OJK Zero Down Payment Policy Drives Multifinance Growth

TEMPO.CO, Jakarta - The recent policy of zero percent down payment for vehicle credit issued by the Financial Services Authority (OJK) believed to be able to drive the performance of the multifinance industry. Businesses are confident that multi-finance companies will perform better with the new regulation.

Chairman of the Indonesian Financing Company Association (APPI) Soewandi Wiranto, said that the business expansion stated in the new regulation can increase financing industry growth. Based on APPI's calculation, industrial asset growth for 2019 can reach up to 9 percent while the growth rate of receivables is predicted to be in a range of 6 to 7 percent.

"With the newly issued regulation, we are currently in anticipation, because in the first four months, we will be facing the presidential election, so our projections is still the same with last year," Soewandi said on Thursday, January 10, 2019.

Nevertheless, Soewandi said that liquidity pressure remains a challenge for the multi-finance industry after a number of companies experienced failure in paying their debts last year. Such condition has caused difficulties fro multi-finance companies to apply for funding from banks. "Liquidity pressure remains a challenge after a number of companies failed to pay off [debts]," Soewandi said.

The OJK had recently issued Regulation No. 35/POJK.05/2018 (Regulation No. 35) on Financing Companies, which revised Regulation No. 29/POJK.05/2014. The revision was much anticipated by multifinance industry and is hoped to be able to improve the industry's performance because it provides new opportunities for business expansion.

The New Regulation stipulates that multifinance companies can channel cash financing. In addition, the New Regulation allows down payment to be reduced to 0 (zero) percent. 

Head of Non-Bank Financial Industry Monitoring Department of OJK Bambang W. Budiawan, said that the OJK decided to allow multi-finance companies to apply zero percent down payment based on striking the balance principle. "So, we did not restrict zero percent down payment if the credit risk is low," Bambang said on Thursday, January 10, 2019.

Based on the New Regulation, financing companies with healthy financial condition and 1 percent non-performing (NPF) loan ratio for vehicle credit can apply the zero percent down payment policy.

Meanwhile, companies with 1 to 3 percent NPF loan ratio can apply a minimum of 10 percent down payment and companies with NPF loan ratio o 3 to 5 percent can apply a minimum of 15 percent down payment. Further, companies with NPF loan ratio of 5 percent, can apply a minimum 15 to 20 percent down payment, and companies with more than 5 percent NPF loan ratio can only apply a minimum down payment of 20 percent.

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