Indonesia’s businesses are increasingly turning to invoice financing to manage cash flow and maintain operations amid long payment cycles on outstanding invoices.
Long payment cycles can strain businesses, disrupting cash inflows even as daily operations continue. Invoice financing addresses this by allowing business owners to use unpaid invoices as collateral. Typically, lenders provide 70-80% of the invoice value upfront, with the proceeds repaying the lender once the customer settles.
“Invoice financing remains the mainstay product for productive online lending in ticket sizes above Rp 2 billion. As long as the scheme is robust, it has remained safe and promising,” Entjik S. Djafar, chairman of the Indonesian Joint Funding Fintech Association (AFPI), told SUAR in Jakarta on Aug. 11.
Several AFPI member platforms, such as Modalku and KoinWorks, offer this facility under the Financial Services Authority’s (OJK) regulatory oversight. The key advantages are not only faster disbursement but also more measurable risk, given the invoice collateral with a clearly identifiable payer.
“Many borrowers still cannot access credit from banks or other financial institutions, while their needs are urgent and require fast processesthis market has significant potential,” Entjik added, without citing specific figures.
Even so, regulation remains crucial to balance the interests of businesses and consumer protection.
OJK’s latest policy on capping lending rates marks an important step toward a healthier, more sustainable digital financing ecosystem.
Interest Rate Cap
Since January, Indonesia’s Financial Services Authority (OJK) has imposed daily interest caps: 0.3% for consumer loans, 0.275% for productive micro loans, and 0.1% for small businesses.
The goal is to protect consumers from high-interest debt traps while maintaining the sustainability of the ecosystem.
“If borrowers profit but platforms don’t, it won’t work—and vice versa. All three must match,” said Entjik S. Djafar.
He said the 0.3% per day rate is a “sweet spot” that balances risk, returns, and access for the public. According to him, the cap is sufficient to cover credit risk, still leaves room for platforms, and does not strangle borrowers.
“If it’s lowered to 0.2%, I’m a thousand percent sure dispersion will drop. Platforms will hesitate to lend to higher-risk communities,” he added.
The term “pindar” (pinjaman daring, or online lending) is being used to replace “pinjol” (online loans) for digital financial services that are legal and licensed by OJK.
The name change aims to improve the fintech industry’s image and make it easier for the public to distinguish between legal and illegal services, as “pinjol” is often associated with illegal and harmful practices.
AFPI research notes that outstanding illegal “pinjol” loans amount to Rp 230 trillion–Rp 260 trillion, far above total Pindar loans of around Rp 80 trillion. Based on Entjik’s remarks, there is gradual “switching,” with users moving from illegal “pinjol” to Pindar at Rp 200 billion–Rp 300 billion per month.
“The question is, are borrowers in the illegal market good-quality? Some are promising, some are not, because our economic literacy remains low,” Entjik said, expressing hope that more people will “move to the right path.”
Financial Inclusion and Behavioral Shifts
Nailul Huda, Director of Digital Economy at the Center of Economic and Law Studies (Celios), said the interest-rate cap is designed to address both industry dynamics and consumer safety.
“In Indonesia, only around 82% of the population has access to formal finance,” he noted.
According to him, behavioral change is already visible: people are increasingly reluctant to visit bank branches and prefer digital services to meet their financial needs.
Even so, Nailul observed that most lending remains consumptive, falling short of OJK’s target for 70% of lending to be productive.
“For example, purchasing a laptop is counted as consumption in the data, but for freelancers it’s a production tool,” he said.
The Ministry of Communications and Digital (Komdigi) is also supporting this effort through 24-hour cyber patrols that monitor and shut down illegal online lending apps. “If it’s not registered with OJK, take it down immediately. Don’t wait for many victims,” said Entjik.
—add graphic (the graphic is not yet available)
From both sides of the coin, he added, the interest cap benefits borrowers by reducing their burden, while lenders remain interested in investing—though reactions vary.
“People used to borrow from relatives; now they’re starting to use platforms,” Nailul said.
He added that Celios’ difference-in-difference analysis shows countries with a fintech industry record a financial inclusion score of 0.712 points, higher than those without. Before fintech, the score was 0.406 points. The impact is significant, especially for the bottom 40% of the population.
Growth in Pindar Assets
Despite initial concerns that rate caps would squeeze the industry, OJK data show expansion after the caps took effect.
As of June 2024, pindar assets reached Rp 9.91 trillion, up 32% year-on-year. Outstanding funding rose 22% to 83.52%, while the non-performing funding ratio remained contained at 2.85%.
According to Hari Gamawan, Director of Institutional Development for Financing Companies and Venture Capital at OJK, interest in the sector now extends beyond fintech players and is increasingly drawing attention from banks.
“If a borrower is unable [to meet obligations], they have to repay—and the burden becomes heavier if they cannot, potentially leading to legal consequences. On the lender side, we also distinguish between professional and non-professional lenders,” Hari explained.
Personal Data Protection
Muchtarul Huda, Director of Strategy and Policy for Digital Space Oversight at the Ministry of Communication and Informatics (Kominfo), warned that pindar (legal online lending) is vulnerable to personal data breaches.
“In the past, personal data was seen as an asset to collect as much as possible. Now, data is a mandate from the data subject, who has full authority over its use,” he said.
Muchtarul explained that in pindar operations, virtually all categories of personal data are collected: full name, phone number, address, financial data, and even account information such as usernames and passwords.
He stressed the importance of a clear legal basis for processing; in the context of pindar, this typically relies on explicit user consent at registration. Any notices or privacy policies displayed in the app must transparently state the purposes for which data is used.
Even so, public literacy remains crucial. Muchtarul noted that many rural residents are tempted by offers of Rp 300,000–Rp 800,000 to hand over biometric data, without realizing the risks of identity theft.
“In big cities, people may understand the dangers of illegal lending apps. But in the regions, immediate needs often outweigh security awareness,” he said.
Kominfo, he added, is preparing Pindar Implementing Institutions (LPP Pindar) and running 24/7 cyber patrols to block illegal applications without waiting for victims to emerge. “This is about building a digital ecosystem that is safe, fair, and trustworthy,” he said.
