Regulatory Update on Indonesian Guarantee Businesses

The Indonesian government has announced a programme to roll out 70,000 rural cooperatives (koperasi desa) with an estimated cost of US$15 billion in capital spending. As a result, guarantee businesses may become key stakeholders in this programme as guarantors for the loans disbursed by the rural cooperatives.

In light of this development, in May 2025 Indonesia’s Financial Services Authority (OJK) updated the regulatory framework for guarantee businesses (Usaha Penjaminan) by issuing OJK Regulation No. 11 of 2025 (Reg 11/2025). 

Reg 11/2025 replaces two previous OJK regulations on this subject (Regulation No. 2 of 2017 and Regulation No. 30 of 2018) and comes into effect on 6 November 2025. This bulletin discusses the key changes and updates under Reg 11/2025, which is intended to improve the robustness of guarantee businesses in Indonesia and ensure they apply prudential principles. 

Key changes

Equity capitalisation 

Reg 11/2025 increases the minimum equity capitalisation requirements while maintaining existing requirements, which are based on a guarantee business’s geographical offering (local or national). 

• Local guarantee businesses must have at least IDR100 billion (~US$6.1 million) in equity. Existing businesses must achieve this by 31 December 2028.
• National guarantee business must have at least IDR250 billion (~US$15.3 million) in equity. Existing businesses must achieve this by 31 December 2028.

Gearing ratio 

There is no change in the maximum gearing ratio requirement, which is 40. This is an aggregate maximum at the organisation level and is not imposed on individual business segments. For context, a guarantee business can offer various types of guarantees, including credit guarantees, SME guarantees, surety bond guarantees, and guarantees for bank guarantees, among others. 

Since the compliance test is at the organisation level, this will require gearing ratio monitoring by each segment of the guarantee business in cases where the guarantee business offers various product segments. To incentivise proper monitoring, guarantee businesses are prohibited from distributing dividends to their shareholders where the business has not complied with the overall gearing cap. Failure to comply with this requirement may lead to OJK regulatory sanctions for the business. 

Risk sharing (own retention capacity)

A new risk sharing concept is being introduced as a statutory requirement. 

In receiving credit guarantees, banks must take on at least 25% of the risk of the outstanding guaranteed amount (nilai yang dijamin). Meanwhile, for its part, the guarantee business must underwrite at least 20% of the guaranteed amount. For example, in a bilateral guarantee arrangement, the guarantee business will underwrite a maximum of 75% of the guaranteed amount.

The agreed split must be stated in writing in the guarantee agreement to avoid any disputes or ambiguity arising in the future. 

In addition to the split requirement, Reg 11/2025 now requires an appropriate and documented debtor underwriting process, particularly for credit guarantee products. It also allows for automatic underwriting if the financial amount guaranteed is IDR50 million (~US$3,100) or less. 

Subrogation 

Reg 11/2025 maintains statutory subrogation (transfer of receivables) from the guarantee beneficiary to the guarantee business when the guarantee business settles a guarantee claim. In other words, the guarantee business has a direct right of claim against the debtor. 

Should a debtor be declared bankrupt in Indonesia or go into voluntary bankruptcy or suspension of debt repayment (PKPU) where the guarantee claim is settled by the guarantee business, then the guarantee business automatically becomes a direct creditor of that debtor and can claim against the debtor’s bankruptcy estate. However, it remains to be seen how bankruptcy administrators will apply this new rule. 

In summary, Reg 11/2025 provides an additional framework for business expansion whilst incentivising prudential business practices. Both existing licensed entities and new market entrants should consider whether these changes will require any changes to their existing business processes. 

If you have any questions or would like to discuss these developments further, please reach out to your usual contact.