Startup Policies in Indonesia

Startup policies in Jakarta

By João Castel-Branco
30 March 2021

Berlin, Germany

The FinTech sector in particular is very sensitive to changes in regulation. As a solution, policy makers in Indonesia have curated a mutually beneficial relationship with its startups. Policy makers seek technical guidance and feedback on legislation to create a conducive legal framework. Meanwhile, startups gain a sense of security in a sector where legislation has previously disrupted business success. The coordination in this sector of how to increase opportunities and efficiency can be a pleasant byproduct of good relations between startup ecosystem agents.

 

Policies in FinTech regulated

In November 2017, Bank Indonesia (BI) introduced a regulatory sandbox through Regulation No 19/12/PBII/2017. This is a broad regulation on all FinTech sectors and although it is not the first of its kind, it still serves as the baseline regulation in the FinTech market. Indonesia’s Financial Services Authority (OJK), has the authority to regulate matters relating to non-payment financial services in the banking, capital markets, insurance, pension fund and financing sectors. For P2P lending institutions, which were legally recognized in December 2016, major policies regarding finance include a foreign ownership limit of 85%, prohibition of carrying out any on-balance sheet lending and a lending limit amount of around $141,000 USD. As a result of the regulation, OJK has already blocked more than one thousand illegal P2P players from fraudulent activity.

 

1000 Startups Movement

Joko Widodo, the President of Indonesia, launched an initiative called “1000 Startups Movement” in June 2016. The project aims to foster 1000 startups by the end of 2020, with an expected valuation around $10B. The programme includes workshops, hackathons, bootcamps, and incubation programmes that are carried out across ten large Indonesian cities. By mid 2019, only 525 startups had been created, so in response, the IT Ministry of Indonesia launched the “1001 Digital Startup Movement” alongside several ecosystem stakeholders in the country’s digital sector to launch further growth. 

 

Photo by Adeolu Eletu on Unsplash.com

Ease of Foreign investment rules for startups

The government has unveiled a draft of presidential regulation which proposes to lift some of the rules concerning foreign investment in tech-based start-ups. It aims to limit the restrictions on foreign investment (from special economic zones) to the minimum requirement of more than Rp 10 billion (US$710,111). It is also intended to ease the process for start-ups to hire foreign workers without being required to have a government-approved plan to use foreign employees, which is included in the current article of the jobs law. The main goal is to decrease the barriers and give more capacity to startups to attract investment and human talent.

 

Startup SG Founder

Announced recently in August 2020, Startup SG Founder is a mentorship program and capital grant to “first-time entrepreneurs with innovative business ideas”. This policy is perhaps the most direct solution proposed by the Singaporean government to tackle what Michelle mentioned as a difficulty in getting young talent to pursue entrepreneurship in a culture that can view the risk negatively.  The policy includes a three-month program called Venture Building Programme and is designed “to groom aspiring entrepreneurs with no business experience to build and scale innovative startups”.

 

Impact

Overall, the use of policy to impose regulations on the FinTech sector in Jakarta (and Indonesia writ large) work in tandem to promote two sides. The first is to allow innovators the freedom to develop new technology and new ways to expand the market. However, this freedom to innovate cannot come at the cost of the loss of credibility. In the end, FinTech relies on trust in technology and financial literacy; it is a market that relies on word of mouth marketing to bring in new customers. If the sector is overrun with bad actors and adverse schemes, it becomes all the more difficult to attract and sustain customers. In the end, these policies work to let the FinTech sector grow uninterrupted for the benefit of all Indonesians for whom financial inclusion is an added value.

 

 

 


João Castel-Branco

João Castel-Branco works as Research Analyst for enpact’s Data& Research sector. He has worked for enpact for more than two years, not only in Data&Research, but across the organization. Originally from Lisbon, Portugal he has a Bachelor’s in Business Management and a Master in Finance from the Lisbon School of Economics and Management (ISEG). Passionate about economy and politics, João is number-orientated and believes in data-informed decision-making.


More on our blog

29.03.2021

news

Startup Policies in Singapore

link

29.03.2021

news

Startup Policies in Bengaluru

Catch a glimpse of the current policy priorities in Bengaluru's startup scene!

link

29.03.2021

news

Size meets speed: corporate and startup engagement

What if David and Goliath joined forces? Close insights into the win-win game of agile startups and giant corporates co-founding powerful synergies.

link