What’s New for Pawnshop Companies Under OJK Regulation No. 39 of 2024
Authors
Overview
Pawnshops have long served as an alternative source of financing outside the traditional banking sector. In Indonesia, the industry is expanding, driven by strong demand for short-term financing. PT Pegadaian (Persero) remains the dominant player, but the number of new market entrants continues to rise.
In line with the growth of the pawnshop industry, there has also been a transformation in both business operations and the range of products offered by market players. To accommodate this development, the Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) issued OJK Regulation No. 39 of 2024 concerning Pawnshops (“OJK Reg 39/2024”). This new regulation replaces the eight-year-old OJK Regulation No. 31/POJK.05/2016. The new regulation retains certain provisions from its predecessor while introducing updated rules to better regulate and support the industry’s evolving landscape.
Additional Licensing Tier and Capitalization Requirements
Previously, OJK only classified pawnshop companies based on two regional scopes: district/city and provincial levels. However, through OJK Reg 39/2024, the OJK now introduces a third category, national-level pawnshop companies. The key differences among these categories, aside from their permissible operational areas, lies in the required amount of paid-up capital. Such pawnshop companies are also mandatory to fulfil the equity requirement, which shall be at least 50% (fifty) percent of the paid-up capital, as outlined below.
| Scope of Operation | Capital | Equity |
|---|---|---|
| District/city-level operations | IDR 2,000,000,000 | IDR 1,000,000,000 |
| Provincial-level operations | IDR 8,000,000,000 | IDR 4,000,000,000 |
| National-level operations | IDR 100,000,000,000 | IDR 50,000,000,000 |
The OJK Reg 39/2024 requires each pawnshop company to designate at least 1 (one) controlling shareholder (Pemegang Saham Pengendali – “PSP”). In this regard, PSP shall be any legal entity, individual, or business group that: 1
- owns at least 25% of the pawnshop company’s issued shares and voting rights; or
- owns less than 25% of the issued shares but exercises control over the pawnshop company, either directly or indirectly.
If no PSP is designated, OJK reserves the right to determine the PSP(s). Companies must report the PSP designation to OJK within 15 working days from the date of designation.
Foreign Involvement in Pawnshop Companies
Unlike the previous regulation, which completely prohibited foreign ownership (except through the capital market), OJK Reg 39/2024 now permits foreign participation in pawnshop businesses 2, subject to the following limitations: 3
- For foreign legal entities, it may own shares in pawnshop company only in the form of partnership with the central or regional governments, Indonesian individuals, and/or Indonesian legal entities.
- For foreign individuals, it may acquire shares only via capital market transactions.
Furthermore, OJK allows pawnshop company with at least 25% (twenty-five percent) foreign ownership to employ foreign workers, either directly or indirectly, but only as: 4
- Members of the Board of Directors in charge of matters other than compliance, human resources, and audit; or
- Members of the Board of Commissioners.
The number of foreign workers appointed as members of the Board of Directors and the Board of Commissioners shall each be limited to a maximum of 1 (one) person. Such appointment must receive prior approval from OJK and comply with obligations set out under the OJK Reg 39/2024.
Business Activities of Pawnshop Companies
The scope of business activities for pawnshop companies remains unchanged, where the main activity shall be granting of loans with collateral in the form of pledged goods, in accordance with pledge law (gadai). 5
Additional business activities, it shall include: 6
- provision of loans with collateral based on fiduciary security;
- provision of safekeeping services for valuables;
- provision of appraisal services;
- activities that generate income based on commissions, provided they do not contradict the prevailing laws and regulations in the financial services sector; and/or
- other activities upon obtaining approval from the OJK.
The main difference with the previous regulation is that OJK Reg 39/2024 now sets a minimum loan-to-collateral ratio under pawn (gadai) arrangements of 51% (fifty-one percent). 7 Furthermore, OJK also now mandates pawnshop companies carrying out activity as stipulated in point (iv) above to report of such activity to the OJK. 8
Lastly, it is also now mandatory for pawnshop companies to conduct risk mitigation for its loan provision, which at least shall be through conducting risk analysis of loan applications, verifying customer identity and document authenticity, and registering fiduciary collateral (if the company imposes fiduciary security over the collateral). For the latter, additional risk mitigation efforts may also be taken, which are through credit insurance or credit guarantee mechanism, as well as insuring the collaterals. 9
Third Party Partnerships
The OJK now allows pawnshop companies to collaborate with other pawnshop company, banks, financing companies, microfinance institutions, peer-to-peer lending platforms, venture capital companies, and/or other permitted institutions, through channelling and joint financing arrangements, provided that no collateral is involved. 10
In addition to loan-related partnerships, pawnshop companies may also collaborate with other financial services institutions and/or non-financial institutions for activities such as:
- generating commission-based income;
- providing marketing services for financial products (only with licensed financial services institutions);
- facilitating risk mitigation; and/or
- outsourcing.
These collaborations must be reported to the OJK within 5 (five) working days from the date of the cooperation agreement. 11
Transitional Provisions
Several obligations under OJK Reg 39/2024 will take effect gradually. Some of the key timelines include: 12
| Activities | Effectivity |
|---|---|
| Existing private and government pawnshop business licenses | Remains valid |
| Licensing and approval applications submitted prior to enactment of OJK Reg 39/2024 | Will be processed in accordance with the former regulation |
| Companies licensed before enactment: | |
| PSP designation reporting | No later than 27 June 2025 |
| Exempted from the new paid-up capital obligations | |
| Restrictions on appraisers holding multiple positions | Shall be effective from 27 December 2025 |
| Assessment on financial soundness | |
| Restrictions on direct investment | |
| Equity ratio obligation, credit quality ratio, and soundness level criteria | Shall be effective from 31 December 2025 |
| Minimum equity requirement | Shall be effective from 27 December 2026 (unless under the supervision status, from 27 December 2025) |
| Existing loan agreements and partnerships | Remains valid until expiry; renewals must comply with OJK Reg 39/2024 |
| Loan-to-collateral ratio under pledge (gadai) arrangements | Shall be effective from 27 December 2026 |
| Obligation regarding quality of loan receivables with collateral under a pledge (gadai) | Shall be effective from 31 December 2026 |
| Companies licensed after enactment: | |
| Association membership for newly licensed companies | Shall be effective from 27 December 2025 |
- Article 5 of OJK Reg 39/2024 ↩
- Article 3 of OJK Reg 39/2024 ↩
- Article 4 of OJK Reg 39/2024 ↩
- Article 57 of OJK Reg 39/2024 ↩
- Article 136 (1) of OJK Reg 39/2024 ↩
- Article 136 (2) of OJK Reg 39/2024 ↩
- Article 137 of OJK Reg 39/2024 ↩
- Article 139 of OJK Reg 39/2024 ↩
- Article 152 of OJK Reg 39/2024 ↩
- Article 157 of OJK Reg 39/2024 ↩
- Article 166 of OJK Reg 39/2024 ↩
- Articles 232–247 of OJK Reg 39/2024 ↩
Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.
Related Updates
Latest Updates
