OJK plans write-off rules for microfinance institutions, due in Q4 2026

Implications

Facts

Amendment: the Financial Services Authority (OJK) will amend POJK 41/2024 on microfinance institutions (LKM), inserting Articles 110A–110C between Articles 110 and 111 to set procedures for writing off non-performing loans. Issuance is planned for Q4 2026. Source: Indikator Bisnis (25 September 2026).

Conditions: write-offs apply to loans classified as non-performing and require provisioning of 100%. Partial write-offs are not allowed; each loan contract must be written off in full. Institutions that have converted into rural banks (BPR) face restrictions on write-offs unless collection efforts have been exhausted. Same source. ¹

Industry reaction: of two institutions interviewed, BKD Pekalongan has not carried out write-offs, while BKD Ponorogo said the rules are consistent with its internal procedures and the impact will be small. Same source.

Analysis

In Indonesia, the number of finance companies with NPF above the threshold is rising (42 in July, OJK), making the resolution of non-bank problem loans an issue. LKMs are small and have lacked explicit write-off rules, so bad loans tended to stay on the books. The amendment institutionalises the treatment of delinquent loans and will require operations that extend to post-write-off recovery management.

Counterpoints and uncertainties

Article numbers and conditions could change at issuance. The two institutions interviewed expect little impact, so the effect across the sector may be smaller than the rule change suggests; the full-provisioning requirement also limits how quickly smaller LKMs can use it.