Article 7
Paragraph (1)
The limit amount is calculated against all Financing facilities given to 1 (one) Borrower or more than 1 (one) Borrower in the event that Financing is used to finance the same project or business. The accuracy of principal and margin/profit share/ujrah repayment is among others assessed through timely repayment of principal and margin/profit share/ujrah, and/or no arrears and in accordance with the agreed Financing requirements. Paragraph (2) Is clear enough. Paragraph (3) Is clear enough.

Article 8
Paragraph (1)
Letter a
Potential business growth is among others assessed through projections of the Borrower's business growth.
Letter b
Market conditions and the Borrower's position in competition are among others assessed through the impact of economic conditions and/or business competition in the market on the Borrower's business.

Letter c
Management quality and labor issues are among others assessed through the Borrower's business management governance, labor composition, and/or labor disputes or strikes. Letter d Support from owners, groups, or affiliates is among others assessed from the capacity and ability of owners, groups, or affiliates to support the Borrower's business. Letter e The term "Borrower" refers to Borrowers who are required to carry out environmental management efforts in accordance with statutory regulations regarding environmental protection and management. Paragraph (2) Letter a Profit acquisition is among others assessed through income and cost analysis (cost and benefit analysis) and/or profit growth from period to period. Letter b Capital conditions are among others assessed through the Borrower's capital ability to finance the business including the ability to add capital if necessary. Letter c Cash flow is among others assessed through liquidity analysis and the Borrower's business working capital and/or the Borrower's ability to meet principal and/or margin/profit share/ujrah repayment obligations without support from other funding sources other than the financed project or business. Paragraph (3) Letter a Accuracy of principal and/or margin/profit share/ujrah repayment is among others assessed through timely repayment of principal and/or margin/profit share/ujrah, and/or no arrears and in accordance with the agreed Financing requirements.

Letter b
Availability and accuracy of Borrower's financial information is among others assessed through the Borrower's regular and accurate submission of financial information whose truthfulness can be believed. Letter c Completeness of Financing documentation is among others assessed through fulfillment of Financing documentation requirements based on Financing policies and procedures. Letter d Compliance with Financing agreements is among others assessed through the Borrower's level of violation of Financing agreements. Letter e Appropriateness of fund usage is among others assessed through the correspondence between the actual use of funds with the purpose of the Financing application and/or the correspondence of Financing facilities with the Borrower's needs. Letter f Fairness of the source of repayment for obligations is among others assessed through the correspondence between the source of repayment for obligations with the project or business financed by BPRS or the income of the respective Borrower.

Article 9
Is clear enough.

Article 10
Conditions causing the Borrower to not have the ability to repay principal and/or margin/profit share/ujrah include among others the source of repayment for principal and/or margin/profit share/ujrah coming from the same BPRS.

Article 11
Is clear enough.

Article 12
Financing deviations include among others Financing given using fake identities or the identity of another party who does not receive benefits from the Financing facility as stated in the Financing agreement.

Article 13
Paragraph (1)
The term "payment grace period" refers to the grace period given to not make principal and/or margin/profit share/ujrah installment payments while the Borrower's project or business has not yet generated income. Example:
Financing for agriculture with a payment grace period during the planting period.
Paragraph (2)
Is clear enough.

Article 14
Paragraph (1)
Is clear enough.
Paragraph (2)
The term "accumulation during the period of running Mudharabah Financing or Musyarakah Financing" refers to the sum of RBH or PBH from the beginning of Financing until the assessment month position. Example:
Mudharabah Financing is given in March 2021, with a duration of 1 (one) year. The calculation of accumulated PBH conducted in June 2021 is PBH of March 2021 plus PBH of April 2021 plus PBH of May 2021 plus PBH of June 2021. Paragraph (3) The determination of PBH is based on agreement between BPRS and Borrower by considering among others the business cycle and Borrower's incoming cash flow so it does not have to be determined monthly. Paragraph (4) Is clear enough. Paragraph (5) Is clear enough.

Article 15
Paragraph (1)
The determination of the need or not for periodic principal installment payments is adjusted to the characteristics of the Borrower's business being financed.
Paragraph (2)
Steps to reduce risk include among others evaluating the Borrower's business performance at least 1 (one) time in 1 (one) year.
Paragraph (3)
Is clear enough.
Paragraph (4)
Is clear enough.

Article 16
Is clear enough.

Article 17
Is clear enough.

Article 18
Is clear enough.

Article 19
Paragraph (1)
Included in Productive Assets are Productive Assets in the form of Ijarah Financing or IMBT Financing.
Paragraph (2)
Is clear enough.

Paragraph (3)
Is clear enough.
Paragraph (4)
Letter a
Is clear enough.
Letter b
Is clear enough.
Letter c
The blocking period for savings and/or deposits at the respective BPRS is at least as long as the Financing duration.
Precious metals include among others gold bars.
Paragraph (5)
Letter a
The term "effective as of December 1, 2019" refers to the calculation of the position report for December 2019 submitted in January 2020.
Letter b
The term "effective as of January 1, 2021" refers to the calculation of the position report for January 2021 submitted in February 2021.
Letter c
The term "effective as of January 1, 2022" refers to the calculation of the position report for January 2022 submitted in February 2022.

Article 20
Is clear enough.

Article 21
Depreciation or amortization policies for Ijarah Financing and IMBT Financing refer to the applicable financial accounting standards for BPRS.
The chosen depreciation or amortization policy must reflect the expected pattern of consumption of future economic benefits from the Ijarah and IMBT Financing objects.

Article 22
Paragraph (1)
Letter a
The blocking period for savings and/or deposits at the respective BPRS is at least equal to the Financing duration.
Letter b
The term "market value" refers to collateral money that is estimated to be obtained from a sales transaction or the result of exchanging an asset on the assessment date after deducting transaction costs. The market value of gold jewelry refers to the generally applicable price in the local gold market. The determination of the market value of gold jewelry can be conducted by the BPRS internal party or an independent appraiser such as a gold shop or gold pawn institution. The BPRS internal appraiser is permitted as long as the BPRS employee has adequate ability and experience in conducting appraisals of gold jewelry. Letter c The term "land and/or buildings with certificates" refers to land and/or buildings, with proof of ownership of land and/or building rights in the form of ownership rights, business use rights, building use rights, use rights, and/or building ownership certificates for units of apartment buildings. Included in buildings are standalone houses, apartment buildings, shop houses, office houses, or office buildings. Apartments with proof of ownership certificates for units of apartment buildings that can be burdened with fiducia are in accordance with statutory regulations. Letter d Is clear enough. Letter e Included in buildings are standalone houses, apartment buildings, shop houses, office houses, or office buildings.

Letter f
The term "Taxable Tax Return or last Value of Taxable Object Certificate" refers to the Taxable Tax Return or Value of Taxable Object Certificate of the last year that is available. Land acknowledgment letters include among others girik letters, petok D, letter C, rincik, and/or ketitir. Letter g Business premises include among others stalls, kiosks, and/or stands. Letter h Mortgage for ships with a weight of 20 m³ (twenty cubic meters) and above in accordance with statutory regulations. Letter i Is clear enough. Letter j Financing that is guaranteed includes among others Financing guaranteed with employment termination insurance for Financing to employees in accordance with the agreed agreement. State-Owned Enterprises/Regional-Owned Enterprises that conduct business as guarantors for Financing include general insurance State-Owned Enterprises/Regional-Owned Enterprises that conduct Financing guarantee business. Letter k Is clear enough. Paragraph (2) Is clear enough. Paragraph (3) Example:
On September 20, 2023, BPRS "YP" provided Financing facilities to Borrower "Nia" with collateral in the form of land burdened with a mortgage right worth IDR 375,000,000.00 (three hundred seventy-five million rupiah). The collateral that can be calculated as a reduction for specific PPAP is 80% (eighty percent) of the collateral value, namely IDR 300,000,000.00 (three hundred million rupiah). On September 20, 2024, the Financing facility was determined to be bad debt by BPRS "YP". If after 2 (two) years, namely after September 19, 2026, Borrower "Nia"'s bad debt Financing has not been resolved, the collateral value used as a specific PPAP reduction factor is 50% (fifty percent) of IDR 300,000,000.00 (three hundred million rupiah), namely IDR 150,000,000.00 (one hundred fifty million rupiah). If after 4 (four) years, namely after September 19, 2028, Borrower "Nia"'s bad debt Financing above is still not resolved, the collateral value cannot be calculated as a reduction factor in the formation of PPAP. Paragraph (4) Example:
On September 20, 2020, BPRS "YP" provided Financing facilities to Borrower "Nia" with collateral in the form of motor vehicles burdened with fiducia worth IDR 100,000,000.00 (one hundred million rupiah). The collateral that can be calculated as a specific PPAP reduction factor is 50% (fifty percent) of the collateral value, namely IDR 50,000,000.00 (fifty million rupiah). On September 20, 2022, the Financing facility was determined to be bad debt by BPRS "YP". If after 1 (one) year, namely after September 19, 2023, Borrower "Nia"'s bad debt Financing has not been resolved, the collateral value used as a specific PPAP reduction factor is 50% (fifty percent) of IDR 50,000,000.00 (fifty million rupiah), namely IDR 25,000,000.00 (twenty-five million rupiah). If after 2 (two) years, namely after September 19, 2024, Borrower "Nia"'s bad debt Financing has not been resolved, the collateral value cannot be calculated as a reduction factor in the formation of PPAP.

Paragraph (5)
Effective as of January 1, 2024, namely the calculation of the position report for January 2024 submitted in February 2024.
Paragraph (6)
Analysis of local and surrounding economic conditions is among others based on economic growth, observation of prices and/or sales levels of land and/or buildings in the area.

Article 23
Paragraph (1)
The term "collateral assessment" refers to the estimate and opinion by the BPRS internal appraiser and/or independent appraiser on the economic value of the collateral based on analysis of objective and relevant facts according to methods and principles generally applicable in the appraisal of each type of collateral. Paragraph (2) Is clear enough. Paragraph (3) Significant decline in collateral value is among others caused by fire and/or natural disasters.

Article 24
Is clear enough.

Article 25
Is clear enough.

Article 26
Paragraph (1)
Conventional banks consist of conventional commercial banks and rural credit banks.
Paragraph (2)
Is clear enough.

Paragraph (3)
Letter a
Placing funds in conventional commercial banks is not included in the Productive Asset category because interest income from conventional commercial banks cannot be recognized as BPRS income. Letter b Is clear enough.

Article 27
Is clear enough.

Article 28
Is clear enough.

Article 29
The term "Deposit Insurance Agency" refers to the Deposit Insurance Agency as regulated in the Law regarding the Deposit Insurance Agency.
Example:
BPRS "NR" places funds with "Bank Dina Syariah" with the following details:

Deposit Type	Amount Placed	Quality
Giro	IDR 2,000,000,000.00	Smooth
Savings	IDR 1,000,000,000.00	Smooth
Deposits	IDR 4,000,000,000.00	Smooth
Sharia Certificates of Deposit	IDR 3,000,000,000.00	Smooth
Total Placement	IDR 10,000,000,000.00

All of BPRS "NR"'s fund placements with "Bank Dina Syariah" meet the Deposit Insurance Agency guarantee criteria requirements. Assuming the guaranteed balance as regulated in statutory regulations regarding guarantee by the Deposit Insurance Agency for each borrower at one bank is at most IDR 2,000,000,000.00 (two billion rupiah), the formation of PPAP that must be formed over all placements of BPRS "NR" with "Bank Dina Syariah" is as follows:

PPAP = 0.5% x (IDR 10,000,000,000.00 – IDR 2,000,000,000.00) = IDR 40,000,000.00.

Article 30
Sharia Principle fulfillment includes among others:

BPRS can impose compensation (ta'widh) on Borrowers in Financing Restructuring. Compensation is determined at the actual cost incurred for collecting rights that should be paid by the Borrower and not potential losses that are estimated to occur due to lost opportunities (al-furshah al-dha'i'ah).
Changes agreed between BPRS and Borrowers in Financing Restructuring, including the determination of compensation, must be stated in a Financing agreement addendum.
In the event that Financing Restructuring is carried out through contract conversion, a new Financing agreement must be made.

Article 31
Paragraph (1)
Letter a
Is clear enough.
Letter b
Consumer Financing Borrowers have good business prospects if there is a clear source of installment repayment from the Borrower.
Paragraph (2)
Financing Restructuring is stated in a Financing agreement addendum and/or conducting a new Financing agreement following the characteristics of each Financing form. Paragraph (3) The term "previous Financing agreement" refers to all related Financing agreements between BPRS and Borrowers.

Article 32
Is clear enough.

Article 33
Paragraph (1)
Letter a
The term "rescheduling" refers to changes in the Borrower's obligation payment schedule or changes in duration.
Letter b
The term "reconditioning" refers to changes in part or all of the Financing requirements without adding the remaining principal obligation of the Borrower that must be paid to BPRS, carried out through among others:

change of payment schedule;
change of installment amount;
change of duration;
change of nisbah in Mudharabah Financing or Musyarakah Financing;
change of PBH in Mudharabah Financing or Musyarakah Financing; and/or
granting of discounts.
Letter c
The term "restructuring" refers to changes in Financing requirements that among others:
add BPRS Financing facility funds;
and/or
convert Financing contracts.
Paragraph (2)
Is clear enough.

Article 34
Is clear enough.

Article 35
Paragraph (1)
Is clear enough.

Paragraph (2)
The term "3 (three) consecutive payment periods" refers to 3 (three) periods since Financing Restructuring is carried out.
Example 1:
BPRS "AP" provides Murabahah Financing to Borrower "Fauzan" with an amount of IDR 1,000,000,000.00 (one billion rupiah). However, Borrower "Fauzan" experiences difficulty in repaying principal and/or margin so the Financing quality is determined as bad debt and restructuring is carried out by BPRS "AP" by considering that it still has good business prospects and is assessed to be able to meet obligations after Financing is restructured. The determination of Financing quality for Borrower "Fauzan" after Financing Restructuring is as follows:
Example 2:
BPRS "NTP" provides Murabahah Financing to Borrower "Meli" with an amount of IDR 7,000,000,000.00 (seven billion rupiah). However, Borrower "Meli" experiences difficulty in repaying principal and/or margin so the Financing quality is determined as bad debt and restructuring is carried out by BPRS "NTP" by considering that it still has good business prospects and is assessed to be able to meet obligations after Financing is restructured. The determination of Financing quality for Borrower "Meli" after Financing Restructuring is as follows:

Payment Period	Financing Quality at End of Assessment Month	Principal	Margin
0	Restructuring	Less Smooth	Less Smooth
1	Meets	Meets	Less Smooth
2	Meets	Meets	Less Smooth
3	Meets	Meets	Smooth
4	Meets	Meets	Borrower "Fauzan"'s Financing quality is determined based on the accuracy of principal and/or margin repayment.

Example 3:
BPRS “EQ” provides Murabahah Financing to Customer “Arman” in the amount of Rp1,000,000,000.00 (one billion rupiah). However, Customer “Arman” experiences difficulty in paying the principal and/or margin, so the Financing quality is classified as non-performing and restructuring is carried out by BPRS “EQ” considering that the business prospect is still good and is assessed to be able to meet obligations after the Financing is restructured. The determination of the Financing quality of Customer “Arman” after Financing Restructuring is as follows:

Payment Period	Financing Quality at End of Month	Principal Assessment	Margin Assessment
0	Restructuring	Substandard	-
1	Meets	Meets	Substandard
2	Meets	Meets	Substandard
3	Meets	Meets	Performing
4	Meets	Meets	Customer “Meli” Financing quality is determined based on business prospects, customer performance, and payment ability.

Payment Period	Financing Quality at End of Month	Principal Assessment	Margin Assessment
0	Restructuring	Substandard	-
1	Meets	Meets	Substandard
2	Does not meet	Meets	Non-performing
3	Meets	Meets	Performing*
4	Meets	Meets	Customer “Arman” Financing quality is determined based on the timeliness of principal and/or margin payments.

Explanation:
*no outstanding principal and/or margin after restructuring, in the example above, the principal arrears for period 2 have been settled. In the event that in period 3 the Customer does not pay the principal arrears for period 2, the Financing quality is determined to be the same as the Financing quality before restructuring was carried out.

Example 4:
BPRS “YP” provides Murabahah Financing to Customer “Aldo” in the amount of Rp7,000,000,000.00 (seven billion rupiah). However, Customer “Aldo” experiences difficulty in paying the principal and/or margin, so the Financing quality is classified as non-performing and restructuring is carried out by BPRS “YP” considering that the business prospect is still good and is assessed to be able to meet obligations after the Financing is restructured. The determination of the Financing quality of Customer “Aldo” after Financing Restructuring is as follows:

Payment Period	Financing Quality at End of Month	Principal Assessment	Margin Assessment
0	Restructuring	Substandard	-
1	Meets	Meets	Substandard
2	Does not meet	Meets	Non-performing
3	Meets	Meets	Performing*
4	Meets	Meets	Customer Aldo Financing quality is determined based on business prospects, customer performance, and payment ability.

Paragraph (3)
Is clear enough.

Paragraph (4)
Is clear enough.

Paragraph (5)
Is clear enough.

Article 36
What is meant by “grace period for payment” is the grace period given by the BPRS to the Customer to not make installment payments of principal and/or margin/profit share/ujrah.

Article 37
Is clear enough.

Article 38
Is clear enough.

Article 39
Is clear enough.

Article 40
Paragraph (1)
Is clear enough.

Paragraph (2)
Is clear enough.

Paragraph (3)
Is clear enough.

Paragraph (4)
What is meant by “net realizable value” is the market value of collateral minus the estimated costs required to sell, with a maximum value equal to the Financing amount to be settled with AYDA.

Paragraph (5)
What is meant by “AYDA assessment” is the estimate and opinion by the BPRS internal appraiser and/or independent appraiser on the economic value of collateral based on analysis of objective and relevant facts according to methods and principles generally accepted in the appraisal of each type of collateral. Independent appraiser means an appraiser who:
a. is not a related party to the BPRS; b. is not part of the borrower group with the BPRS Customer;
c. carries out appraisal activities based on professional ethical codes and regulations set by the competent authority;
d. uses appraisal methods based on professional appraisal standards issued by the competent authority; e. has a business license from the competent authority to operate as an appraisal company; and f. is registered as a member of an association recognized by the competent institution.

Paragraph (6)
Is clear enough.

Paragraph (7)
Is clear enough.

Article 41
Paragraph (1)
Efforts to settle AYDA can be carried out actively, such as marketing and selling AYDA.
Example:
On September 20, 2021, BPRS “EQ” took over collateral handed over by the Customer, the deadline for settling AYDA is September 19, 2022.
This regulation is intended so that BPRS sells AYDA as soon as possible within a maximum period of 1 (one) year in accordance with Law Number 21 of 2008 concerning Sharia Banking and not to own collateral for more than that period.

Paragraph (2)
Example:
On September 20, 2021, BPRS “NS” took over collateral in the form of land handed over by the Customer with a net realizable value of Rp100,000,000.00 (one hundred million rupiah). a. If after 1 (one) year from the date of taking over the collateral, namely after September 19, 2022, BPRS “NS” has not been able to liquidate the AYDA, in the KPMM calculation of BPRS “NS”, since September 20, 2022, the value of AYDA counted as a factor reducing the core capital of BPRS “NS” is as follows:
AYDA = 50% x Rp100,000,000.00 = Rp50,000,000.00. b. If after 3 (three) years from taking over the collateral, namely after September 19, 2024, BPRS “NS” has not been able to liquidate the AYDA, in the KPMM calculation of BPRS “NS”, since September 20, 2024, the value of AYDA counted as a factor reducing the core capital of BPRS “NS” is as follows:
AYDA = 75% x Rp100,000,000.00 = Rp75,000,000.00.
c. If after 5 (five) years from taking over the collateral, namely after September 19, 2026, BPRS “NS” has not been able to liquidate the AYDA, in the KPMM calculation of BPRS “NS”, since September 20, 2026, the value of AYDA counted as a factor reducing the core capital of BPRS “NS” is as follows:
AYDA = 100% x Rp100,000,000.00 = Rp100,000,000.00.

Paragraph (3)
Example:
On September 20, 2021, BPRS “RW” took over collateral in the form of motor vehicles handed over by the Customer with a net realizable value of Rp100,000,000.00 (one hundred million rupiah). a. If after 1 (one) year from the date of taking over the collateral, namely after September 19, 2022, BPRS “RW” has not been able to liquidate the AYDA, in the KPMM calculation of BPRS “RW”, since September 20, 2022, the value of AYDA counted as a factor reducing the core capital of BPRS “RW” is as follows:
AYDA = 50% x Rp100,000,000.00 = Rp50,000,000.00. b. If after 2 (two) years from taking over the collateral, namely after September 19, 2023, BPRS “RW” has not been able to liquidate the AYDA, in the KPMM calculation of BPRS “RW”, since September 20, 2023, the value of AYDA counted as a factor reducing the core capital of BPRS “RW” is as follows:
AYDA = 100% x Rp100,000,000.00 = Rp100,000,000.00.

Paragraph (4)
Is clear enough.

Paragraph (5)
Is clear enough.

Article 42
Is clear enough.

Article 43
Paragraph (1)
Is clear enough.

Paragraph (2)
Write-off is carried out on all funds provided under one agreement.

Paragraph (3)
Is clear enough.

Paragraph (4)
Debt forgiveness for Financing Restructuring and Financing settlement is intended for transparency to the Customer.
Financing settlement is carried out, among others, through taking over collateral or repayment by the Customer.

Article 44
Paragraph (1)
Efforts to recover Productive Assets provided include, among others, collection from the Customer, Financing Restructuring, collection from parties providing guarantees for Productive Assets, and Financing settlement through taking over collateral.

Paragraph (2)
Is clear enough.

Paragraph (3)
Is clear enough.

Article 45
Is clear enough.

Article 46
The determination of specific areas affected by natural disasters is set by the Financial Services Authority through a Commissioner Board Decision referring to Financial Services Authority Regulations regarding special treatment for bank credit or financing for specific areas in Indonesia affected by natural disasters.

Article 47
Is clear enough.

Article 48
Is clear enough.

Article 49
Is clear enough.

Article 50
Is clear enough.

Article 51
Is clear enough.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6424

APPENDIX I
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 29 /POJK.03/2019
CONCERNING
PRODUCTIVE ASSET QUALITY AND
FORMATION OF PROVISION FOR WRITE-OFF OF PRODUCTIVE ASSETS OF SHARIA PEOPLE’S FINANCING BANKS GUIDELINES FOR SHARIA PEOPLE’S FINANCING BANKS FINANCING POLICY (PKPB)

TABLE OF CONTENTS
CHAPTER I INTRODUCTION ................................................................... - 36 -
A. BACKGROUND.................................................................. - 36 - B. FUNCTION AND OBJECTIVE OF BPRS FINANCING POLICY......... - 36 -

Function............................................................................. - 36 -
Objective ........................................................................... - 37 -
CHAPTER II SCOPE OF BPRS FINANCING POLICY ........................ - 38 -
A. BASIC POLICIES IN FINANCING .................................... - 38 -
Prudence Principle in Financing ....................... - 38 -
Organization and Management of Financing ......................... - 42 -
Financing Approval Policy ................................ - 47 -
Documentation and Administration of Financing ................... - 52 -
Financing Supervision ................................................ - 53 -
Handling of Problematic Financing ............................ - 57 -
B. TRANSPARENCY ..................................................................... - 61 -
Information regarding Characteristics of Financing Offered ..................................................................... - 61 -
Clarity regarding Financing Agreement Material and Collateral Binding ........................................................ - 63 -

CHAPTER I
INTRODUCTION
A. BACKGROUND
Based on Law Number 21 of 2008 concerning Sharia Banking (Sharia Banking Law), BPRS is one type of bank with main activities of gathering funds and distributing Financing. The distribution of Financing is a business activity that is the main source of income for BPRS to ensure the continuity of BPRS business, so BPRS must maintain the quality of Financing by applying the prudence principle and the principles of healthy Financing as well as the application of Sharia Principles so that the quality of Financing provided remains performing. In the event that BPRS is unable to maintain the quality of Financing well, it will affect the performance of BPRS, particularly financial performance, which can disrupt BPRS’s ability to meet obligations to depositor Customers. Therefore, so that the application of the prudence principle and the principles of healthy Financing as well as the application of Sharia Principles is implemented consistently, BPRS must have BPRS Financing Policy (KPB) at least in accordance with the guidelines in this Appendix.

B. FUNCTION AND OBJECTIVE OF BPRS FINANCING POLICY

Function
In carrying out business activities, BPRS must have an internal control system. To implement this internal control system, BPRS must have policies, procedures, and organizational devices that have functional separation. One of the internal control systems that must be owned by BPRS is the internal control system in Financing, which is formulated in KPB. The aforementioned KPB has the function as:
a. a guideline for BPRS in every implementation of activities in the Financing field containing all aspects of Financing that meet the prudence principle and the principles of healthy Financing as well as Sharia Principles, among others in the process of providing Financing individually, monitoring the Financing portfolio as a whole, and rescue and settlement of Financing; and b. a standard or measure in the implementation of supervision of Financing provision at all stages of the Financing process individually.
Objective
BPRS must have KPB with the objective:
a. to consistently and continuously apply the prudence principle and the principles of healthy Financing as well as Sharia Principles for risk mitigation for every provision of Financing; b. to prevent abuse of authority by insiders in the provision of Financing that can harm BPRS; and
c. to prevent the practice of providing unhealthy Financing.

CHAPTER II
SCOPE OF BPRS FINANCING POLICY
A. BASIC POLICIES IN FINANCING

Prudence Principle in Financing
The prudence principle in Financing includes policies in the provision of Financing, assessment of Financing quality, and the professionalism and integrity of BPRS officials in the Financing field. a. Policy in the Provision of Financing The policy in the provision of Financing covers basic policies regarding the regulation of healthy Financing provision, collateral assessment, provision of Financing to related parties with BPRS, group Customers, and/or large Customers, Financing to economic sectors, business activities, and high-risk Customers, as well as Financing that needs to be avoided.

Healthy Financing provision policy must at least include:
a) procedures and authority for healthy Financing including having Financing analysis procedures, Financing approval procedures, Financing documentation and administration procedures, and Financing supervision procedures; b) Financing that requires special attention; c) procedures for handling problematic Financing consisting of Financing rescue and Financing settlement; and d) settlement of collateral already owned by BPRS obtained from the results of Financing settlement.
Collateral assessment policy must at least include:
a) Procedures and methods for assessing collateral from legal and economic aspects including:
(1) collateral ownership documents;
(2) collateral binding;
(3) determination of collateral appraisal value; and (4) determination of the limit of collateral value against the amount of Financing to be provided, while paying attention to changes in collateral value during the Financing period and risk mitigation in case of obstacles to executing collateral, among others ownership of land separated from ownership of buildings on that land, which are both pledged separately. b) Collateral to be used as a factor to reduce PPAP is collateral that exists and is clearly present, and can be executed as regulated in this Financial Services Authority Regulation. As for collateral that does not exist and is not clearly present, and cannot be executed and cannot be used as a factor to reduce the formation of PPAP includes among others:
(1) collateral that has been used for public facilities that cannot be returned to function, for example used as a public cemetery; (2) collateral in dispute; (3) collateral seized by the state; (4) collateral whose existence cannot be known, for example vehicles whose physical form no longer exists; and/or (5) collateral that no longer has economic value due to certain reasons, for example fire, accident, and others.
Policy on providing Financing to related parties with BPRS, group Customers, and/or large Customers must at least include:
a) the maximum percentage of the amount of Financing facilities provided to related parties with BPRS, group Customers, and/or large Customers against the total amount of Financing or the amount of BPRS capital, based on the BPRS KPMM calculation; b) the maximum percentage of the amount of Financing facilities provided to related parties with BPRS, group Customers, and/or large Customers referring to regulations regarding the maximum limit of fund distribution for Sharia People’s Financing Banks; c) the provision of Financing to related parties with BPRS must be approved by at least 1 (one) member of the Board of Directors and 1 (one) member of the Board of Commissioners; d) the provision of Financing to group Customers, and/or large Customers, which will be syndicated and share risk (risk sharing) with other banks, must be approved by at least 1 (one) member of the Board of Directors; e) maintaining a list of names of related parties with BPRS, group Customers, and/or large Customers to ensure the effectiveness of applying the maximum limit of fund distribution to all Financing facilities provided by BPRS to related parties with BPRS, group Customers, and/or large Customers; and f) Financing procedures approved by the Board of Directors must contain criteria for related parties with BPRS and group Customers referring to regulations regarding the maximum limit of fund distribution for Sharia People’s Financing Banks, as well as criteria for large Customers set by the Board of Directors.
Policy on providing Financing to economic sectors, business activities, and high-risk Customers, among others BPRS must have a Financing work unit or employees who have adequate competence in the business field to be financed.
Provision of Financing to economic sectors, business activities, and high-risk Customers, among others:
a) commodities with highly fluctuating prices; b) economic sectors or business activities that are greatly influenced by external factors such as weather and others; c) economic sectors or business activities outside the expertise and ability of BPRS; d) business locations in specific areas such as conflict areas, riots, or disaster-prone areas; and/or e) Customers classified as politically exposed persons (PEP) as regulated in Financial Services Authority Regulations regarding the application of anti-money laundering and counter-terrorism financing programs in the financial services sector. Policy on providing Financing to Customers classified as PEP must at least pay attention to regulations regarding anti-money laundering and counter-terrorism financing.
Policy regarding Financing that needs to be avoided, among others:
a) Financing for speculative purposes; b) Financing provided without sufficient financial information except for Financing to micro businesses as long as there is certainty about the Customer; c) Financing that requires special expertise not owned by BPRS; and/or d) Financing to problematic Customers and/or Customers who have Financing with non-performing quality at BPRS or other banks.

b. Policy on Assessment of Financing Quality
The policy on assessment of Financing quality must be in accordance with this Financial Services Authority Regulation, among others BPRS must determine the same Financing quality for several Financing accounts:

used to finance 1 (one) Customer or 1 (one) project or the same business at the same BPRS; and/or
provided by more than 1 (one) BPRS jointly used to finance 1 (one) Customer or 1 (one) project or the same business based on a joint Financing agreement.
The definition of 1 (one) Customer includes Financing facilities to husband and wife except in the event of a property separation agreement in accordance with regulations.

c. Policy on Professionalism and Integrity of Financing Officials or Employees
All BPRS officials or employees related to Financing including members of the Board of Directors and members of the Board of Commissioners must at least:

carry out expertise professionally, honestly, objectively, carefully, and meticulously; and
have a commitment not to carry out acts as referred to in Article 63 paragraph (2) of the Sharia Banking Law.

Organization and Management of Financing
a. Policy on Financing Devices
Financing devices can be:

a work unit or Financing unit; or
employees,
who carry out the function of providing Financing from application to disbursement, and Financing administration.
Employees who carry out Financing analysis must be different from employees who disburse Financing and employees who administer Financing.
BPRS forms a Financing Committee (KP) especially for BPRS that have Financing provided to related parties with BPRS, group Customers, and/or large Customers, and Customers with high risk. KP is tasked with assisting the Board of Directors in evaluating and/or deciding on Financing applications in accordance with the amount and type of Financing set by the Board of Directors. The number and membership of KP are set by the Board of Directors according to needs, consisting of at least the Board of Directors and officials in the Financing field.

b. Policy on Duties, Authorities, and Responsibilities of the Board of Directors, Board of Commissioners, Sharia Supervisory Board, Financing Devices, and Financing Committee in the Financing Field BPRS must clearly regulate the details of duties, authorities, and responsibilities of:

Board of Directors
The duties, authorities, and responsibilities of the Board of Directors related to financing must at least include:
a) being responsible for drafting the KPB containing all aspects listed in the PKPB Guidelines to be approved by the Board of Commissioners; b) approving Financing procedures referring to the KPB approved by the Board of Commissioners; c) ensuring BPRS’s compliance with regulations in the field of financing; d) ensuring that KPB is applied and implemented consistently and consistently; e) appointing KP members in the event that KP formation is required; f) being responsible for drafting the business plan in the Financing field formulated in the BPRS business plan submitted to the Financial Services Authority as regulated in Financial Services Authority Regulations regarding business plans for rural credit banks and Sharia People’s Financing Banks; g) ensuring that the business plan in the Financing field is implemented; h) ensuring the implementation of improvement steps for various deviations in Financing found by the internal audit work unit or executive officials responsible for

implementation of the internal audit function; i) report corrective steps that have been, are being, and will be taken to the Board of Commissioners periodically and in writing, at least regarding:
(1) the development and quality of Financing as a whole; (2) the development and quality of Financing provided to related parties, Group Customers, and/or Large Customers; (3) Financing under special supervision (watchlist) and Problematic Financing; (4) deviations in the implementation of the Financing Policy; (5) significant findings in Financing, including deviations or violations of regulations in the Financing field reported by the internal audit unit or the executive official responsible for the internal audit function; (6) the implementation of the Financing plan as outlined in the BPRS business plan submitted to the Financial Services Authority as regulated in the Financial Services Authority Regulation regarding the business plan of rural credit banks and sharia financing banks; (7) deviations or violations of regulations in the Financing field that are findings of external auditors and/or the Financial Services Authority; and (8) the number and type of education and training for Financing personnel, j) establish an education and training plan for employees handling Financing and ensure the implementation of such education and training meets employee needs; and k) establish the form, duties, authority, and responsibilities of Financing personnel in accordance with BPRS needs.

Board of Commissioners
The duties, authority, and responsibilities of the Board of Commissioners related to Financing include at least:
a) approving the Financing Policy proposed by the Board of Directors; b) approving the annual Financing plan, including to related parties of the BPRS, as outlined in the BPRS business plan submitted to the Financial Services Authority as regulated in the Financial Services Authority Regulation regarding the business plan of rural credit banks and sharia financing banks; c) supervising the implementation of the annual Financing plan as referred to in letter b); d) requesting explanations and/or accountability from the Board of Directors and requesting corrective steps in the event that the implementation of Financing deviates from the established Financing plan; e) requesting explanations and/or accountability from the Board of Directors regarding all aspects contained in the Financing Policy; f) requesting explanations and/or accountability from the Board of Directors in the event of deviations in the implementation of the Financing Policy; g) requesting explanations and/or accountability from the Board of Directors regarding the development and quality of the Financing portfolio as a whole, including Financing provided to related parties of the BPRS, Group Customers, and/or Large Customers, and other matters as referred to in Chapter II section A.1.a.3); h) monitoring the planning and implementation of education and training for employees handling Financing; and i) reporting the results of supervision regarding the implementation of the Financing Policy and Financing procedures by the Board of Directors to the Financial Services Authority in the business plan supervision report as regulated in the Financial Services Authority Regulation regarding the business plan of rural credit banks and sharia financing banks.
Sharia Supervisory Board
The duties and authority of the Sharia Supervisory Board related to Financing include at least:
a) ensuring compliance with Sharia Principles in the Financing Policy; and b) requesting explanations and/or accountability from the Board of Directors in the event of deviations in the implementation of the Financing Policy related to compliance with Sharia Principles.
Financing Personnel
The duties, authority, and responsibilities of each employee of the Financing personnel include at least:
a) complying with all regulations established in the Financing Policy and Financing procedures; b) carrying out duties honestly, objectively, carefully, and meticulously without influence from parties interested in the Financing applicant or other parties that could harm the BPRS; c) continuously improving skills and knowledge in the field of Financing, including skills and knowledge regarding economic sectors, business activities, and/or high-risk Customers that have been and will be financed by the BPRS; and d) rejecting Financing applications submitted by Customers if they do not meet the requirements in the Financing procedures.
Financing Committee
The duties, authority, and responsibilities of the Financing Committee (KP) from the Financing personnel include at least:
a) providing recommendations for the approval or rejection of Financing in accordance with authority limits or types of Financing, including considering liquidity aspects; b) adhering to and following all established Financing Policies and Financing procedures; c) carrying out duties, especially regarding the approval of Financing, professionally, honestly, objectively, carefully, meticulously, and independently without influence from any party; and d) providing recommendations for the approval or rejection of Financing to the Board of Directors along with the considerations. BPRS may expand the scope of the functions, duties, authority, and responsibilities mentioned above in accordance with BPRS needs, provided they do not conflict with the functions, duties, authority, and responsibilities established in this PKPB.

Financing Approval Policy
The Financing approval policy includes at least the concept of the total relationship of the Financing applicant, the establishment of approval authority limits for Financing, the responsibility of the Financing decision-making official, the Financing approval process, the Financing agreement, and the Financing disbursement approval.

a. Concept of Total Relationship of the Financing Applicant The approval of Financing must not be based solely on considerations for a single transaction or a single Financing account from the applicant, but must be based on a comprehensive assessment of all Financing facilities provided or to be provided simultaneously to the Financing applicant, known as the concept of the total relationship of the Financing applicant. The term Financing applicant includes all individuals, companies, and/or parties related to the Financing applicant who have received or will receive Financing facilities simultaneously from the BPRS. The approval of Financing based on the concept of the total relationship of the Financing applicant must be reflected in the Financing analysis.

b. Establishment of Approval Authority Limits for Financing The regulation of approval authority limits for Financing includes at least:

the basis for consideration and criteria for setting approval authority limits for Financing are written in the Board of Directors' decision, including ceiling amounts, Customer criteria such as connection to the BPRS, classification as high-risk Customers, Politically Exposed Persons (PEPs), Group Customers, and others, as well as the level of position of designated employees;
stages of the Financing approval process;
every Financing provision must obtain approval from the official authorized to make Financing decisions;
every Financing approval must be done in writing;
signing the Financing agreement; and
approval of Financing disbursement.

c. Responsibility of the Financing Decision-Making Official
The responsibility of the Financing decision-making official includes at least:

Ensuring that every Financing provided meets banking regulations, adheres to prudential principles and the principle of healthy Financing, and Sharia Principles;
ensuring that the implementation of Financing provision complies with the Financing Policy and Financing procedures;
ensuring that the provision of Financing is based on honest, objective, careful, and meticulous assessment and is free from the influence of parties interested in the Financing applicant or other parties that could harm the BPRS; and
believing that the Financing to be provided can be repaid at maturity based on analysis of the submitted application.

d. Financing Approval Process

Financing Application
In assessing Financing applications, BPRS must pay attention to:
a) Financing applications must be made in writing, both for new Financing and Financing Restructuring; b) the Financing application as referred to in letter a) must contain complete information and meet requirements as established in the Financing procedures, including Financing history at the BPRS, other banks, and/or other financial institutions; and c) data, information, and documents submitted in the Financing application must be verified to ensure completeness and accuracy. Financing application documents include at least:
(1) documents related to the Customer, such as Customer identity documents, Family Card, Taxpayer Identification Number (NPWP), business legality documents; (2) Customer financial information; and (3) documents related to collateral and its binding.
Financing Analysis
Every Financing application that meets the requirements must undergo written analysis, paying attention to:
a) the form, format, and analysis of Financing are adjusted to the amount and type of Financing; b) the Financing analysis must reflect the concept of the total relationship of the Financing applicant in the event that the applicant has received Financing facilities or is simultaneously applying for other Financing; c) the Financing analysis must be made completely, accurately, and objectively, including at least:
(1) information related to the project or business and applicant data, including results of research in the Financial Information Services System (SLIK); (2) assessment of the appropriateness of the Financing application amount with the project or business to be financed, with the aim of avoiding the possibility of inflation (mark up) practices that could harm the BPRS; and (3) an objective assessment not influenced by parties interested in the Financing applicant. Financing analysis must not merely be a formality performed to meet Financing procedures; d) the Financing analysis includes at least assessment of the Customer's character, capacity, capital, collateral, and business prospects (condition of economy), or commonly known as the 5C’s, and assessment of the Financing repayment source focused on business results or income sources related to the object financed by the BPRS, and presents an evaluation of the legal aspects of Financing with the aim of protecting the BPRS from potential risks; and e) in syndicated Financing, the Financing analysis for the BPRS as a syndicate participant must include assessment of the bank acting as the syndicate coordinator. In the event that the BPRS acts as the syndicate coordinator, the BPRS must assess the syndicate participant banks.
Financing Approval Recommendation
The Financing approval recommendation must be prepared in writing based on the results of the Financing analysis conducted. The content of the Financing approval recommendation must align with the conclusions of the Financing analysis.
Granting Financing Approval
a) Every granting of Financing approval must consider the Financing analysis and Financing approval recommendation. b) Every granting of Financing approval that differs from the content of the Financing approval recommendation must be explained in writing.

e. Financing Agreement
Every approved Financing must be stipulated in a written Financing agreement. The form, format, and content of the Financing agreement are established by the BPRS, including at least:

meeting legal validity and requirements that can protect the interests of the BPRS and the Customer;
containing the amount, tenure, rate of return, purpose of use, method of repayment of Financing, and other Financing requirements as established in the decision regarding the Financing approval; and
the Financing agreement is made in at least 2 (two) copies, one of which is delivered to the Customer.

f. Financing Disbursement Approval
Disbursement of approved Financing must be based on:

Financing disbursement is only approved if all conditions established in the Financing approval letter and Financing agreement have been met by the Financing applicant.
Before Financing disbursement is carried out, it must be ensured that all legal aspects related to Financing have been resolved and provide adequate protection for both the BPRS and the Customer.

Financing Documentation and Administration
a. Financing Documentation
Documentation is one of the important aspects in the Financing process, so Financing documents must be documented well and orderly in accordance with statutory regulations.

Types of Financing Documents
Financing documents are all documents required for the disbursement of Financing, which serve as proof of the agreement or legal bond between the BPRS and the Customer, proof of ownership of collateral goods, and other Financing documents that constitute legal acts and/or may have legal consequences. The types of Financing documents to be documented are adjusted to the Financing provided, including application documents, Financing analysis documents, Financing agreements, and Financing disbursement instruments.
Storage and Use of Financing Documents
Every Financing document must be stored safely and orderly in accordance with statutory regulations regarding company documents. The method of use or retrieval of Financing documents from storage must be ensured to have adequate security.

b. Financing Administration
Financing administration is necessary for assessing the development and quality of Financing, supervising Financing, protecting the interests of the BPRS, and reporting to the Financial Services Authority, so all bookkeeping and administration of the Financing process must be regulated well and orderly.

Financing Bookkeeping
All Financing provided by the BPRS must be recorded and booked correctly, completely, and accurately, covering all necessary information.
Financing Administration Procedures
Financing administration procedures must include elements in the internal control system, including at least:
a) establishment of Financing personnel responsible for Financing administration; b) types of documents to be bookkept, including at least:
(1) Financing application documents, including documents related to collateral and its binding; (2) Financing analysis documents; (3) Financing agreements; (4) Financing disbursement instruments; (5) documents related to the Customer; and (6) documents related to collateral and its binding, and c) procedures for bookkeeping documents, including document codification, and document retention periods refer to statutory regulations.

Financing Supervision
a. Principles of Financing Supervision
Financing is one of the BPRS business activities that carries risks that can harm the BPRS, the interests of depositors, and banking service users, so the Financing supervision function needs to be applied comprehensively, paying attention to:

The Financing supervision function must begin with early prevention efforts against the possibility of unhealthy Financing practices and/or other matters that can harm the BPRS.
This must be reflected in the BPRS internal control system related to Financing, consisting of at least Financing organization and management, Financing Policy, Financing procedures, and the information system in the Financing field.
There is a mechanism such that every violation of the Financing Policy and Financing procedures can be immediately known and reported to the authorized official, Board of Directors, and/or Board of Commissioners.
In the event of deviations in the implementation of the Financing Policy and Financing procedures related to compliance with Sharia Principles, reports are also submitted to the Sharia Supervisory Board.
There is sufficient opportunity for the supervised party to provide explanations regarding the background of the issues and input as solutions for the future.
Financing supervision includes:
a) daily supervision by the Board of Directors and/or officials handling Financing hierarchically for every implementation of Financing provision, commonly known as embedded supervision; and b) supervision carried out by the internal audit unit or the executive official responsible for the internal audit function regarding all aspects of Financing, including review of the Financing Policy, Financing procedures, and Financing organization and management.

b. Objects of Financing Supervision
Financing supervision must cover all aspects of Financing and all supervision objects without exception, namely:

Supervision regarding the implementation of the Financing Policy and Financing procedures, and BPRS officials or employees related to Financing.
Supervision regarding all types of Financing and Customers, especially Financing to related parties of the BPRS, Group Customers, and/or Large Customers. Supervision of these parties must be conducted intensively.

c. Scope of Financing Supervision
Financing supervision includes at least:

Regarding internal BPRS:
a) Monitoring and supervising the compliance of the Financing provision and collection process with policies, procedures, and applicable regulations. b) Ensuring that the amount of Financing provided does not violate or exceed the maximum fund disbursement limits in accordance with statutory regulations regarding the maximum fund disbursement limits of sharia financing banks. c) Monitoring and supervising the handling of Problematic Financing (Financing Restructuring, write-off, write-off of receivables, and collateral takeover) in accordance with the Financing Policy and statutory regulations. d) Monitoring the compliance of Financing document bookkeeping and administration with statutory regulations. e) Monitoring the establishment of Financing quality and the adequacy of the amount of provision for Financing write-off in accordance with this Financial Services Authority Regulation. f) Providing early warnings to the work unit or relevant employees in the event that the quality of Customer Financing or the entire Financing portfolio in the work unit or employee is potentially declining. g) Evaluating the compliance of the establishment of employees occupying positions in the Financing field with their competencies. h) Supervising the behavior of Financing employees and reporting to superiors, the Board of Directors, and/or the Board of Commissioners in the event of violations or deviations committed by Financing employees.

i) Evaluating Financing policies, procedures, organization, and management comprehensively.
2) Regarding external to BPRS:
a) Supervising the use of Financing in accordance with the purpose of use as stated in the Financing agreement. b) Monitoring Customer business development, including monitoring through site visits to Customer business and collateral locations at any time, based on criteria such as the amount of Financing facilities, Customer type, type of project or business, and/or Financing quality. c) Providing written early warnings to Customers in the event of a decline in Customer Financing quality assessed as posing a risk to the BPRS. d) Monitoring Customer economic development and business competition, especially Customers with economic sectors, business activities, and high-risk Customers.

d. Internal Audit of Financing
The internal audit function is to monitor the performance of the internal control system and ensure that the implementation of Financing has been carried out correctly and in accordance with the Financing Policy, and has met the scope of Financing supervision principles, accompanied by corrective actions or recommendations. Implementation of internal audit regarding Financing to verify:

Financing provision has been implemented in accordance with the Financing Policy, Financing procedures, and internal BPRS regulations as well as statutory regulations;
Financing quality and the adequacy of the amount of provision for Financing write-off are in accordance with this Financial Services Authority Regulation;
Financing provision to related parties of the BPRS, Group Customers, and/or Large Customers is in accordance with the Financing Policy and statutory regulations regarding the maximum fund disbursement limits of sharia financing banks;
monitoring the implementation of Financing document bookkeeping and administration in accordance with statutory regulations; and
handling of Problematic Financing, namely Financing Restructuring, write-off, write-off of receivables, and collateral takeover, is in accordance with the Financing Policy and statutory regulations.

Handling of Problematic Financing
BPRS must detect the existence of Problematic Financing or Financing that has the potential to become Problematic Financing and handle Problematic Financing as soon as possible. a. Principles of Handling Problematic Financing All BPRS employees, especially those related to Financing, must have the same understanding in handling Problematic Financing, by carrying out efforts as follows:

handling of Problematic Financing is carried out among others by more intensive guidance to Customers with Problematic Financing and Financing that has the potential to be problematic;
disclosure of information regarding Problematic Financing clearly in Financing documentation and administration for follow-up handling internally within the BPRS and submitted to the Board of Commissioners to become material in the Board of Commissioners' supervision report of the BPRS business plan to the Financial Services Authority.
The information mentioned includes at least the main causes of Problematic Financing, the development of Problematic Financing, the development of handling of Problematic Financing, and follow-up handling of Problematic Financing, especially those having a significant impact on BPRS performance;
not making exceptions in handling Problematic Financing, especially for Problematic Financing to related parties of the BPRS, Group

group, and/or Large Customers; and
4) not resolving troubled Financing by increasing the Financing ceiling or arrears of margin/profit-sharing/ujrah and capitalizing such margin/profit-sharing/ujrah arrears.
b. Formulation of Troubled Financing Handling Program The troubled financing handling program must be approved by the Board of Directors and formulated as early as possible before impacting the overall Financing performance of the BPRS. The troubled financing handling program must at least include:

handling procedures for each troubled Financing in accordance with this Financial Services Authority Regulation as well as the BPRS Business Plan (KPB) and Financing procedures regarding the rescue and resolution of troubled Financing;
estimated time frame for resolution;
estimated results of rescue or resolution of troubled Financing, both from the perspective of Financing repayment and from the perspective of Financing quality; and
prioritizing the handling of troubled Financing to parties related to the BPRS, Group Customers, and/or Large Customers.
This troubled financing handling program is one of the materials that must be reported in the business plan supervision report as referred to in Chapter II item A.2.b.2).i).
c. Efforts to Handle Troubled Financing
In formulating the troubled financing handling program, the BPRS may carry out the following efforts:
Financing Restructuring
Criteria for Financing that can be restructured must at least meet:
a) The Customer experiences difficulties in paying principal and/or margin/profit-sharing/ujrah; and b) The Customer has a good business prospect and is assessed to be able to meet obligations after the Financing is restructured.

Financing Restructuring Policy must at least include:
a) The Board of Directors must form a working unit or appoint officials or employees to handle Financing Restructuring; b) officials or employees assigned in the working unit or officials or employees appointed to handle Financing Restructuring are not involved in the process of granting Financing to the Customer to be restructured; c) in the event that the BPRS does not have a sufficient number of employees, such authority may be exercised by the Board of Directors; d) determination of the authority limit to decide on restructured Financing as regulated in Financing procedures; e) the progress of handling restructured Financing must be reported periodically by the working unit or appointed officials or employees to the Board of Directors and/or Board of Commissioners; and f) the rights and obligations of Customers and other requirements for Financing Restructuring must be stated in a written amendment (addendum) to the Financing agreement.
2) Resolution of Troubled Financing
For troubled Financing that cannot be collected after rescue efforts have been made, the troubled Financing may be resolved through:
a) Collateral Sale
Customers may sell collateral directly or through the BPRS, via auction or out of court, to resolve troubled Financing. b) Collateral Takeover (1) The BPRS Board of Directors formulates collateral takeover policies stated in Financing procedures and is responsible for their implementation. (2) Collateral takeover is carried out in accordance with this Financial Services Authority Regulation and accounting guidelines for BPRS. (3) Financing resolution procedures through AYDA are supplemented with:
(a) Procedures and time limits for AYDA disbursement, including the determination of the Board of Directors or appointed officials to disburse AYDA, and the formulation of an action plan for AYDA disbursement in accordance with this Financial Services Authority Regulation. (b) Procedures and periods for AYDA assessment. (c) Application of AYDA accounting treatment in accordance with this Financial Services Authority Regulation as well as the BPRS Business Plan (KPB) and Financing procedures. (d) Periodic reassessment of AYDA in accordance with this Financial Services Authority Regulation and accounting guidelines for BPRS. (e) Documentation and administration of takeover and sale of collateral. d. Write-off and/or Write-off of Receivables In carrying out write-off and/or write-off of receivables for Financing with bad quality, the BPRS must pay attention to the following provisions:

Write-off and/or write-off of receivables may only be carried out for Financing with bad quality.
Plans for write-off and/or write-off of receivables for Financing with bad quality in significant amounts must be recorded in the BPRS business plan.
Implementation of write-off and/or write-off of receivables must be adjusted to the authority stated in the BPRS Business Plan (KPB) and Financing procedures.
Write-off of bad Financing may be carried out if the BPRS has formed sufficient PPAP and:
a) The Customer has no prospect for restructuring or Financing Restructuring efforts have failed so that the BPRS Financing portfolio remains bad; and/or b) Collateral is insufficient to pay off the Financing.
Write-off cannot be carried out for part of the Financing (partial write off).
Write-off of receivables may be carried out for part or all of the Financing.
Write-off of receivables for part of the Financing may only be carried out for Financing Restructuring or Financing resolution.
Write-off and/or write-off of receivables may only be carried out after the BPRS has made efforts to recover the Financing provided.
Write-off and/or write-off of receivables for bad Financing must be carried out in good faith, considering fairness, and without conflict of interest.
The BPRS must document the efforts made and the basis for consideration for the implementation of write-off and/or write-off of receivables.
The BPRS must administer data and information regarding Financing that has been written off and/or written off of receivables.
B. TRANSPARENCY
In the application of good corporate governance, the BPRS must apply transparency of information regarding each type of Financing to be offered to Customers or prospective Customers adequately, clearly, accurately, and comparably between products with each other in accordance with the rights and needs of Customers or prospective Customers. The information provided must be easy and understandable by Customers and must at least include:

Information on Characteristics of Offered Financing
Information on the characteristics of offered Financing must at least include:
a. product name; b. benefits and risks of the Financing offered to Customers or prospective Customers in their entirety, especially risks that will arise if Customers or prospective Customers cannot meet obligations as stated in the Financing agreement, including imposition of sanctions (ta’zir), compensation (ta’widh), collateral takeover, and others;
c. Financing requirements including among others documents required, mechanisms, Financing application procedures, and collateral requirements;
d. attached costs to be charged to Customers including among others administrative fees, commissions, sanctions (ta’zir), compensation (ta’widh), and insurance so that Customers obtain clarity regarding costs to be charged and have confidence in their ability and willingness to meet obligations to the BPRS; e. information on the magnitude of margin, profit-sharing ratio, or ujrah must at least include calculation methods, calculation procedures, charging, and adjustment of profit-sharing ratio or ujrah magnitude. The calculation method for the magnitude of margin, profit-sharing ratio, or ujrah must be supplemented with estimates or simulations of the magnitude of margin, profit-sharing ratio, or ujrah to be charged to Customers during the Financing period; and f. the duration of each offered product and installment schedule. Information on product characteristics as referred to in letters a to f must be provided by the BPRS to Customers or prospective Customers before signing the Financing agreement.

This copy is consistent with the original
Legal Director 1
Legal Department signed
Yuliana
2. Clarity on Financing Agreement Materials and Collateral Binding
Before signing the Financing agreement, the BPRS must transparently, completely, and clearly inform prospective Customers regarding the form and content of the Financing agreement and collateral binding agreement. Determined in Jakarta, On the date of 27 November 2019 CHAIRMAN OF THE COMMISSIONERS BOARD FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed WIMBOH SANTOSO

APPENDIX II
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 29 /POJK.03/2019
REGARDING
PRODUCTIVE ASSET QUALITY AND FORMATION OF PROVISION FOR WRITE-OFF OF PRODUCTIVE ASSETS SHARIA PEOPLE'S FINANCING BANKS
PART A
CLASSIFICATION OF FINANCING QUALITY BASED ON PROFIT-SHARING CONTRACTS BUSINESS PROSPECTS Financing Quality Components Good Special Attention Substandard Doubtful Bad

Potential
business growth
Business activities still have growth.
Business activities do not have growth.
Business activities have negative growth.
Business activities likely have the potential to cease operations in the near future.
No business growth potential (business has ceased operations).
Market
conditions and
Customer position in competition

Stable market.
Customer position in
the market is good, including a strong position in the market.
Market share is
comparable to competitors.
Customer position in
the market is quite good with a high level of competition.
Market is influenced by
economic condition changes.
Customer position in
the market is less good.
Market is influenced by
significant economic condition changes.
Customer position in the market
is weak.
Loss of market share along
with declining economic conditions.
Customer business has
ceased operations.

BUSINESS PROSPECTS
Financing Quality Components
Good Special Attention Substandard Doubtful Bad
3. Quality
of management and labor issues

Management quality
is very good.
Never recorded experiencing
management disputes or labor strikes, or has experienced minor management disputes or labor strikes in the last 1 (one) year but has been resolved well.
Management quality
is good.
Has experienced
management disputes or labor strikes in the last 1 (one) year that have been resolved well but there is still a possibility of recurrence.
Management quality
is quite good.
There are management
disputes or labor strikes in the last 1 (one) year with a fairly material impact on the Customer's business activities.
Management quality
is less good.
There are management disputes or labor strikes
in the last 1 (one) year with a material impact on the Customer's business activities.
Management quality is not good (no human resources supporting business implementation).

Support from
owners, groups, or affiliates
Owners, groups, or affiliates are stable and support the Customer's business.
Owners, groups, or affiliates are stable and do not have a burdensome impact on the Customer.
Owners, groups, or affiliates are less stable and begin to provide a burdensome impact on the Customer.
Owners, groups, or affiliates have provided a burdensome impact on the Customer.
Owners, groups, or affiliates are very detrimental to the Customer.
Efforts made
by the Customer to maintain the environment (for Large Customers whose business types have an important impact on the environment according to regulations) Environmental management efforts have been carried out well and achieve results in accordance with minimum requirements as regulated in provisions of legislation regarding protection and environmental management. Environmental management efforts have been carried out sufficiently well but have not yet reached minimum requirements as regulated in provisions of legislation regarding protection and environmental management. Environmental management efforts are less good and have not yet reached minimum requirements as regulated in provisions of legislation regarding protection and environmental management. Environmental management efforts have not been implemented as regulated in legislation provisions regarding protection and environmental management. Environmental management efforts have not been implemented as regulated in provisions of legislation regarding protection and environmental management, and there is a possibility of criminal prosecution

BUSINESS PROSPECTS
Financing Quality Components
Good Special Attention Substandard Doubtful Bad important to the environment according to regulations) protection and environmental management. environmental management. and civil lawsuits in court.

CUSTOMER PERFORMANCE
Financing Quality Components
Good Special Attention Substandard Doubtful Bad

Profit Acquisition Good profit acquisition. Profit acquisition is quite
good but tends to decline.
Profit acquisition is low and declining very significantly.

Negative profit acquisition
(incurring losses).
Operational activities
are financed by asset sales.
Negative profit acquisition
(incurring losses) in large amounts and eroding capital.
Customer is unable
to meet all obligations.

Capital Condition
Capital is very strong.
Capital is strong. Capital is quite strong. Capital is less strong. Capital is weak.
Cash Flow • Strong liquidity and working
capital.

Cash flow analysis
shows that the Customer is able to meet obligations for Financing repayment and profit-sharing portion without support from additional funding sources and meet other operational needs.
Liquidity and working
capital are quite strong.
Cash flow analysis
shows that although the Customer is able to meet obligations for Financing repayment and profit-sharing portion, there are indications of certain problems that if not addressed will affect payments in the near future.
Liquidity is low and
working capital is limited.
Cash flow analysis
shows that the Customer is only able to provide profit-sharing portion and/or part of Financing installments.
Liquidity is very
low.
Cash flow analysis shows
inability to repay
Financing installments and profit-sharing portions.
Liquidity difficulties.
Cash flow analysis
shows that the Customer is unable to repay
Financing installments and profit-sharing portions and cover production costs.

Financing Quality Components
Good Special Attention Substandard Doubtful Bad

Timeliness of principal and profit-sharing payments.
a. There are principal installment payments

Principal installment
payments are on time;
Principal installment
payment arrears have not exceeded 30
(thirty) days and
Financing has not matured; or
Principal settlement
arrears have not exceeded 15
(fifteen) days after maturity; and
RBH to PBH ratio is greater than
or equal to
80% (eighty percent) (RBH ≥ 80%
PBH).
Principal installment
payment arrears have exceeded 30 (thirty) days but have not exceeded 90 (ninety) days; or
Principal settlement
arrears have exceeded 15 (fifteen) days but have not exceeded 30 (thirty) days after maturity; and/or
RBH to PBH ratio is greater than 50%
(fifty percent) and less than
80% (eighty percent) (50% <
RBH/PBH < 80%).
Principal installment
payment arrears have exceeded 90
(ninety) days but have not exceeded 180
(one hundred eighty) days; or
Principal settlement
arrears have exceeded 30 (thirty) days but have not exceeded 60 (sixty) days after maturity; and/or
RBH to PBH ratio is greater than 30%
(thirty percent) and less than or equal to 50% (fifty percent) (30% < RBH/PBH ≤ 50%).
Principal installment
payment arrears have exceeded 180 (one hundred eighty) days but have not exceeded 360 (three hundred sixty) days; or
Principal settlement
arrears have exceeded
60 (sixty) days but have not exceeded 90 (nine ty) days after maturity; and/or
RBH to PBH ratio is less than
or equal to 30%
(thirty percent) during 3 (three) payment periods (RBH/PBH ≤ 30% during 3 (three) payment periods).
Principal installment
payment arrears have exceeded 360 (three hundred sixty) days; or
Principal settlement
arrears have exceeded
90 (ninety) days after maturity; and/or
RBH to PBH ratio is less than
or equal to 30%
(thirty percent) for more than 3 (three) payment periods (RBH/PBH ≤ 30% for more than 3 (three) payment periods). b. There are no principal installment payments
Financing has not
matured or principal settlement arrears have not exceeded 15 (fifteen) days after maturity; and
RBH to PBH ratio is
greater than or equal to
80% (eighty percent) (RBH ≥ 80%
PBH).
Principal settlement
arrears have exceeded 15 (fifteen) days but have not exceeded 30 (thirty) days after maturity; and/or
RBH to PBH ratio is
greater than 50%
(fifty percent) and less than
80% (eighty percent) (50% <
RBH/PBH < 80%).
Principal settlement
arrears have exceeded 30 (thirty) days but have not exceeded 60 (sixty) days after maturity; and/or
RBH to PBH ratio is
greater than 30%
(thirty percent) and less than or equal to 50% (fifty percent) (30% < RBH/PBH ≤ 50%).
Principal settlement
arrears exceed 60
(sixty) days but have not exceeded 90 (nine ty) days after maturity; and/or
RBH to PBH ratio is
Principal settlement
arrears exceed 90
(ninety) days after maturity; and/or
RBH to PBH ratio is
PBH is equal to or less than 30% (three ty percent) for more than 3 (three) payment periods (RBH/PBH ≤ 30% for more than 3 (three) payment periods).

Financing Quality Components
Good Special Attention Substandard Doubtful Bad
2. Availability and
accuracy of
Customer financial information

Customer relationship
with the BPRS is good, the Customer always submits financial information regularly and accurately.
There are recent financial
reports and
BPRS analysis results of financial reports or financial information submitted by the Customer.
Customer relationship with the BPRS has deteriorated and financial information cannot be trusted or there are no BPRS analysis results of financial reports or financial information submitted by the Customer. Customer relationship with the BPRS is very poor and financial information is not available or cannot be trusted.

Completeness
of financing documentation
Financing
Documentation is complete.
Financing
Documentation is less complete, including documents related to Financing applications, especially owner identity documents.
Financing
Documentation is less complete, including documents related to applications, especially business legality documents.
Financing Documentation is significantly less complete, including documents related to Financing applications and Financing analysis is inadequate.
There is no
Financing documentation
(application documents,
Financing analysis,
Financing agreement, and disbursement instruments).
Compliance
with
Financing agreement
There are no violations of the
Financing agreement.
There are violations of basic requirements in the Financing agreement that can affect the ability to pay Customer.
There are very fundamental violations of basic requirements in the Financing agreement that can affect Customer's ability to pay and cause collateral to be executed.
Suitability
of fund usage
Fund usage is in accordance with
Financing application.
Fund usage is less in accordance with
Financing application, but the amount is not material.
Fund usage is less in accordance with
Financing application, with an amount that is fairly material.
Fund usage is less in accordance with
Financing application, with a material amount.
Fund usage is not in accordance with
Financing application.
Fairness of
source of payment for obligations
Payment source comes from the results of the financed project or business or the Customer's income.
Payment source does not always come from the results of the financed project or business or the Customer's income.
Payment source comes from other than the results of the financed project or business or the Customer's income.
Payment source is not known and the source of payment comes from other than the results of the financed project or business or the Customer's income.
There is no source of payment.

PART B
CLASSIFICATION OF FINANCING QUALITY BASED ON SALES AND LENDING CONTRACTS BUSINESS PROSPECTS Financing Quality Components Good Special Attention Substandard Doubtful Bad

Potential
business growth
Business activities still have growth.
Business activities do not have growth.
Business activities have negative growth.
Business activities likely have the potential to cease operations in the near future.
No business growth potential
(business has ceased operations).
Market
conditions and
Customer position in competition

Stable market.
Customer position in
the market is good, including a strong position in the market.
Market share is
comparable to competitors.
Customer position in
the market is quite good with a high level of competition.
Market is influenced by
economic condition changes.
Customer position in
the market is less good.
Market is influenced by
significant economic condition changes.
Customer position in the market
is weak.
Loss of market share
along with declining economic conditions.
Customer business has
ceased operations.

Quality
of management and labor issues

Management quality
is very good.
Never recorded experiencing
management disputes or labor strikes, or has experienced minor management disputes or labor strikes in the last 1 (one) year but has been resolved well.
Management quality
is good.
Has experienced
management disputes or labor strikes in the last 1 (one) year that have been resolved well but there is still a possibility of recurrence.
Management quality
is quite good.
There are management
disputes or labor strikes in the last 1 (one) year with a fairly material impact on the Customer's business activities.
Management quality
is less good.
There are management disputes or labor strikes
in the last 1 (one) year with a material impact on the Customer's business activities.
Management quality is not good (no human resources supporting business implementation).

BUSINESS PROSPECTS

Financing Quality Components

Category	Current	Special Attention	Less Current	Doubtful	Loss
4. Support from owners, groups, or affiliates	Owners, groups, or affiliates are stable and support the Customer's business.	Owners, groups, or affiliates are stable and do not have a burdensome impact on the Customer.	Owners, groups, or affiliates are less stable and begin to have a burdensome impact on the Customer.	Owners, groups, or affiliates have had a burdensome impact on the Customer.	Owners, groups, or affiliates have severely harmed the Customer.
5. Efforts made by the Customer to maintain the environment (for large-scale Customers whose business type has a significant impact on the environment according to statutory regulations).	Environmental management efforts have been carried out well and achieve results in accordance with minimum requirements as regulated in statutory regulations concerning environmental protection and management.	Environmental management efforts have been carried out adequately but have not yet met the minimum requirements as regulated in statutory regulations concerning environmental protection and management.	Environmental management efforts are poor and have not met the minimum requirements as regulated in statutory regulations concerning environmental protection and management.	Environmental management efforts have not been carried out as regulated in statutory regulations concerning environmental protection and management.	Environmental management efforts have not been carried out as regulated in statutory regulations concerning environmental protection and management, and there is a possibility of criminal prosecution or civil lawsuit in court.

CUSTOMER PERFORMANCE

Financing Quality Components

Category	Current	Special Attention	Less Current	Doubtful	Loss
1. Profit Acquisition	Profit acquisition is good.	Profit acquisition is adequate but tends to decline.	Profit acquisition is low and declining significantly.	• Profit acquisition is negative (incurring losses).<br>• Operational activities are financed by asset sales.<br>• Profit acquisition is negative (incurring losses) in large amounts and erodes capital.<br>• Customer is unable to meet all obligations.
2. Capital Condition	Capital is very strong.	Capital is strong.	Capital is adequate.	Capital is less strong.	Capital is weak.
3. Cash Flow	• Liquidity and working capital are strong.<br>• Cash flow analysis shows that the Customer is able to meet principal and margin payment obligations without additional funding support and meet other operational needs.	• Liquidity and working capital are adequate.<br>• Cash flow analysis shows that although the Customer is able to meet principal and margin payment obligations, there are indications of certain problems that, if not addressed, will affect future payments.	• Liquidity is insufficient and working capital is limited.<br>• Cash flow analysis shows that the Customer is only able to pay part of the principal and margin.	• Liquidity is very low.<br>• Cash flow analysis shows inability to pay principal and margin.<br>• Liquidity difficulties.<br>• Cash flow analysis shows that the Customer is unable to pay principal and margin and cover production costs.

Financing Quality Components

Category	Current	Special Attention	Less Current	Doubtful	Loss
1. Timeliness of principal and margin payments.<br>a. Timeliness of principal and margin payments (installment period 1 month or more)	• No outstanding principal and margin installments; or<br>• There are outstanding principal and/or margin installments not exceeding 30 (thirty) days from the installment due date and the Financing has not yet matured.	• There are outstanding principal and/or margin installments more than 30 (thirty) days from the installment due date but not more than 90 (ninety) days from the installment due date; or<br>• The Financing has matured not more than 15 (fifteen) days.	• There are outstanding principal and/or margin installments more than 90 (ninety) days from the installment due date but not more than 180 (one hundred eighty) days from the installment due date; or<br>• The Financing has matured more than 15 (fifteen) days but not more than 30 (thirty) days.	• There are outstanding principal and/or margin installments more than 180 (one hundred eighty) days from the installment due date but not more than 360 (three hundred sixty) days from the installment due date; or<br>• The Financing has matured more than 30 (thirty) days but not more than 60 (sixty) days.	• There are outstanding principal and/or margin installments more than 360 (three hundred sixty) days from the installment due date;<br>• The Financing has matured more than 60 (sixty) days;<br>• The Financing has been handed over to the Directorate General of State Assets (DJKN); or<br>• The Financing has been submitted for insurance claim to the Financing insurance company.
b. Timeliness of principal and margin payments (installment period less than 1 month)	• No outstanding principal and margin installments; or<br>• There are outstanding principal and/or margin installments not exceeding 15 (fifteen) days from the installment due date and the Financing has not yet matured.	• There are outstanding principal and/or margin installments more than 15 (fifteen) days from the installment due date but not more than 30 (thirty) days from the installment due date; or<br>• The Financing has matured not more than 15 (fifteen) days.	• There are outstanding principal and/or margin installments more than 30 (thirty) days from the installment due date but not more than 90 (ninety) days from the installment due date; or<br>• The Financing has matured more than 15 (fifteen) days but not more than 30 (thirty) days.	• There are outstanding principal and/or margin installments more than 90 (ninety) days from the installment due date but not more than 180 (one hundred eighty) days from the installment due date; or<br>• The Financing has matured more than 30 (thirty) days but not more than 60 (sixty) days.	• There are outstanding principal and/or margin installments more than 180 (one hundred eighty) days from the installment due date;<br>• The Financing has matured more than 60 (sixty) days;<br>• The Financing has been handed over to DJKN; or<br>• The Financing has been submitted for insurance claim to the Financing insurance company.
2. Availability and accuracy of Customer financial information	• Customer relationship with BPRS is good, Customer always submits financial information regularly and accurately.<br>• There are up-to-date financial reports and BPRS analysis results of the financial reports or financial information submitted by the Customer.	Customer relationship with BPRS has deteriorated and financial information is not trustworthy or there are no BPRS analysis results of the financial reports or financial information submitted by the Customer.	Customer relationship with BPRS is very poor and financial information is unavailable or not trustworthy.
3. Completeness of Financing documentation	Financing documentation is complete.	Financing documentation is incomplete, including among others regarding Financing application documents, specifically the business owner's identity documents.	Financing documentation is incomplete, including among others regarding application documents, specifically business legality documents.	Financing documentation is significantly incomplete, including among others regarding Financing application documents and Financing analysis is inadequate.	There is no Financing documentation (Financing application documents, Financing analysis, Financing agreement, Financing disbursement warrants).
4. Compliance with Financing agreement	There are no violations of the Financing agreement.	There are violations of the principal requirements in the Financing agreement that can affect the Customer's payment ability.	There are very fundamental violations of the principal requirements in the Financing agreement that can affect the Customer's payment ability and cause collateral to be executed.
5. Appropriateness of fund usage	Funds are used in accordance with the Financing request.	Funds are used less in accordance with the Financing request, but the amount is not material.	Funds are used less in accordance with the Financing request, with a fairly material amount.	Funds are used less in accordance with the Financing request, with a material amount.	Funds are used not in accordance with the Financing request.
6. Fairness of the source of payment of obligations	The source of payment comes from the results of the financed project/business or the relevant Customer's income.	The source of payment does not always come from the results of the financed project/business or the relevant Customer's income.	The source of payment comes from other than the results of the financed project/business or the relevant Customer's income.	The source of payment is unknown and the source of payment comes from other than the results of the financed project/business or the relevant Customer's income.	There is no source of payment.

PART C

CLASSIFICATION OF FINANCING QUALITY BASED ON LEASE AGREEMENTS

BUSINESS PROSPECTS

Financing Quality Components

Category	Current	Special Attention	Less Current	Doubtful	Loss
1. Potential for business growth	Business activities still have growth.	Business activities do not have growth.	Business activities have negative growth.	Business activities are likely to have the potential to cease operations in the near future.	There is no potential for business growth (business has ceased operations).
2. Market conditions and Customer's position in competition	• Stable market.<br>• Customer's position in the market is good, including a strong position in the market.<br>• Market share is comparable to competitors.	• Customer's position in the market is quite good with intense competition levels.<br>• Market is influenced by changes in economic conditions.<br>• Customer's position in the market is less good.	• Market is influenced by significant changes in economic conditions.<br>• Customer's position in the market is weak.<br>• Loss of market share in line with declining economic conditions.	Customer's business has ceased operations.
3. Management quality and labor issues	• Management quality is very good.<br>• Never recorded experiencing management disputes or labor strikes, or has experienced minor management disputes or labor strikes in the last 1 (one) year but has been resolved well.	• Management quality is good.<br>• Has experienced management disputes or labor strikes in the last 1 (one) year that have been resolved well but there is still a possibility of recurrence.	• Management quality is adequate.<br>• There are management disputes or labor strikes in the last 1 (one) year with a fairly material impact on the Customer's business activities.	• Management quality is poor.<br>• There are management disputes or labor strikes in the last 1 (one) year with a material impact on the Customer's business activities.	Management quality is not good (no human resources supporting business implementation).

BUSINESS PROSPECTS

Financing Quality Components

Category	Current	Special Attention	Less Current	Doubtful	Loss
4. Support from owners, groups, or affiliates	Owners, groups, or affiliates are stable and support the Customer's business.	Owners, groups, or affiliates are stable and do not have a burdensome impact on the Customer.	Owners, groups, or affiliates are less stable and begin to have a burdensome impact on the Customer.	Owners, groups, or affiliates have had a burdensome impact on the Customer.	Owners, groups, or affiliates have severely harmed the Customer.
5. Efforts made by the Customer to maintain the environment (for large-scale Customers whose business type has a significant impact on the environment according to statutory regulations).	Environmental management efforts have been carried out well and achieve results in accordance with minimum requirements as regulated in statutory regulations concerning environmental protection and management.	Environmental management efforts have been carried out adequately but have not yet met the minimum requirements as regulated in statutory regulations concerning environmental protection and management.	Environmental management efforts are poor and have not met the minimum requirements as regulated in statutory regulations concerning environmental protection and management.	Environmental management efforts have not been carried out as regulated in statutory regulations concerning environmental protection and management.	Environmental management efforts have not been carried out as regulated in statutory regulations concerning environmental protection and management, and there is a possibility of criminal prosecution or civil lawsuit in court.

CUSTOMER PERFORMANCE

Financing Quality Components

Category	Current	Special Attention	Less Current	Doubtful	Loss
1. Profit Acquisition	Profit acquisition is good.	Profit acquisition is adequate but tends to decline.	Profit acquisition is low and declining significantly.	• Profit acquisition is negative (incurring losses).<br>• Operational activities are financed by asset sales.<br>• Profit acquisition is negative (incurring losses) in large amounts and erodes capital.<br>• Customer is unable to meet all obligations.
2. Capital Condition	Capital is very strong.	Capital is strong.	Capital is adequate.	Capital is less strong.	Capital is weak.
3. Cash Flow	• Liquidity and working capital are strong.<br>• Cash flow analysis shows that the Customer is able to meet rent payment obligations without additional funding support and meet other operational needs.	• Liquidity and working capital are adequate.<br>• Cash flow analysis shows that although the Customer is able to meet rent payment obligations, there are indications of certain problems that, if not addressed, will affect future payments.	• Liquidity is insufficient and working capital is limited.<br>• Cash flow analysis shows that the Customer is only able to pay part of the rent.	• Liquidity is very low.<br>• Cash flow analysis shows inability to pay rent.<br>• Liquidity difficulties.<br>• Cash flow analysis shows that the Customer is unable to pay rent and cover production costs.

Financing Quality Components

Category	Current	Special Attention	Less Current	Doubtful	Loss
1. Timeliness of rent payments.<br>a. Timeliness of rent payments (rent payment period 1 month or more)	• No outstanding rent payments; or<br>• There are outstanding rent payments not exceeding 30 (thirty) days from the rent payment due date and the Financing has not yet matured.	• There are outstanding rent payments more than 30 (thirty) days from the rent payment due date but not more than 90 (ninety) days from the rent payment due date; or<br>• The Financing has matured not more than 15 (fifteen) days.	• There are outstanding rent payments more than 90 (ninety) days from the rent payment due date but not more than 180 (one hundred eighty) days from the rent payment due date; or<br>• The Financing has matured more than 15 (fifteen) days but not more than 30 (thirty) days.	• There are outstanding rent payments more than 180 (one hundred eighty) days from the rent payment due date but not more than 360 (three hundred sixty) days from the rent payment due date; or<br>• The Financing has matured more than 30 (thirty) days but not more than 60 (sixty) days.	• There are outstanding rent payments more than 360 (three hundred sixty) days from the rent payment due date;<br>• The Financing has matured more than 60 (sixty) days;<br>• The Financing has been handed over to DJKN; or<br>• The Financing has been submitted for insurance claim to the Financing insurance company.
b. Timeliness of rent payments (rent payment period less than 1 month)	• No outstanding rent payments; or<br>• There are outstanding rent payments not exceeding 15 (fifteen) days from the rent payment due date and the Financing has not yet matured.	• There are outstanding rent payments more than 15 (fifteen) days from the rent payment due date but not more than 30 (thirty) days from the rent payment due date; or<br>• The Financing has matured not more than 15 (fifteen) days.	• There are outstanding rent payments more than 30 (thirty) days from the rent payment due date but not more than 90 (ninety) days from the rent payment due date; or<br>• The Financing has matured more than 15 (fifteen) days but not more than 30 (thirty) days.	• There are outstanding rent payments more than 90 (ninety) days from the rent payment due date but not more than 180 (one hundred eighty) days from the rent payment due date; or<br>• The Financing has matured more than 30 (thirty) days but not more than 60 (sixty) days.	• There are outstanding rent payments more than 180 (one hundred eighty) days from the rent payment due date;<br>• The Financing has matured more than 60 (sixty) days;<br>• The Financing has been handed over to DJKN; or<br>• The Financing has been submitted for insurance claim to the Financing insurance company.
2. Availability and accuracy of Customer financial information	• Customer relationship with BPRS is good, Customer always submits financial information regularly and accurately.<br>• There are up-to-date financial reports and BPRS analysis results of the financial reports or financial information submitted by the Customer.	Customer relationship with BPRS has deteriorated and financial information is not trustworthy or there are no BPRS analysis results of the financial reports or financial information submitted by the Customer.	Customer relationship with BPRS is very poor and financial information is unavailable or not trustworthy.
3. Completeness of Financing documentation	Financing documentation is complete.	Financing documentation is incomplete, including among others regarding Financing application documents, specifically the business owner's identity documents.	Financing documentation is incomplete, including among others regarding application documents, specifically business legality documents.	Financing documentation is significantly incomplete, including among others regarding Financing application documents and Financing analysis is inadequate.	There is no Financing documentation (Financing application documents, Financing analysis, Financing agreement, Financing disbursement warrants).
4. Compliance with Financing agreement	There are no violations of the Financing agreement.	There are violations of the principal requirements in the Financing agreement that can affect the Customer's payment ability.	There are very fundamental violations of the principal requirements in the Financing agreement that can affect the Customer's payment ability and cause collateral to be executed.

This copy is consistent with the original

Legal Director 1
Legal Department signed
Yuliana

Financing Quality Components

Category	Current	Special Attention	Less Current	Doubtful	Loss
5. Appropriateness of fund usage	Funds are used in accordance with the Financing request.	Funds are used less in accordance with the Financing request, but the amount is not material.	Funds are used less in accordance with the Financing request, with a fairly material amount.	Funds are used less in accordance with the Financing request, with a material amount.	Funds are used not in accordance with the Financing request.
6. Fairness of the source of payment of obligations	The source of payment comes from the results of the financed project/business or the relevant Customer's income.	The source of payment does not always come from the results of the financed project/business or the relevant Customer's income.	The source of payment comes from other than the results of the financed project/business or the relevant Customer's income.	The source of payment is unknown and the source of payment comes from other than the results of the financed project/business or the relevant Customer's income.	There is no source of payment.

Determined in Jakarta on 27 November 2019

CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

APPENDIX III

FINANCIAL SERVICES AUTHORITY OF THE
REPUBLIC OF INDONESIA
REGULATION
NUMBER 29 /POJK.03/2019
CONCERNING
PRODUCTIVE ASSET QUALITY AND
FORMATION OF PROVISION FOR WRITE-OFF
OF PRODUCTIVE ASSETS OF SHARIA PEOPLE'S FINANCING BANKS

FINANCING RESTRUCTURING PROCEDURE

Financing Restructuring can be carried out by considering the characteristics of each type of Financing, as follows:

Murabahah Financing and Istishna Financing

Restructuring of Murabahah Financing and Istishna Financing is carried out by:

a. Rescheduling

Restructuring is carried out by extending the maturity period of the Financing without changing the remaining obligations of the Customer to be paid to the BPRS.

b. Reconditioning

Restructuring is carried out by re-establishing the terms and conditions of the Financing, including changes to the payment schedule, installment amount, duration, and/or granting discounts, as long as it does not increase the remaining obligations of the Customer to be paid to the BPRS.

c. Reorganization by Converting Murabahah Financing or Istishna Financing Equal to the Customer's Remaining Obligations into IMBT Financing, Mudharabah Financing, or Musyarakah Financing

The aforementioned Financing conversion is carried out as follows:

The BPRS terminates the Murabahah Financing or Istishna Financing agreement by calculating the fair value of the Murabahah or Istishna Financing object.

If there is a difference between the amount of the Customer's liability and the fair value of the Murabahah Financing or Istishna Financing object, it is recognized as follows:
a) If the fair value is smaller than the Customer's liability amount, the remaining Customer liability remains the right of the BPRS, the settlement of which is agreed upon between the BPRS and the Customer; b) If the fair value is larger than the Customer's liability amount, the difference in value is recognized as an advance payment for IMBT Financing or reduces the capital of Mudharabah Financing from the BPRS or increases the Customer's capital portion for Musyarakah Financing.

The previous Murabahah Financing or Istishna Financing object becomes the basis for creating a new Financing contract.
The BPRS enters into a new Financing contract by considering the Customer's conditions, including the type of business and the Customer's repayment ability.
The BPRS includes the chronology of the previous Financing contract in the new Financing contract.

The remaining Customer liability in the restructuring of Murabahah Financing or Istishna Financing as referred to in letters a through c is the principal amount and margin that have not been paid by the Customer at the time the restructuring is carried out.

Qardh Financing
Restructuring of Qardh Financing is carried out by:
a. Rescheduling
Restructuring is carried out by extending the maturity period of the Financing without changing the remaining Customer liability to be paid to the BPRS. b. Renegotiation Restructuring is carried out by re-establishing Financing conditions, including changes in payment schedule, installment amount, term, and/or granting discounts, as long as it does not increase the remaining Customer liability to be paid to the BPRS.

The remaining Customer liability in the restructuring of Qardh Financing as referred to in letters a and b is the principal amount that has not been paid by the Customer at the time the restructuring is carried out.

Mudharabah Financing and Musyarakah Financing
Restructuring of Mudharabah Financing and Musyarakah Financing is carried out by:
a. Rescheduling
Restructuring is carried out by extending the maturity period of the Financing without changing the remaining Customer liability to be paid to the BPRS. b. Renegotiation Restructuring is carried out by re-establishing Financing conditions, including profit-sharing ratios, installment amounts, terms, payment schedules, and/or granting principal discounts, without increasing the remaining Customer liability to be paid to the BPRS.
c. Reorganization with Additional Funds
Restructuring is carried out by adding BPRS funds to the Customer so that the Customer's business activities can run well again.

The remaining Customer liability in the restructuring of Mudharabah Financing or Musyarakah Financing as referred to in letters a and b is the principal amount that has not been paid by the Customer at the time the restructuring is carried out.

Restructuring of Financing does not include extensions of Mudharabah Financing or Musyarakah Financing that meet the performing quality and have matured, and are not caused by the Customer experiencing a decline in repayment ability.

Ijarah Financing and IMBT Financing
Restructuring of Ijarah Financing and IMBT Financing is carried out by:
a. Rescheduling
Restructuring is carried out by extending the maturity period of the Financing, and the BPRS may re-establish the amount of ujrah to be paid by the Customer under the following conditions:

Ijarah Asset Owned by BPRS
The extension period is at most until the economic life of the ijarah asset.
Ijarah Asset Not Owned by BPRS
The extension period is at most until the end of the right to use the ijarah asset. b. Renegotiation Restructuring is carried out by re-establishing Financing conditions, including installment amounts, terms, payment schedules, and/or granting ujrah discounts, and the BPRS may re-establish the ujrah to be paid by the Customer, under the following conditions:
Ijarah Asset Owned by BPRS
If the BPRS grants an extension of the term, the extension period is at most until the economic life of the ijarah asset.
Ijarah Asset Not Owned by BPRS
If the BPRS grants a time extension, the extension period is at most until the end of the right to use the ijarah asset.
c. Reorganization by Converting Ijarah Financing or IMBT Financing into Mudharabah Financing or Musyarakah Financing
Conversion of Financing for ijarah assets owned by the BPRS is carried out as follows:
The BPRS terminates the Ijarah Financing or IMBT Financing contract by considering the fair value of the ijarah asset.
If there is a difference between the fair value of the ijarah asset and the book value of the ijarah asset plus ijarah installment arrears, it is recognized as follows:
a) If the fair value is smaller than the book value plus ijarah installment arrears, the BPRS recognizes a loss equal to the difference; b) If the fair value is larger than the book value plus ijarah installment arrears, the BPRS recognizes deferred profit equal to the difference and amortizes it during the term of the Mudharabah Financing or Musyarakah Financing.
The BPRS creates a new Financing contract by considering the Customer's conditions, including the type of business and the Customer's repayment ability.
The BPRS records Mudharabah Financing or Musyarakah Financing at the fair value of the ijarah asset.
The BPRS includes the chronology of the previous Financing contract in the new Financing contract.

Multijasa Financing
Restructuring of multijasa Financing is carried out by:
a. Rescheduling
Restructuring is carried out by extending the maturity period of the Financing without changing the remaining Customer liability to be paid to the BPRS. b. Renegotiation Restructuring is carried out by re-establishing Financing conditions, including installment amounts, terms, payment schedules, and/or granting discounts, without increasing the remaining Customer liability to be paid to the BPRS.

Established in Jakarta,
On the date of 27 November 2019
CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signature
WIMBOH SANTOSO
This copy is in accordance with the original
Legal Director 1
Legal Department signature
Yuliana

Productive Asset Quality and Formation of Productive Asset Write-down Provisions for Sharia Microfinance Banks

BUSINESS PROSPECTS

Financing Quality Components

CUSTOMER PERFORMANCE

Financing Quality Components

Financing Quality Components

PART C

CLASSIFICATION OF FINANCING QUALITY BASED ON LEASE AGREEMENTS

BUSINESS PROSPECTS

Financing Quality Components

BUSINESS PROSPECTS

Financing Quality Components

CUSTOMER PERFORMANCE

Financing Quality Components

Financing Quality Components

Financing Quality Components

APPENDIX III

Lineage: Superseded

Timeline