Policy

Jakarta, 14 January 2025. Indonesia Financial Services Authority (OJK) supports the Government's program related to housing provision for the public, especially for Low-Income Communities (MBR), by providing opportunities for the wider community to own homes through the 3 million housing program. In the process of granting Home Ownership Loans (KPR) or financing, OJK allows Financial Services Institutions (LJK) to implement credit/financing policies based on risk management practices aligned with their risk appetite and business considerations. OJK has issued letters to banks and other financial institutions to encourage the expansion of financing for KPR targeting low-income communities.

The Role of the Financial Information Service System (SLIK) in Supporting Credit/Financing Distribution

SLIK provides  neutral information and does not function as a blacklist database. It is used to minimize asymmetric information (moral hazard and adverse selection) to streamline the credit/financing process and support the implementation of risk management by Financial Services Institutions (LJK). Moreover, a credible SLIK is crucial for maintaining a healthy investment climate in Indonesia.

The use of SLIK in the housing credit/financing approval process serves as one of the references for analyzing the feasibility of prospective borrowers but is not the sole factor in granting credit/financing.

OJK does not prohibit credit/financing for borrowers with non-performing loans, including cases where other credit/financing facilities are consolidated, especially for small-scale credit/financing. This is evidenced by the practices implemented by LJK, where as of November 2024, a total of 2.35 million new credit accounts were granted by LJK to borrowers who previously had non-performing loans reported in SLIK.

OJK has also established a dedicated complaint channel via Contact 157 to accommodate complaints regarding issues in the mortgage (KPR) application process for low-income communities (MBR), including reports of Settlement Letters (SKL) from loans/financing at other financial institutions that have not been updated in the SLIK report and any difficulties in making repayments. To handle such complaints more quickly and effectively, OJK will establish a special task force in collaboration with the Ministry of Housing and Settlements and other stakeholders.

Other Strategic Policies of OJK in Supporting Housing Sector Financing

In addition, several strategic policies of OJK to support financing in the housing sector include:

1. Home Ownership Loan (KPR) Quality Can Be Assessed Solely Based on Payment Timeliness. According to OJK Regulation (POJK) No. 40/POJK.03/2019 on Asset Quality Assessment of Commercial Banks, the quality of productive assets for borrowers with a credit ceiling of up to IDR5 Billion can be assessed solely based on the timeliness of principal and/or interest payments (one pillar). This also applies to KPR. This asset quality assessment is more lenient compared to other types of credit, where banks assess using three pillars (business prospects, borrower performance, and repayment capability).
2. Home Ownership Loan (KPR) Can Be Assigned a Low Risk Weight and Set Granularly in Credit Risk-Weighted Asset (RWA) Calculations. As stipulated in OJK Circular Letter (SEOJK) No. 24/SEOJK.03/2021 concerning RWA Calculation for Credit Risk Using the Standardized Approach for Commercial Banks, loans for residential property can be assigned a lower RWA for credit risk compared to other types of loans, such as corporate loans. Under this regulation, the risk weight is set granularly, with the lowest weight being 20%, based on the Loan-to-Value (LTV) ratio. In the context of credit RWA, LTV is calculated at the end of each month based on the recorded loan value compared to the property collateral value. As loan installments are paid and maturity approaches, the LTV decreases, followed by a reduction in the credit RWA weight. This provides banks with greater capital flexibility to extend additional KPR loans.
3. Removal of Restrictions on Land Procurement/Development Loans for Housing Developers
   To support funding for housing developers, OJK lifted the ban on land procurement/development loans as of 1 January 2023. OJK now allows housing developers to obtain financing from banks for land procurement/development. This is a reversal of the previous ban as stipulated in POJK No. 44/POJK.03/2017 in conjunction with POJK No. 16/POJK.03/2018 concerning Credit or Financing Restrictions by Commercial Banks for Land Procurement and/or Development. Following this policy change, banks are advised to place greater emphasis on sound risk management practices.

Furthermore, OJK, together with relevant stakeholders, will discuss liquidity support for financing the "Three Million Homes Program," considering the significant funding required for this initiative. This includes improving the Asset-Backed Securities Participation Letter (EBA SP) scheme in the capital market.

With these various policy supports, the Government's program to provide 3 million homes is expected to be successfully implemented.