Transform Alternative Credit Scoring in Indonesia
- Pratama Adhi Nugraha
- Feb 23
- 3 min read
Introduction: A New Chapter in Financial Inclusion
Millions of Indonesians and MSMEs remain excluded from formal financial systems due to a lack of credit history. This gap hinders economic growth and leaves underserved segments without opportunities to thrive. With OJK Regulation No. 29 of 2024, a new era of financial inclusion is taking shape.
This regulation provides a comprehensive framework for Alternative Credit Scoring Providers (Pemeringkat Kredit Alternatif/PKA), ensuring fairness, innovation, and robust governance in the financial ecosystem. It is not merely a compliance requirement but a strategic milestone that encourages industry players to leverage technology and data for inclusive growth.
Regulation Highlights
1. Objectives
The regulation focuses on enhancing Financial Inclusion by enabling access to financial services for 'Individuals with limited or no credit history and MSMEs'.
It provides a legal framework for Alternative Credit Scoring by utilizing non-traditional data, such as telco usage, utility payments, and e-commerce behavior.
2. Licensing and Compliance
Licensing is mandatory for all PKAs, with a minimum paid-up capital of IDR 5 billion required.
Entities must demonstrate operational readiness and compliance with strict data security standards to protect consumer information.
3. Governance
PKAs are required to implement Good Governance Practices, including Risk Management, Data Protection, and Compliance monitoring.
Annual business plans must be submitted to OJK by November 10, with limited opportunities for amendments.
4. Data Handling and Scoring
Only Alternative Data approved by OJK may be used for credit scoring, and the data must be obtained with the owner’s consent.
Scoring Models must be transparent, justifiable, and secure, with options for bilingual presentation to ensure clarity.
5. Ownership and Workforce
Foreign ownership is capped at 85%, unless the company is publicly traded.
The use of foreign workers is restricted, requiring knowledge transfer to local employees within a specified timeframe.
6. Accountability and Reporting
PKAs must submit regular business reports and undergo audits covering scoring methodologies, governance, and compliance.
Non-compliance may result in sanctions, including fines, operational suspension, or license revocation.
7. Opportunities for Growth
The regulation encourages innovation by supporting sandbox environments for testing new technologies.
It promotes a focus on underserved markets, such as MSMEs and individuals without traditional credit records, creating opportunities for market expansion.
Possible Implications for ICS Entities
Operational Adjustments
Increased costs for licensing, compliance, and IT infrastructure enhancements.
Investments in data governance and system reliability to meet regulatory standards.
Business Model Realignment
ICS entities may need to redefine services to align with OJK-approved activities, potentially impacting revenue streams.
Partnerships with data providers and financial institutions will require formalized agreements, increasing collaboration costs.
Governance and Accountability
Enhanced oversight responsibilities for Directors and Commissioners to ensure compliance with governance standards.
Risks of personal liability for management if compliance requirements are not met.
Market Dynamics
Stricter compliance may lead to market consolidation, favoring larger players with robust governance and advanced technology.
Entities with innovative solutions gain a competitive advantage in capturing underserved markets.
Strategic Opportunities
The focus on underserved segments opens new growth opportunities for ICS entities.
Participation in the sandbox program enables testing and scaling of innovative scoring solutions.
Action Steps for ICS Entities
To thrive under this regulation, ICS entities should take the following actions:
Conduct a Gap Analysis Identify shortfalls in compliance, governance, and operational readiness to align with OJK requirements.
Enhance Data Governance and IT Infrastructure Strengthen data protection policies, implement secure systems, and invest in advanced technologies.
Restructure Ownership and Workforce Plans Ensure ownership complies with foreign ownership limits and prioritize knowledge transfer to local employees.
Strengthen Strategic Partnerships Build formal collaborations with data providers and financial institutions to create sustainable ecosystems.
Engage with OJK Utilize the sandbox environment to refine methodologies, test technologies, and gain insights into regulatory expectations.
Conclusion: From Compliance to Innovation
OJK Regulation No. 29 of 2024 is a transformative step for Indonesia’s financial landscape. While it presents challenges such as increased costs and stricter oversight, it also unlocks significant opportunities for growth, innovation, and market leadership.
By proactively addressing compliance requirements and leveraging the regulation’s emphasis on financial inclusion, ICS entities can position themselves as key enablers of change in Indonesia’s credit ecosystem.
The question now is: Are you ready to lead the transformation?
Author : Pratama Adhi Nugraha
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