JAKARTA (Reuters) – Indonesia will cut top interest rates charged through money-generating corporations (fintechs) in the microfinance sector, amid court cases that say too high rates have hurt borrowers, the country’s monetary regulator said on Friday.
Starting next year, fintech companies will only apply a maximum interest rate of 0. 3% per day for a customer loan, which will fall to 0. 1% by 2026, the country’s Financial Services Authority (OJK) said. Currently, the maximum is 0. 4% interest consistent with the day.
“Because if we don’t adjust interest rates properly, the ones who will suffer the most will be consumers,” Agusman, the OJK commissioner in charge of supervising financial firms, told a news conference.
Fintech lending has skyrocketed in Indonesia, especially after the coronavirus pandemic, but has been marred by illegal business in the market and reports of borrowers being unable to repay their loans.
Agusman added that rates will be much lower if the loans are for productive purposes. They will be capped at 0. 1% per day starting in January 2024 and a lower rate in 2026, as the government transfers most admissions loans to advertising. activities, especially for micro, small and medium-sized enterprises.
Authorizing 50 to 70 percent of loans made through fintech corporations to be channeled into productive activities through 2028, compared with less than 40 percent today, Agusman said.
The regulation of interest rates is part of the authority’s plan to expand the fintech sector for the 2023-2028 era.
(Reporting by Stefanno Sulaiman; editing by Raju Gopalakrishnan)
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