Indonesian regulator gives banks green light to invest in fintech

INDONESIA has issued a regulation standardising banks’ investments into financial technology companies in response to a booming digital finance sector, the country’s financial regulator said in a statement on Wednesday (Nov 16).

Before this, there were no specific rules on such investments. Some Indonesian banks have already invested in fintech firms through their venture capital units.

The new regulation, which was signed earlier this month and is effective immediately, stipulates that a bank can invest a maximum of 35 per cent of its capital in fintechs.

The bank must also come up with a formal procedure to manage the risks from its investment.

“Capital injection has to be balanced with a higher quality of risk management to anticipate potential risks ... that could affect the bank’s sustainability,” the Financial Services Authority (OJK) said in a statement.

The new rules apply to direct investments or purchases through the stock exchange, OJK said.

Indonesia, which has an estimated 191 million Internet users, is a significant market for a host of tech platforms.

As of September, outstanding loans from fintechs totalled 48.73 trillion rupiah (S$4.3 billion), up 77 per cent from the same period last year, data from OJK shows. REUTERS