SEOJK on the Amount of Down Payment (Down Payment/Urbiun) for Motor Vehicle Financing for Sharia Financing

To:

1. The Board of Directors of Sharia Financing Companies; and
2. The Board of Directors of Financing Companies having Sharia Business Units,
   At their respective locations.

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 20/SEOJK.05/2015 CONCERNING THE AMOUNT OF DOWN PAYMENT (DOWN PAYMENT/URBUN) FOR MOTOR VEHICLE FINANCING FOR SHARIA FINANCING

In accordance with the mandate of Article 12 paragraph (3) of the Financial Services Authority Regulation Number 31/POJK.05/2014 concerning the Conduct of Sharia Financing Business (State Gazette of the Republic of Indonesia Year 2014 Number 366, Supplement to the State Gazette of the Republic of Indonesia Number 5640), it is necessary to regulate changes to the amount of down payment (down payment/urbun) for motor vehicle financing for Sharia financing in the Circular Letter of the Financial Services Authority as follows:

I. GENERAL PROVISIONS
In this Circular Letter of the Financial Services Authority, the following terms are defined as:

1. Financing Company is a business entity that conducts financing activities for the procurement of goods and/or services.
2. Sharia Financing Company is a Financing Company whose entire business activities conduct Sharia financing.
3. Sharia Financing is the disbursement of financing conducted based on Sharia principles.
4. Sharia Principles are Islamic legal provisions based on fatwas and/or Sharia compliance statements from the National Sharia Board of the Indonesian Ulema Council.
5. Sharia Business Unit, hereinafter abbreviated as UUS, is a working unit of the Financing Company's headquarters functioning as the parent office of offices conducting Sharia Financing.
6. Sharia Company refers to Sharia Financing Companies and UUS.
7. Sales Financing is financing in the form of providing goods through sales transactions in accordance with the Sharia financing agreement agreed upon by the parties.
8. Sharia Financing Agreement is a written agreement between the Sharia Company and other parties containing the rights and obligations of each party in accordance with Sharia Principles.
9. Down Payment (Down Payment/Urbiun) for Motor Vehicle Financing is a cash down payment or advance payment where the source of funds comes from the consumer (self-financing) in the context of Sales Financing for motor vehicles.
10. Consumer is a company or individual who enters into a Sharia Financing Agreement with the Sharia Company regarding the business activities of the Sharia Company.
11. Problematic Productive Assets are productive assets with poor, doubtful, and/or non-performing quality regarding Sales Financing for motor vehicles, without considering provisions for the write-off of productive assets.
12. Problematic Productive Asset Ratio is the ratio between Problematic Productive Assets and total productive assets regarding Sales Financing for motor vehicles.

II. AMOUNT OF DOWN PAYMENT (DOWN PAYMENT/URBUN) FOR MOTOR VEHICLE FINANCING FOR SHARIA COMPANIES

1. Sharia Companies having a Problematic Productive Asset Ratio value lower than or equal to 5% (five percent) must apply the down payment (Down Payment/Urbiun) amount for Motor Vehicle Financing to Consumers, with the following provisions:
   a. for two- or three-wheeled motor vehicles, at least 10% (ten percent) of the selling price of the relevant vehicle; b. for four-wheeled or more motor vehicles used for productive purposes, at least 15% (fifteen percent) of the selling price of the relevant vehicle; or
   c. for four-wheeled or more motor vehicles used for non-productive purposes, at least 20% (twenty percent) of the selling price of the relevant vehicle.

2. Sharia Companies having a Problematic Productive Asset Ratio value higher than 5% (five percent) must apply the down payment (Down Payment/Urbiun) amount for Motor Vehicle Financing to Consumers, with the following provisions:
   a. for two- or three-wheeled motor vehicles, at least 15% (fifteen percent) of the selling price of the relevant vehicle; b. for four-wheeled or more motor vehicles used for productive purposes, at least 20% (twenty percent) of the selling price of the relevant vehicle; or
   c. for four-wheeled or more motor vehicles used for non-productive purposes, at least 25% (twenty-five percent) of the selling price of the relevant vehicle.

III. AMOUNT OF DOWN PAYMENT (DOWN PAYMENT/URBUN) FOR MOTOR VEHICLE FINANCING FOR UUS HAVING A VALUE OF SALES FINANCING RECEIVABLES FOR MOTOR VEHICLES HIGHER THAN 50% (FIFTY PERCENT) OF TOTAL FINANCING RECEIVABLES FOR MOTOR VEHICLES OF ITS PARENT FINANCING COMPANY

1. UUS having a value of Sales Financing receivables for motor vehicles higher than 50% (fifty percent) of the total financing receivables for motor vehicles of its parent Financing Company must apply the down payment (Down Payment/Urbiun) amount for Motor Vehicle Financing to Consumers, with the following provisions:
   a. for two- or three-wheeled motor vehicles, at least 15% (fifteen percent) of the selling price of the relevant vehicle; b. for four-wheeled or more motor vehicles used for productive purposes, at least 15% (fifteen percent) of the selling price of the relevant vehicle; or
   c. for four-wheeled or more motor vehicles used for non-productive purposes, at least 20% (twenty percent) of the selling price of the relevant vehicle.

2. In the event that a UUS has a Problematic Productive Asset Ratio value higher than 5% (five percent) but has a value of Sales Financing receivables for motor vehicles higher than 50% (fifty percent) of the total financing receivables for motor vehicles of its parent Financing Company, the down payment (Down Payment/Urbiun) amount for Motor Vehicle Financing follows the provisions as stated in Roman numeral II point 2.

3. In the event that a UUS has a Problematic Productive Asset Ratio value lower than 5% (five percent) but has a value of Sales Financing receivables for motor vehicles higher than 50% (fifty percent) of the total financing receivables for motor vehicles of its parent Financing Company, the down payment (Down Payment/Urbiun) amount for Motor Vehicle Financing follows the provisions as stated in point 1.

IV. IMPLEMENTATION PERIOD OF THE DOWN PAYMENT (DOWN PAYMENT/URBUN) AMOUNT FOR MOTOR VEHICLE FINANCING

1. The application of the down payment (Down Payment/Urbiun) amount for Motor Vehicle Financing as referred to in Roman numeral II and/or Roman numeral III is calculated based on monthly reports as of June 30 and December 31.

2. The application of the down payment (Down Payment/Urbiun) amount for Motor Vehicle Financing as referred to in point 1 takes effect on August 1 or February 1 for the subsequent 6 (six) months.

Example:
If the monthly report of a Sharia Company as of June 30, 2015, has a Problematic Asset value higher than 5% (five percent), then that Sharia Company applies the Down Payment (Down Payment/Urbiun) provisions for Motor Vehicle Financing as stated in Roman numeral II point 2. The application of the down payment (Down Payment/Urbiun) amount for Motor Vehicle Financing takes effect from August 1, 2015, to January 31, 2016.

If the monthly report of a UUS as of December 31, 2015, shows the Problematic Asset Ratio of said UUS is still higher than 5% (five percent) and has a value of Sales Financing receivables for motor vehicles higher than 50% (fifty percent) of the total financing receivables for motor vehicles of its parent Financing Company, then that UUS continues to apply the down payment (Down Payment/Urbiun) provisions for Motor Vehicle Financing as stated in Roman numeral II point 2. The application of the down payment (Down Payment/Urbiun) amount for Motor Vehicle Financing takes effect from February 1, 2016, to July 31, 2016.

V. CALCULATION METHOD FOR THE DOWN PAYMENT (DOWN PAYMENT/URBUN) AMOUNT FOR MOTOR VEHICLE FINANCING

1. The calculation of the down payment (Down Payment/Urbiun) amount for Motor Vehicle Financing is conducted against the selling price of the vehicle after deducting discounts (discount) and other deductions.

Example:
Motor price: Rp10,000,000.00
Discount and other deductions given: Rp500,000.00 Selling price of vehicle: Rp10,000,000.00 – Rp500,000.00 = Rp9,500,000.00 Down Payment (Down Payment/Urbiun) for Motor Vehicle Financing to be charged and paid in cash at once is 10% x Rp9,500,000.00 = Rp950,000.00

2. The calculation of the down payment (Down Payment/Urbiun) amount for Motor Vehicle Financing as referred to in point 1 does not include the first installment, survey fees, commissions, insurance, guarantees, fidusia, notary fees, or other costs.

Example 1 (insurance, guarantee, or other costs paid in cash by Consumer):
Motor price: Rp10,000,000.00
Discount and other deductions given: Rp500,000.00 Insurance, guarantee, or other costs paid by Consumer in cash: Rp1,000,000.00 Selling price of vehicle: Rp10,000,000.00 – Rp500,000.00 = Rp9,500,000.00 Down Payment (Down Payment/Urbiun) for Motor Vehicle Financing to be charged and paid in cash at once is 10% x Rp9,500,000.00 = Rp950,000.00 Costs paid by Consumer in cash at once (if insurance, guarantee, or other costs are paid in cash by Consumer) = down payment (Rp950,000.00) + insurance, guarantee, or other costs (Rp1,000,000.00) = Rp1,950,000.00 Total financing by the Financing Company to Consumer = selling price of vehicle (Rp9,500,000.00) – down payment (Rp950,000.00) = Rp8,550,000.00

Example 2 (insurance, guarantee, or other costs not paid in cash (installment) by Consumer):
Motor price: Rp10,000,000.00
Discount and other deductions given: Rp500,000.00 Insurance, guarantee, or other costs: Rp1,000,000.00 Selling price of vehicle: Rp10,000,000.00 – Rp500,000.00 = Rp9,500,000.00 Down Payment (Down Payment/Urbiun) for Motor Vehicle Financing to be charged is 10% x Rp9,500,000.00 = Rp950,000.00 Costs paid by Consumer if insurance, guarantee, or other costs are not paid in cash by Consumer or are paid in installments = down payment (Rp950,000.00) Total financing by the Financing Company to Consumer = insurance, guarantee, or other costs (Rp1,000,000.00) + vehicle financing price (Rp8,550,000.00) = Rp9,550,000.00

VI. COMPLIANCE ENFORCEMENT AND SANCTIONS
Sharia Companies that do not meet the down payment (Down Payment/Urbiun) amount provisions for Motor Vehicle Financing as stated in this Circular Letter of the Financial Services Authority are subject to the provisions as stated in Article 55 and Article 57 of the Financial Services Authority Regulation Number 31/POJK.05/2014 concerning the Conduct of Sharia Financing Business.

VII. CLOSING
The provisions in this Circular Letter of the Financial Services Authority take effect on the date of determination.
To inform everyone, the publication of this Circular Letter of the Financial Services Authority is ordered by placing it in the State Gazette of the Republic of Indonesia.
Determined in Jakarta on June 30, 2015
EXECUTIVE HEAD OF INSURANCE, PENSION FUND,
FINANCING INSTITUTION, AND
OTHER FINANCIAL INSTITUTION SUPERVISOR
FINANCIAL SERVICES AUTHORITY,
Signed,
FIRDAUS DJAELANI

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR NUMBER Copy in accordance with the original Legal Director I Legal Department, Signed.
Signed.
Sudarmaji