Indonesian Otoritas Jasa Keuangan (OJK) and Credit Relaxation Policy
The economic impact of the coronavirus disease (COVID-19) pandemic has greatly affected the Indonesian economy over the past few months. Starting from March, the implementation of work from home (WFH) policy has forced multiple business ventures to tone down their activities during the pandemic significantly. The decreased volume of income for these businesses also spurred the government to look up for alternative solutions to maintain economic growth.
In a press conference on March 24 2020, Indonesian President Joko Widodo stated that the Financial Services’ Authority (OJK) would provide loan settlement relaxation for micro, small, and medium enterprises (MSMEs). Since these enterprises are vulnerable due to their reliance on credit loans to support their activities, the government decided that it is best to alleviate some of their payment processes.
In normal times, these ventures rely on vehicular means such as motorcycles, cars, trucks, and other vehicles to support their daily jobs and gradually pay the loans from their income. Since the pandemic has caused a significant decrease to their income, many feared that these ventures would be unable to pay their loans to their respective multifinance corporations.
Based on a recently released frequently asked question (FAQ) by OJK on April 7, the government would provide a stimulus to give a sense of leniency regarding the loan settlements. This stimulus takes form in prioritization of targeted businesses that would receive a delay of payment in a 1-year time. In this period, multifinance companies and MSMEs must agree on a specified date to perform the loan settlement when compared to a regular loan settlement schedule in normal times.
To implement this policy, OJK stated that the new loan settlement policy would not take place automatically. Instead, both the MSMEs and the multifinance companies must file a personal request to be able to receive these relaxation benefits. This is mainly caused by the surging amount of complaints from debtors regarding this new policy.
According to OJK’s spokesperson Sekar Putih Djarot, OJK still receives reports of illegal debt collecting activities after the enactment of this new policy. To provide clarification for this issue, she emphasized that informal worker without a stable amount of income shall receive the full benefits of this policy. In addition, as for debtors with a steady amount of income before and during the pandemic, they still have to settle their loans based on the previously agreed conditions and they shall not receive the privileges from this policy.
However, several obstacles need to be sorted out before this policy can be implemented entirely. Fithra Faisal, an economist from the University of Indonesia, claimed that the loan settlement relaxation policy needs to be specified for different contexts. Despite the core idea itself is laudable, the policy itself does not have a different set of rules for various companies.
Regarding this issue, Commission XI from People’s Representative Council (DPR) plans to hold a meeting with OJK to address this issue in the upcoming weeks. As a governmental commission tasked with responsibilities in banking and non-banking financial institutions, Commission XI seeks out a more detailed meeting with OJK to ensure a balanced implementation of this policy to all business ventures in Indonesia. By doing this, the government expects mitigation of possible financial loss that stems from the current situation to both the multifinance companies and the MSMEs.
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