Jakarta. The Financial Services Authority (OJK) is set to implement new regulations allowing financial technology platforms to offer online loans of up to Rp 10 billion ($617,526), an increase from the previous limit of Rp 2 billion.

Nailul Huda, Director of the Digital Economy at the Center of Economic and Law Studies (CELIOS), stated that the primary beneficiaries of this increased funding will be productive sectors, particularly micro, small, and medium enterprises (MSMEs).

"If the productive sector wishes to expand, they will seek loans up to the ceiling, provided certain conditions are met," Nailul explained on Monday.

He proposed several conditions for online loan providers. First, borrowers should belong to the productive sector, such as business operators, rather than individual consumers.

Second, borrowers seeking maximum loans should have a strong repayment history or a good credit score, ideally limited to A+ or A.

Third, borrowers should not have any previous defaults on loans from other financial platforms, including banks. This allows for filtering out poor borrowers by integrating data from OJK's Financial Information Services System (SLIK), which serves as an initial screening tool.

The new loan cap of Rp 10 billion is expected to benefit entrepreneurs underserved by traditional banking. For MSMEs, the ceiling has changed, with micro and ultra-micro enterprises now eligible for loans up to Rp 2 billion, while small enterprises could receive loans up to Rp 10 billion.

In related news, House Speaker Puan Maharani emphasized the need for comprehensive education regarding online loan regulations among Indonesians, noting that many people are trapped in debt due to a lack of financial literacy.

"Many people are increasingly entangled in online loan debt. Therefore, education is crucial to protect them from falling into default situations," she said.

According to OJK data, nearly 5 percent of the Indonesian population is affected by online loan debt, leading to various social issues, including cases of suicide due to financial strain.

As of February 2024, outstanding loans from peer-to-peer lending companies reached Rp 61 trillion, up from Rp 60.1 trillion in January, with 16.6 million loan recipients. The 90-days non-performing loan ratio (TWP90) stood at 2.95 percent, with most defaults occurring among individuals aged 19-34, totaling Rp 693 billion across 269,118 accounts.

"This data shows that the majority of online borrowers are from Generation Z and Millennials. We need to pay attention to and protect them from such issues," Puan added.

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