Spike in internet usage is acting as a catalyst in boosting crowdfunding in Indonesia, which involves raising money from a large number of people to support a new business endeavor.
Crowdfunding in Indonesia is a strong instrument for raising funds from the general public in a quick, inexpensive, and seamless way. According to Statista, by 2025 the value of transactions related to crowdfunding in Indonesia would increase to US$7.5 million.
Given the huge opportunities, crowdfunding presents for businesses and the vast landscape of internet usage in Indonesia has set the stage for foreign investors to invest in the archipelago.
In this article, we will discuss important questions like what exactly is crowdfunding in Indonesia and how it works.
How Crowdfunding in Indonesia Became a New Trend
As Indonesia’s economy has grown in recent years, the aspiring middle class is heavily contributing to the growth of new creative industries such as coffee shops, fashion, and healthy food industries. The majority of these industries are start-ups or micro, small, and medium enterprises (MSMEs), who need money to secure, streamline and expand their operations.
Moreover, bankability is a common issue for these startups and MSMEs, which makes it difficult for them to expand their operations. In light of such problems, equity crowdfunding seems to be a viable solution.
The Financial Services Authority (OJK) of Indonesia, published Regulation Number 37/POJK.04/2018 on Information Technology-based Crowdfunding Services via Public Offerings (POJK 37). The question begs: what exactly is equity crowdfunding?
The method of acquiring essential capital (as for a new firm) by seeking contributions from a large number of individuals, particularly from the internet community, is defined by Merriam Webster as equity crowdfunding (also known as crowdfunding).
In a nutshell, equity crowdfunding is a method of bringing investors and businesses in need of capital together.
How to start a crowdfunding business in Indonesia
Who can conduct Crowdfunding services?
The following are the participants in equity crowdfunding activities as defined under POJK 37:
- Investors who acquire issuer-issued shares through platform providers;
- Suppliers of platforms, managers, and operators of crowdfunding operations in Indonesian legal entities;
- Issuers such as Indonesian limited liability companies that offer their shares through platform providers and are not controlled by:
- a business group or conglomerate,
- public companies or subsidiaries of public companies;
- having assets of more than USD 675k, excluding land and buildings;
- Custodian parties that offer custodians services for securities and other assets connected to securities and other services.
What are the requirements to conduct Crowdfunding in Indonesia?
A platform provider must get a business license from the OJK in order to launch a crowdfunding platform. A platform provider must meet the following criteria to be able to apply for OJK licenses:
- It’s either a partnership or a limited liability business.;
- It has a minimum capital of USD 170k;
- It possesses human resources with knowledge and/or experience in the field of information technology, or it may perform a review of the issuer.
Amended Provisions on Crowdfunding Service Providers’ Mandatory Registration as Electronic Systems Providers issued on August 25, 2021, includes:
- After obtaining company licenses from the Financial Services Authority (Otoritas Jasa Keuangan – “OJK”), crowd funders must now register as electronic system providers with the Ministry of Communications and Informatics (Article 15A).
- If they have not filed a registration certificate as an electronic system provider to the OJK, crowdfunding service providers who have obtained business licenses from the OJK are banned from providing any services related to the selling of securities by issuers.
- Any violation of the above-mentioned requirement and restriction shall result in the application of administrative penalties.
In compliance with POJK 37, the following are the crowdfunding standards the issuer must meet:
- The activity of crowdfunding must be carried out through a platform provider that has received an OJK license.
- Unless the OJK specifies otherwise, the total money raised through the crowdfunding activity shall not exceed USD 675k, in one or more offerings.
- The time for issuing shares must be completed within sixty days.
- POJK 37 also gives platform providers the option of creating a secondary market for trade among their registered customers.
Start your Crowdfunding Business in Indonesia with Cekindo
Cekindo is a business setup company that can make the crowdfunding business in Indonesia accessible and affordable for global individuals and companies. By using a crowdfunding model through your business, projects can be accomplished at a fraction of the total cost.
A crowdfunding business allows entrepreneurs to build working capital, where financing through conventional methods has become a challenge for most foreigners. We are a fully authorized business setup company in the country with specialists who can analyze the potential and feasibility of your crowdfunding business by using our expertise.