Provisions Regarding Multifinance Company in Indonesia.

We set out below a summary about Provisions of Multifinance Company in Indonesia based
on the regulation in Indonesia.

GENERAL

1. The Provisions of Finance Technology Services Regarding Regarding Establishment of

Multifinance Company in Indonesia is stipulates under the Financial Service Authority
(Otoritas Jasa Keuangan - OJK) Regulation Number 28/POJK.05/2014 on
Business License and The Institution of Multi Finance Company (“POJK 28/2014”)
and Regulation Number 35/POJK.05/2018 on Multi Finance Company Activities
(“POJK 35/2018”).

2. Pursuant to article 1 poin 1 POJK 35/2018, Multi Finance Company (“MFC”) is:

“A corporation who works on financing activities of goods and services.”

LICENSE PROCESSING

3. The MFC shall and must have a business license from OJK to do business activities in
Indonesia jurisdiction. (article 3 POJK 28/2014)

4. Pursuant to article 2 POJK 28/2014, The company must be established by legal bodies
in a form of Limited Liability Company (Perseroan Terbatas – PT) which shares can
be owned by:
a. Indonesian Nationals
b. A legal Indonesian Companies or Institution.
c. Foreign Companies or Institution
d. Foreign Nationals (can only be done through capital market)
e. State of Republic of Indonesia
f. Regional Governments

5. Directors shall submit the business license application (by using OJK forms) by
attaching following documents such as:
a. Deed of Establishment, with at least consist of:
1) Name & Business Domicile Place
- the name shall consist “finance” or “pembiayaan” words (article 7 POJK
28/2014)
2) Description and purpose of business
3) Capital
- For PT, the amount of capital that must be deposits is at least Rp
100.000.000.000,00 (one hundred billion rupiah). (article 9 POJK 28/2014)
- Maximum total amount of alien/foreign ownership in PT company is 85%
from the deposited capital. (article 10 POJK 28/2014)
4) Owner
5) Authority. Responsibility, the period of time of the directors and commisioner
position
 And/or the amendment of Article Of Association (“AOA”) with the confirmation,
approval and/or notification from the authorities.

b. List of owners, in a forms of shareholders list with the amount of shares that owned
by the shareholder.

c. Shareholders data:
1) If it is a person, the company shall attach the shareholders data with:
- Copy of Identification Card (ID or passport)
- Copy of Tax Obligation Number (Nomor Pokok Wajib Pajak – NPWP)
- Curriculum Vitae with an updated photo with a size of 4 x 6 cm.
- Statement letter that states that the stored capital in the company is not
from loan, money laudering activity, not listed on bad debt and list of failure
person (Daftar Tidak Lulus – DTL), Never sentenced by the court because of
harming the state finances and/or related financial sectors in past 5(five)
years, never found guilty which implicates the company is stated bankruptcy
by the legally court verdict in past 5(five) years, never stated against
regulations regarding finansial service which he/she already done.

2) If it is legal bodies, the company shall attach with:

- Deed of establishment (with the approval from the authorities in charge)
- Financial report which already audited by public accountant and the latest
financial report.
- List of shareholders with the amount share owned.
- Statement letter that states that the stored capital in the company is not
from loan, money laudering activity, not listed on bad debt and list of failure
person (Daftar Tidak Lulus – DTL), Never sentenced by the court because of
harming the state finances and/or related financial sectors in past 5(five)
years, never found guilty which implicates the company is stated bankruptcy
by the legally court verdict in past 5(five) years, never stated against
regulations regarding finansial service which he/she already done.

d. Deeds of Shareholders Board Meeting (Rapat Umum Pemegang Saham –

RUPS)
e. Copy of Evidence regarding repayment of capital deposits in one of a convensional
bank in Indonesia and legalized by the recipient bank which still valid during the
process of submitting business license.
f. Opening Balance Sheet (neraca awal/pembukaan)
g. Expertise evidence in the form of certification in financial and/or risk management
for the director that in charge in the main activities
h. List of officials under one level from the directors who have at least an expertise
and/or experience in a field of:
1) Marketing, analysis of credit/finance and billing.
2) Risk management, including internal control
3) Application of understanding customers principles
4) Syariah finance

By attaching the evidence of expertise and experience as stated above.

 i. Evidence of operational readiness with at least in the forms of:
1) List of assets and inventory.
2) Evidence of office building ownership and authorization
3) Examples of financial agreement
4) NPWP
j. Work Plan for the first 2(two) years with at least consist of:
1) Feasibility study on Market Oppurtunity and Economic Potential
2) Funding distribution and steps taken to make realization of the work plan
3) cash flow projections, balance sheets and monthly calculations of profit / loss
with underlying assumptions that starts since the Company carry out operational
activities.
k. Copies of cooperation agreement between the foreign parties and Indonesia parties
(if the company have participate the foreign corporation/company or institution)
l. Guidance of Implementing an Application Of Understanding Customers Principles (
Pedoman Pelaksanaan Penerapan Prinsip Mengenal Nasabah – P4MN)
m. Guidance of Company Governance.

ORGANIZATION STRUCTURE

6. Pursuant to article 14 POJK 28/2014, The MFC shall have an organization structure
which draws clearly with along at least in fuction of:
a. Administration and bookkeeping
b. Marketing, analysis an appropriateness of financing and collection.
c. Risk management, including internal control
d. Application of understanding customers principles

7. The structure organization shall be completed with a description of their job, authority,
responsibility and legitimate working procedures.

BUSINESS ACTIVITIES

8. The business activities regarding Multifinance Company pursuant to article 2 POJK

35/2018 are including:
a. Investment Financing.
financing activities on capital goods along with services needed for business
activities, rehabilitation, modernization, expansion or relocation of business place
that given to debtor. (article 1 poin 2 POJK 35/2018)
b. Working Capital Financing.
financing activities on supplying an expenditure needs that already runs out on one
cycle of debtor business activities. (article 1 poin 3 POJK 35/2018)
c. Multipurpose Financing.
Goods and services financing activities which needed by the debtor for consumption
and not for the business purpose with a period of time as agreed. (article 1 poin 4
POJK 35/2018)
d. Other Financing Business Activites under OJK Approval.
 financing activities which cause financing receivables/claim in the balance sheet of
Financing Company, but it cannot classified in the category of Investment Financing,
Financing of Working Capital and / or Multipurpose Financing.1
e. Operating Lease and/or Fee Service Activities as long as not violating
regulations about the financial service sector.
Operating lease is a lease activity that do not substantially diverts benefits and risk of
goods that leased and Fee service activities is an activity that can be carried out by
the MFC for marketing purpose of financial services products including mutual
funds, micro insurance, or other related products with financial service activities.2

9. The MFC is required to clearly describes their business activities on the Articles Of
Association (AOA). (article 7 POJK 35/2018)

FINANCING METHODS

10. The Financing Activities on MFC shall be done with the following methods as stipulates
under the POJK 35/2018 which is :
a. Lease Financing (only for Investment Financing & Multipurpose Financing)
b. Sale and Lease Back (only for Investment Financing & Working Capital Financing)
c. Factoring with a guarantee from the receivables/claim seller (only for Investment
Financing & Working Capital Financing)
d. Factoring without a guarantee from the receivables/claim seller (only for Investment
Financing & Working Capital Financing)
e. Purchase with installment payment. (only for Investment Financing & Multipurpose
Financing)
f. Project financing (only for Investment Financing)
g. Infrastructure financing (only for Investment Financing)
h. Business capital facilities (only for Working Capital Financing)
i. Funds Facilities (only for Multipurpose Financing)
j. Other financing methods ( after get an approval from OJK)

11. The MFC who wants to do other financing business and methods activities shall meet
the following requirements as stipulates under the POJK 35/2018 which is:
a. A plan for doing other business and methods activities which already included on the
MFC Business Plan.
b. Have a financial health level with healthy minimum conditions.
c. Have a low levels of minimum risk
d. Meet the gearing ratio standard/provision
e. Have a minimum equity at least Rp. 200.000.000.000,00 (Two Hundred Billions
Rupiah)
f. Not being penalized by OJK
g. Shall submit an application to OJK to get an approval and must attach/submit a
document with a minimum descriptions about:

1
Explanations on POJK 35/2018 https://ojk.go.id/id/regulasi/Documents/Pages/Penyelenggaraan-Usaha-
Perusahaan-Pembiayaan/pojk%2035-2018.pdf
2
Ibid.
 1) The product that will be marketed.
2) Business prospect analysis.
3) Financing mechanism/methods that will be implemented.
4) Rights and Obligations for both parties.
5) Example of Financing Agreement that will be used.

12. The MFC who wants to do fee service activities shall reports the OJK with an attachment
at least about:
a. Description about the product of fee service that will be
b. Description about the marketing mechanisme
c. Description about the rights and obligations for both parties
d. Draft of cooperation agreement
e. A copy of license from the authorities who have an authority (if any)

INFORMATION SYSTEM AND TECHNOLOGY

13. Pursuant to article 18 POJK 35/2018, the MFC is required to have Integrated
Information System and Technology. (the obligation only applies for the MFC Company
who have more than 5 branches)

14. Pursuant to article 19 POJK 35/2018, the MFC could doing their business activities by
using information technologies with a following requirements which is:
a. Have a Standard Operating Procedure (SOP) regarding business activities by using
information technology.
b. Have human resources which have expertise and/or background in information
technology field.
c. Have data centre and disaster recovery centre placed in Indonesia.
d. Have a reliable and secure information technology system.

COOPERATION

15. In doing the MFC business activities, the MFC could cooperates with other parties
through channeling or joint financing and shall be done pursuant to regulation
provisions that applies to both sides. (article 39 poin 1 & 2 POJK 35/2018)

16. The MFC is prohibited to doing a cooperation with other parties through channeling
with recourse and joint financing with recourse. (article 39 poin 1 & 2 POJK 35/2018)

17. Pursuant to article 39 poin 4 POJK 35/2018, other parties are:

a. Bank
b. Secondary housing MFC
c. Micro financial institution
d. P2P Fintech Company
e. Venture Capital Company
f. Other institution which grated to do cooperation through channeling and joint
financing as stipulated under the Indonesian regulation

With a condition that other parties is already licensed and registered in OJK.
18. Channeling is only can be done by the MFC if the risk is arising from this activity lies for
the owner of the fund. (article 40 poin 1 POJK 35/2018)

19. On channeling, the recipient only act as an administrator and obtain their rewards from
funds managing. (article 40 poin 2 POJK 35/2018)

20. Joint financing is only can be done by the MFC if the souce of financing fund is from the
MFC and other parties. (article 41 poin 1 POJK 35/2018)

21. The risk that is arising from joint financing become a burden proportionally suitable to
amount of funds issued. (article 41 poin 2 POJK 35/2018)

22. In doing a financing cooperation through channeling and/or joint financing, the MFC
shall have reliable Information System and Technology to ensure the appropriateness of
debtor data owned by the MFC and other parties. (article 42 POJK 35/2018)