- Indonesia caps online lending rates to protect consumers from predatory practices.
- The move follows earlier efforts to rein in the fast-growing sector.
- Companies must now focus on sustainability over unchecked revenue growth.
Indonesia’s financial regulator, Otoritas Jasa Keuangan (OJK), has imposed lower maximum interest rates on loans issued by online lending platforms starting January 1. The move aims to protect consumers from predatory lending practices.
New rules on interest and late fees
Under the new rules, online lenders can charge up to 0.1% daily interest on productive loans and 0.3% on consumer loans — less than half the previous 0.4% ceiling.
Late fees are also capped at 0.1% and 0.3%, respectively. Total interest and fees are also limited to 100% of the loan principal.
Helps promote responsible lending
The regulations follow previous efforts to rein in the sector, including restricting borrowers to loans from a maximum of three platforms and capping individual borrowing limits.
The head of the Indonesian online lenders association said the moves would promote more responsible lending by forcing platforms to better assess borrowers’ risk profiles.
Adjusting to slower revenue growth
The new interest rate caps close a period of explosive but unchecked growth for Indonesia’s online lending sector. Analysts say responsible platforms can still thrive through better risk analysis and financial inclusion of the unbanked.
All companies must adjust to slower revenue growth in exchange for long-term sustainability. Ultimately, innovators providing positive social impact alongside profits will lead the newly regulated market.
