The loan market in Indonesia has been influenced by recent economic cycles and regulatory changes. Loan demand has increased, particularly in sectors such as mining and related industries (like smelters), as well as manufacturing. Regarding the regulatory environment, the Financial Services Authority (OJK) has been actively strengthening financial sector regulations as part of implementing the Financial Sector Omnibus Law issued in 2023. Near the end of 2024, the OJK issued new regulations related to banking activities, trading of digital financial assets including crypto, and alternative credit scoring. In February 2025, an investment agency named Daya Anagata Nusantara (Danantara) was launched to advance national development and prosperity by leveraging state-owned enterprises and building a world-class sovereign wealth fund to drive Indonesia’s economic transformation.
The fluctuations in foreign currency, especially the US dollar, significantly impact the loan market, especially cross-border loans involving foreign banks providing financing to Indonesian companies. Chinese banks have been particularly active in financing projects in Indonesia. Therefore, China’s economic conditions will also be a major factor influencing the Indonesian loan market.
The high-yield market has expanded financing options for Indonesian companies, albeit with higher costs and greater complexity. This is driving innovation in loan structures and terms, as well as the need for careful financial planning and risk management.
Alternative credit providers, especially peer-to-peer (P2P) lending platforms and multi-finance companies, have recently gained popularity in Indonesia and attracted considerable investor interest. Multi-finance companies, in particular, have diversified their business models to broaden their product offerings in Indonesia.
The use of HoldCo structures, often involving a Singapore-based company, is a common practice in Indonesia. While preferred equity is used by some companies, its application is not widespread. Preferred equity structures are usually used more for control purposes, rather than as a finance technique, enabling relevant shareholders to gain greater control through voting rights and involvement in company management.
Indonesia has seen significant growth in ESG and sustainability-linked lending, particularly in sectors such as palm oil, cement, and consumer goods. These loans encourage borrowers to meet sustainability performance targets, linking their loan terms to their ESG performance. In 2024, PT Indonesia Infrastructure Finance (IIF) had integrated sustainable principles into numerous projects across the country, achieving an ESG Entity Rating of 2 from Sustainable Fitch. Meanwhile, state-owned Bank Mandiri had disbursed ESG credit of IDR285 trillion (USD18 billion) up to September 2024, an increase of almost 13% from the previous year.
In Indonesia, only banks, financial companies (such as multi-finance companies) and peer-to-peer lending (P2P) platforms are authorised to provide financing to companies. Multi-finance companies must provide financing for goods or services. P2P platforms cannot use their own funds for providing financing. The platform only connects between lenders and borrowers. Therefore, the funds must be from the lenders accessing to the platform.
Foreign lenders are not restricted from providing loans to Indonesian borrowers, as long as the loans are provided on a non-solicitation basis. However, if foreign lenders actively market their loan products within Indonesia, it may be deemed as doing business in the country, which would trigger the need for a legal presence and business licence from Indonesian authorities, specifically (from the OJK).
Foreign lenders providing financing to Indonesian companies may receive security and guarantees from the Indonesian borrowers. These security documents can include pledges (of shares), fiduciary security (over moveable assets, receivables, inventory, etc), mortgages (on land and buildings). Guarantees can be in the form of personal or corporate guarantees.
Indonesian borrowers do not require approval or a licence to convert rupiah into foreign currencies. However, banks in Indonesia cannot transfer rupiah currency abroad under any circumstances. Consequently, repayments of foreign loans must be made in foreign currency.
Bank Indonesia Regulation require banks in Indonesia to ensure that any customer conducting foreign currency transactions against the rupiah exceeding USD100,000 (or its equivalent in other currencies) per month provides certain documents, such as a loan agreement.
The customer must also submit a copy of the underlying transaction document (such as a loan agreement) to the relevant bank for any outgoing transfer in foreign currency exceeding USD100,000 (or its equivalent in another currency).
There are no restrictions on the borrower’s use of loan or debt securities proceeds, as long as the financed activities are not prohibited by law.
The use of agents, such as facility agent or security agent, is permitted and common practice in Indonesia. A security agent, for example, is appointed to hold Indonesian security rights on behalf of lenders. Foreign lenders usually appoint a bank in Indonesia to act as the security agent, allowing the agent to hold the original documents of the (Indonesian) borrowers, facilitate communication with them and performing enforcement (if any).
In Indonesia, the most common loan transfer mechanism is the assignment of receivables (cessie), regulated under the Indonesian Civil Code. When a loan is assigned through a cessie, any security interest securing the loan will follow or remained attached. To make the assignment effective, the existing lender must notify the security provider, who must then acknowledge the notice.
Debt buyback by the borrower or sponsor is possible, unless the relevant loan agreement or guarantee agreement explicitly restrict it.
There are no specific rules on “certain funds” in public acquisition finance transactions as the term is not explicitly defined in Indonesian law. Both short-form and long-form documentation are used, depending on the complexity of a deal. These documents, such as loan agreements and share purchase agreements, are generally not publicly filed unless for regulatory compliance. There is no recent case law on “certain funds” that the authors are aware of.
JIBOR is scheduled to be permanently discontinued as of 1 January 2026, with the Indonesia Overnight Index Average (INDONIA) to be adopted as the benchmark interest reference rate in Indonesia for overnight tenors.
There is generally no limit on the amount of interest that can be charged. However, the rate should be reasonable.
An Indonesian company that obtains a loan from a foreign party will be subject to certain offshore loan reporting obligations and other requirements.
Briefly, the company must report its offshore loan transactions to:
In addition, companies must meet a credit rating requirement before signing a loan agreement, unless exempted.
Interest payments (including premiums, discounts and returns from debt repayment guarantees) made to lenders are subject to withholding tax in Indonesia, while the repayment of loan principal is not taxable. For Indonesian lenders, interest is subject to income tax (Income Tax Article 23 or PPh Pasal 23) at a rate of 15%, with certain exemptions for Indonesian banks and registered financial institutions. For foreign lenders, interest is subject to withholding tax (Income Tax Article 26 or PPh Pasal 26) at a rate of 20%.
In addition to taxes, there are Non-Tax State Revenue (Penerimaan Negara Bukan Pajak – PNBP) imposed on the registration of mortgages, hypothecs (rights established by law over debtors’ property that remains in the debtors’ possession), and fiduciary security with the relevant authorities in Indonesia. Additionally, stamp duties (bea meterai) of IDR10,000 may apply to each copy of loan and security agreements.
As mentioned in 4.1 Withholding Tax, interest received by foreign lenders is subject to income tax at a rate of 20%. However, this rate may be reduced under a Double Taxation Agreement (DTA) between Indonesia and the lender’s country of residence.
In general, the assets available as collateral to lenders in Indonesia include moveable, immoveable, tangible, and intangible assets (whether present or future) of the borrower. The form of security used for each asset may differ depending on the type of asset being secured as a collateral. Therefore, securing assets as collateral in Indonesia typically involves several security documents.
These forms of security include the following.
Mortgage
Land and land-related objects in Indonesia can be secured by a mortgage. The “objects” or “goods” of a mortgage include buildings, plants and produce, both existing and future, which form an inseparable part of the land, regardless of whether the land-owner (titleholder of the land) owns the buildings, plants or produce. To secure land as collateral, both the lender and borrower must – in the presence of a Land Deed Official (Pejabat Pembuat Akta Tanah – PPAT) where the land is located – sign a notarial deed in Indonesian (Akta Pemberian Hak Tanggungan – “Mortgage Security Deed”). In practice, if the transaction involves a foreign lender, the lender may appoint a local security agent to appear before a PPAT or to sign a power of attorney authorising certain persons to sign the Mortgage Security Deed before a PPAT (known as Surat Kuasa Membebankan Hak Tanggungan).
A lender (or the appointed security agent) will then then register the mortgage security with the Land Office through the electronic mortgage system (Hak Tanggungan Elektronik – HT-El) using their account. Once the required documents (including a copy of the land certificate) are submitted, the mortgage will be registered. The HT-El will then issue (i) an HT-El certificate and (ii) an annotation on the mortgage for the relevant land certificate. By law, the HT-El registration process may take up to seven working days as of the submission of complete application documents.
A Mortgage Security Deed must be prepared by a PPAT and the fee for preparing the deed depends on the appointed PPAT. Specifically for a Mortgage Security Deed, the PPAT will typically charge based the secured amount. The Mortgage Security Deed is subject to official registration fees in the form of PNBP. The PNBP for Mortgage Security is ranging from IDR50,000/certificate for mortgage security with a value of up to IDR250 million to IDR50 million/certificate for mortgage security with a value over IDR1 trillion.
Fiduciary Security
Fiduciary security is a non-possessory security right. The objects of fiduciary security are moveable assets, whether tangible or intangible (such as receivables, insurance claims, inventory, machinery and vehicles), as well as immoveable assets such as buildings (which are not subject to a mortgage).
Unlike the Mortgage Security Deed, a fiduciary security deed must be made in Indonesian in notarial deed form by a notary, and registered with the Fiduciary Security Registration Office (as evidenced by a Fiduciary Registration Certificate). The process to obtain the fiduciary security certificate usually takes 1–2 working days as of the submission of the complete application documents. Notaries in Jakarta typically charge between IDR10 million to IDR20 million per fiduciary security deed.
The fiduciary security deed is also subject to official registration fees in the form of PNBP. The PNBP for fiduciary security ranges from IDR50,000/certificate for fiduciary security with a value up to IDR50 million to IDR13.3 million/certificate for fiduciary security with a value over IDR1 trillion.
Hypothec
Hypothec is a security interest applicable for immoveable assets. It was used for securing land before the mortgage security came into effect. However, as land cannot be secured by hypothec anymore, it is now primarily used for securing vessels that have a gross tonnage of more than 20 metric tons. For vessels having size lower than 20 metric tons, it can be secured by fiduciary security as noted above. It must be noted that hypothec security only applicable to vessels owned by an Indonesian individual or entity. Furthermore, although Indonesia has no regulation yet governing security over aircrafts, hypothec in practice was also applicable to secure airplanes and helicopters and the Directorate General of Civil Aviation were willing to accept the registration of such deed. However, following the enactment of the new Aviation Law in 2009, security over aircraft and helicopters are usually made under foreign security documents and registered with the International Registry.
To perfect a hypothec over a vessel, both the lender and borrower must enter into a hypothec deed (akta hipotek kapal) before a Vessel Registration and Ownership Recordation Official (Pejabat Pendaftar dan Pencatat Balik Nama Kapal) at the domicile where the ship is registered and recorded. The hypothec deed will then be registered with the Directorate General of Sea Transportation of Ministry of Transportation to obtain the hypothec certificate (grosse akta hipotek) which is the evidence of the recordation of such hypothec deed in the Vessel Main Registry (Daftar Induk Pendaftaran).
The fees for preparing the hypothec deed depends on the loan amount. The process to obtain the hypothec deed certificate usually takes 1–2 weeks. The hypothec deed is also subject to official registration fees in the form of PNBP. The PNBP for hypothec deed ranges from IDR100,000–IDR30 million depending on the size of the vessel.
Pledge
A pledge can be used to secure moveable property, whether tangible (such as machinery, vehicles, inventory, etc) or intangible (such as accounts receivables, shares, patent rights, etc). Unlike fiduciary security, a pledge is a possessory security, meaning that when it concerns a pledge of tangible movables, the pledged items must come into the physical possession of the pledgee, or at least must no longer be in the physical possession or control of the pledgor.
To secure an asset with a pledge, the lender and borrower must enter into a pledge agreement. The establishment of a pledge depends on the nature of the goods and is classified as follows.
Unlike mortgage and fiduciary security, there is no filing or registration requirement to any government authority for a pledge. However, for a pledge of shares of a publicly listed company, the pledge must be registered with the Indonesian central custodian to ensure that the relevant share account is blocked to prevent the shares from being redeemed or transferred. In addition, if the pledge is established over shares of a publicly listed company that amount to at least 5% or more of the voting rights in that company, the owner of the shares must report such granting of security to the Financial Service Authority (OJK). The 5% threshold can be satisfied from a single or an accumulation of multiple pledge transactions over shares of a publicly listed company. For a pledge of shares in a privately held company, the pledge needs to be registered in the shareholders’ register of the company.
The concept of a floating charge is not recognised under Indonesian law. However, Indonesian law does recognise fiduciary security, which shares similarities with a floating charge. Fiduciary security allows the borrower to retain possession and use of the secured asset, while the ownership title of the asset is transferred to the lender. This arrangement is generally referred to as a non-possessory security right. Fiduciary security can be used to secure moveable assets and can be created over both existing and future assets. In securing future assets, the lender usually requires the borrower to periodically update the list of fiduciary security objects and obtain new fiduciary security certificates to cover any new assets that come into existence.
As a general rule, Indonesian corporate entities are allowed to provide guarantees to third parties, including downstream, upstream and cross-stream guarantees. When providing a corporate guarantee, it is important to check the provisions in the corporate entity’s articles of association and determine whether it is allowed to provide guarantee to another party and to check if the granting of the guarantee benefits the corporate entity. It is also important to ensure that all internal corporate approvals and authorisations required by the articles of association, as well as Indonesian law, are obtained by the guarantor, and that the individuals signing the guarantee have the authority to do so.
Furthermore, Indonesian company law states that a claim relating to a principal debt against the company can be converted into equity if, among other things, it results from the enforcement of a guarantee provided by the company for a third-party’s loan, and the company has actually received a benefit in the form of money or goods that can be valued in money. Although this provision mainly applies to debt-to-equity swaps, it implies that a corporate guarantee can only be given if there is a corporate benefit for the company.
A guarantee for an offshore loan must be reported to Bank Indonesia. Specifically, the guarantor must report foreign exchange flow activities, including the position and changes in offshore financial obligations. This requirement applies to both individual and corporate guarantors.
If the guarantor is a publicly listed company or controlled by a publicly listed company, certain regulatory formalities must be followed to allow them to provide a corporate guarantee.
In the case of a target being acquired, there are no explicit restrictions under Indonesian law preventing the target from granting guarantees, security or financial assistance for the acquisition of its own shares. However, the granting of guarantees, security or financial assistance for the acquisition of its own shares must provide a corporate benefit to the target.
The granting of security by an Indonesian corporate entity generally requires corporate approvals in accordance with its articles of association and Indonesian company law. These approvals may vary depending on the type and value of the security.
Additionally, the authors highlight that financing involving Indonesian state-owned enterprises may be subject to the World Bank Negative Pledge (WBNP), which prohibits a borrower from creating liens or encumbrances on its assets without providing the same security to the original lender. WBNP applies when the following conditions are met: (i) there is an element of ownership or control by the Indonesian government or Indonesian state-owned enterprises or their subsidiaries, directly or indirectly over the assets, and (ii) the project loan is not denominated in Indonesian rupiah.
For individuals in a marital relationship, unless a prenuptial agreement is in place (whether before or after marriage), all assets acquired by the couple are considered joint marital asset. Consequently, when one spouse seeks to grant security over any asset, spousal consent is required. Failure to obtain this approval can result in the non-consenting spouse challenging the validity of the security during execution, arguing that the encumbrance was made without the necessary approvals to bind the marital assets.
Although, in principle, a security interest ceases when the relevant debt secured has been paid, expired, or rendered null and void, depending on the types of collateral, certain formalities must be followed to release specific types of security. For mortgage security, the lender must provide a release letter, which serves as the basis for requesting the security’s release from the appropriate authorities (eg, the National Land Agency). In the case of fiduciary security, the party holding the security is responsible for notifying the Fiduciary Registration Office by submitting a release letter. The Fiduciary Registration Office will then delete the fiduciary security from the Fiduciary Register Book and issue a written statement confirming that the Fiduciary Registration Certificate is no longer valid. For assets secured by a pledge, the pledge can be released by terminating the pledge agreement once the borrower fulfils their obligations and the pledged asset must be returned to the borrower. In the case of a pledge over shares, the lender must notify the company of the release so that the Board of Directors can update the shareholders’ register to remove the annotation indicating the pledged shares. If the share certificate for the pledged shares is under the possession of the lender, it must also be returned to the borrower.
Holders of mortgages, fiduciary securities, hypothec and pledges have priority over other creditors. In the event of a borrower’s bankruptcy, lenders holding these types of security are classified as secured creditors and have the right to enforce their security, subject to certain formalities under Indonesian bankruptcy law. Assets secured by mortgages, fiduciary securities and pledges are excluded from the bankruptcy estate.
However, contractual security arrangements (such as guarantee agreement) may not survive a borrower’s bankruptcy, as the receiver has the authority to determine the continuation of such contracts. Under Indonesian insolvency law, lenders relying on contractual security are typically classified as unsecured creditors by the receiver which are generally treated equally under the principle of pari passu unless where statutory or secured claims take precedence.
Lenders should note that, by law, certain claims must be prioritised over others, including foreclosure expenses, costs related to safeguarding secured asset (such as mortgages, fiduciary securities or pledges) from loss, and preferential claims by tax authorities.
Further details regarding insolvency proceedings under Indonesian law is provided in 7. Bankruptcy and Insolvency.
Under Indonesian law, a mortgaged object, such as land, can be encumbered with multiple mortgages. A first-rank mortgage takes priority over subsequent ranks, with priority determined by the registration date of the relevant mortgage deed. If multiple deeds are registered on the same date, priority is determined by order indicated in the deeds. The same concept also applies to vessel secured by hypothec, which can be encumbered with multiple hypothecs in which the rank will be determined by date and serial number of the hypothec deed. Other types of security interests cannot take priority over a lender’s existing security interest, as Indonesian law prohibits multiple security rights being established over the same asset (eg, pledge).
The enforcement of collateral by a secured lender depends on the type of security and the terms set forth in the security documents. These often include triggers such as events of default or change of control.
Security interests are generally enforced through public auctions or private sales or sales in a manner determined by the court. By law, secured assets cannot be automatically transferred to the lender in the event of the borrower’s default and the lender is only entitled to the proceeds from the enforcement of the security. While securities with executory titles, such as mortgages and fiduciary security, are legally enforceable without court involvement, in practice, a court ruling with an execution order is often required.
Secured lenders hold priority over other unsecured creditors when recovering payments from the proceeds of collateral enforcement. This preferential right remains intact even in the event of the borrower’s bankruptcy or liquidation.
Under Indonesian law, a contract governed by foreign law is generally recognised as valid, binding and enforceable under the freedom of contract principle, except for contracts that must be governed by Indonesian law, such as construction contracts. However, the choice of foreign law as governing law is subject to certain limitations, such as public policy, mandatory provisions and a sufficient connection (nexus) to the parties or transaction. Similarly, parties to a contract may choose to resolve disputes in a foreign jurisdiction, as this is permitted under the same principle.
Regarding waivers of immunity, such waivers are, in principle, valid under Indonesian law. However, Indonesia lacks explicit regulations on this matter. As a general legal principle, sovereign immunity applies only to parties whose actions or assets are attributable to a sovereign entity or state.
A foreign court judgment cannot be directly enforced in Indonesia. To enforce such a judgment, the concerned party must file a new claim with the relevant Indonesian district court. The foreign court judgment may be given evidentiary weight at the Indonesian court’s discretion, but the Indonesian court will essentially conduct a retrial of the case, as it is not bound by the foreign court’s findings.
Foreign arbitral awards are enforceable in Indonesia, except those involving the government of the Republic of Indonesia, and subject to the grounds for refusal under Indonesian arbitration law. Enforcement requires obtaining a court order (exequatur) from the Chairperson of the Central Jakarta District Court (Ketua Pengadilan Negeri Jakarta Pusat). However, Indonesian courts may refuse to enforce a foreign arbitral award if:
There are no specific restrictions on foreign lenders seeking to enforce their rights under a loan or security agreement or initiate legal proceedings against a party in Indonesia. As a general principle, if a foreign lender intends to settle a dispute through the Indonesian courts, the claim should be filed to the district court where the defendant is domiciled. However, contracts may designate a specific district court for dispute resolution (such as the South Jakarta District Court) and may outline the preferred method of dispute resolution, such as litigation or arbitration.
Upon the debtor’s declaration of bankruptcy, the lender (as a creditor) must submit its claims to the receiver for verification. Once verified, the claims are listed among the acknowledged claims, and the lender gains recognition as a creditor. This requires the lender to follow the bankruptcy proceedings to seek repayment, precluding the enforcement of the loan through other means, such as civil litigation.
For secured debts, the lender cannot immediately enforce the security following the bankruptcy ruling due to an automatic stay. This stay, lasting 90 days, restricts secured creditors from pursuing certain enforcement actions. However, the stay does not apply to creditors secured by cash deposits or those with set-off rights.
The order in which creditors are paid is as follows.
In principle, the debtor’s assets are used to settle all debts, with distributions made proportionally. However, considering the above hierarchy, unsecured creditors often do not receive full payment of their claims.
The bankruptcy application must be granted or rejected within 60 working days. After the bankruptcy ruling is issued, all known creditors are notified and invited to file their claims for verification, with a newspaper announcement issued to inform any unknown creditors. The bankrupt debtor must first attempt to settle existing debts through a composition or restructuring plan. If unsuccessful, the debtor is declared insolvent, and the receiver will manage and sell the bankruptcy assets to settle verified claims. The entire process often takes significant time, mainly due to the effort required to sell the bankruptcy assets for repayment. Depending on the volume of assets and claims, the process can take up to a year or more.
Creditor recoveries depend on whether the bankrupt debtor has sufficient assets to settle verified claims. However, in most cases, the debtor’s assets are insufficient, resulting in partial or no payment for claims, particularly for unsecured creditors, who typically receive prorated distributions.
Aside from bankruptcy proceedings, the main formal debt restructuring process in Indonesia, with court involvement, is the delay of payment procedure (Penundaan Kewajiban Pembayaran Utang – PKPU). PKPU is a debt restructuring process (involving the commercial court) for debtors requiring more time to repay or restructure debts, as opposed to bankruptcy, which applies to debtors unable to repay or who are insolvent.
Once the commercial court places a debtor under PKPU, the debtor retains its rights but is subject to prior approval and supervision by the appointed administrator and supervisory judge. Initially, the court issues a temporary PKPU ruling for up to 45 days and appoints an administrator and supervisory judge. During this period, the debtor may propose a restructuring (composition) plan for approval by the secured and unsecured creditors. If the plan is rejected, the debtor is automatically declared bankrupt. At the debtor’s request, secured and unsecured creditors may also approve a permanent PKPU, extending the PKPU period for up to 270 days, inclusive of the temporary PKPU period.
In addition to the court-supervised process, consensual out-of-court restructuring arrangements are also available. Where the restructuring involves specific creditors, the company may negotiate and execute restructuring agreements with the relevant parties.
Lenders face the risk of not receiving full repayment of the debt or loan, especially if no security is in place. Unsecured creditors are the lowest priority in the repayment hierarchy and usually only receive a prorated amount in bankruptcy proceedings.
With the Indonesian government placing considerable emphasis on power and infrastructure, power plants remain one of the country’s most active sectors for project finance. Furthermore, the government’s introduction of incentives for the electric vehicle (EV) industry in Indonesia has begun to yield results, attracting foreign investment in EV-related industries. Consequently, project financing for EV-related sectors, such as nickel mining and processing, has also become increasingly active in Indonesia.
Public–private partnerships (PPPs) in infrastructure are mainly governed by Presidential Regulation No 38 of 2015 (“PR 38/2015”) and its implementing regulation, National Development Agency Regulation No 7 of 2023 on the Implementation of Public–Private Partnership Schemes for the Procurement of Infrastructure (“Reg 7/2023”).
Under Reg 7/2023, infrastructure eligible for development through PPPs includes:
Construction contracts and power purchase agreements in Indonesia must be governed by Indonesian law. For dispute resolution, the parties may agree to settle disputes either through onshore or offshore courts or arbitration forums.
Offtake contracts are not subject to specific requirements regarding governing law or dispute resolution. Therefore, they can be governed by foreign law, with international arbitration as the chosen dispute resolution forum.
Land Ownership
There are several types of land rights under Indonesian laws, including the following.
Hak Milik (“Right of Ownership”)
Although Indonesian agrarian law does not fully recognise the concept of freehold ownership, Hak Milik is the nearest equivalent. Subject to planning regulations, this right allows its holder to use the land for any purpose, except for exploiting natural resources beneath the land.
Only Indonesian individuals, and certain legal entities specified in government regulations are permitted to hold this land right, and its validity is unlimited.
Hak Guna Usaha (“Right to Cultivate”)
This land right is granted for agricultural purposes, including plantations, fisheries, and livestock properties. Depending on the type of crop, this right is granted for a term of 35 years, extendible for another 25 years, and then renewable for a further 35 years.
Indonesian individuals and companies/entities incorporated and domiciled in Indonesia, including foreign capital investment companies, are entitled to hold this land right.
Hak Guna Bangunan (“Right to Build”)
This land right grants its holder the right to build and exclusively own buildings on state or private land. Although a Right to Build is usually granted for erecting structures, it does not preclude the holder from having plants or a fish pond, provided the main use of the land is for buildings.
This right is granted for a maximum term of 30 years, extendible for another 20 years, and then renewable for a further 30 years. Indonesian individuals and companies/entities incorporated and domiciled in Indonesia, including foreign capital investment companies, are entitled to hold this land right.
Hak Pakai (“Right to Use”)
This land right grants its holder the right to use the land and obtain the produce from a plot of land, either directly controlled by the state or privately owned, subject to limitations imposed by the decision granting the land right or an agreement with the landowner. However, granting a Right to Use over privately owned land is still uncommon.
Indonesian agrarian law does not specify a particular period for the validity of this land right. Under Government Regulation No 18 of 2021 on the Right to Manage, Land Rights, Multi-Story Housing Units and Land Registration (“GR 18/2021”), a Right to Use is granted for a maximum term of 30 years, extendible for another 20 years, and then renewable for a further 30 years. A Right to Use for embassies and religious institutions for example, is granted for an unlimited term for as long as the embassy or religious institution needs the land.
A Right to Use for a certain term can be held by Indonesian individuals and companies/entities, resident foreigners and foreign companies represented in Indonesia.
Hak Pengelolaan (“Right to Manage”)
This right is not provided in Indonesia’s 1960 Agrarian Law, but under GR 18/2021, a Right to Manage may be granted for State Land (Tanah Negara) or Customary Land (Tanah Ulayat). A Right to Manage granted over State Land can be conferred to state-owned or region-owned companies, central or regional governments, and legal entities appointed by the central government through a decree from the Minister of Agrarian Affairs.
The holder of a Right to Manage has the authority to grant a Right to Build and a Right to Use over the land subject to Right to Manage to another party, through a land utilisation agreement. The term of this right is usually tied to the period for which the holder intends to use the land for its designated purpose. Due to its specific conditions, a Right to Manage cannot be transferred to another party. However, the Right to Build or Right to Use over the Right to Manage can be transferred to another party with prior approval from the holder of the Right to Manage.
Land Ownership by Foreigners
Government Regulation No 18 of 2021 (“GR 18/21”), issued on 2 February 2021, allows certain foreigners to hold a Right to Use title over state-owned land, land under a Right of Ownership, and land under Right of Management. The Right to Use includes a specific right to the underlying land. Under GR 18/21, certain foreigners may also hold a Right to Use over apartments.
However, according to GR 18/21, the foreigner’s presence must be “of benefit” because, meaning they must be conducting business, working, or investing in Indonesia. To qualify for land ownership rights over apartments, foreigners must possess the necessary permits (work permit, stay permit, etc).
Land Ownership by Foreign Investment Companies
A foreign capital investment (PMA) company may hold a Right to Build, Right to Use, or a Right to Cultivate, depending on its business activities. The most common right held by a PMA company is the Right to Build.
Note that each land certificate can only correspond to one of the aforementioned rights. For example, a Right to Build certificate only grants the right to build on the land.
Non-certificated land, which may include customary land or state-owned land, has not yet been registered with the relevant Land Office and cannot be owned by a company until it is certificated.
For state-owned land, a company must apply for and obtain a Right to Build before it can use the land.
The following are the main issues to consider when structuring a project finance deal in Indonesia.
The Type of Security to Be Provided Under Indonesian Law
Indonesian law recognises various types of security, depending on the nature of the assets. However, certain assets, such as government-owned assets, cannot be used as security. In project finance transactions, especially those involving the government, such as the public–private partnerships, some assets will remain under government ownership. In such cases, these assets cannot be included in the security package for financing, and lenders will need to explore alternative forms of security.
Refer to 5. Guarantees and Security for the types of security interest available under Indonesian law.
Requirements for Offshore Loans
Disbursement procedure
Bank Indonesia, the central bank, requires that any foreign currency offshore loan received by Indonesian parties, including loans from (i) non-revolving loan agreements and (ii) debt securities (such as bonds, medium-term notes, floating rate notes, etc), must be disbursed through banks in Indonesia (including foreign bank branch offices) that are licensed to conduct foreign currency banking activities (“FX Banks”). Therefore, offshore lenders should be aware that the loan cannot be disbursed through an offshore account. The borrower will need to open a bank account with an FX Bank to receive the proceeds of the offshore loan.
Offshore loan reporting or approval and prudential principle requirements
An Indonesian company receiving an offshore loan must comply with reporting requirements to both Bank Indonesia and the Ministry of Finance. The report includes a preliminary report (before signing) and a post-signing report. In addition, an Indonesian company receiving an offshore loan in foreign currency must adhere to prudential principle requirements, which include obtaining a credit rating of at least BB- from a rating agency recognised by Bank Indonesia.
If the borrower is an Indonesian state-owned company, prior approval from the Ministry of Finance is required before receiving the offshore loan.
Restrictions on Foreign Investment
The Indonesian government has been moving toward greater leniency, opening more business activities to foreign ownership. However, certain sectors still have restrictions, with some closed or only partially open to foreign investment. It is necessary for foreign lenders to understand the borrower’s business plan and any relevant foreign ownership restrictions when providing convertible loans to the borrower.
Applicable Tax Benefits Under Tax Treaties
Generally, any interest or fee payments made by an Indonesian borrower to a foreign lender are subject to income tax. However, the withholding tax rate may be reduced if the lender’s country and Indonesia are parties to a tax treaty that provides a favourable tax rate.
The most common source of financing for project finance transactions in Indonesia is bank loans. Additionally, subordinated shareholders loans are often provided for any further financial support required by the borrower.
Lenders typically require that all assets in the project finance be encumbered in their favour. They also commonly require that material contracts (such as concession agreements) be assigned to them as part of the security package. Since the financial viability of the special purpose vehicle (SPV) developing the project often relies on the sponsors, it is also common for the sponsors to issue letters of undertaking. These letters typically commit the sponsors to ensure project completion, cover any cash deficiencies, repay any outstanding loans of the SPV, and fulfil other obligations.
Under Bank Indonesia Regulation No 7 of 2023 as amended by Bank Indonesia Regulation No 3 of 2025 on Foreign-Exchange Export Proceeds and Foreign-Exchange Import Payments (“BI 7/2023”), exporters of foreign-exchange export proceeds derived from the business, management and/or processing of natural resources (“Natural Resources Export Proceeds”) with a minimum export value of USD250,000 (or its equivalent) must deposit these proceeds into a special account designated for Natural Resources Export Proceeds (“Special Account”). This Special Account must be opened with either an Indonesian bank licensed to engage in foreign exchange activities (“Indonesian FX Bank”) or with the Indonesian Export Financing Institution (Lembaga Pembiayaan Ekspor Indonesia – LPEI) in the case of export transactions involving debtors to the LPEI.
Under its overarching regulation, Government Regulation No 36 of 2023 as amended by Government Regulation No 8 of 2025 on Foreign-Exchange Export Proceeds From Business, Management, and/or Processing Activities of Natural Resources, 100% of the Natural Resources Export Proceeds deposited into the Special Account (as previously outlined) must be placed in the Indonesian financial system for a minimum of 12 months as of the date of the deposit. The full deposit requirement can be met through the following instruments:
Therefore, any income derived from the Natural Resources Export Proceeds must comply with these requirements.
Under Government Regulation No 22 of 2021 on the Implementation of the Protection and Management of the Environment (“GR 22/2021”), an Environmental Approval is required for a company to obtain its business licence. This approval can take the form of:
The Ministry of the Environment is the main regulatory body overseeing environmental matters.
Summitmas I, 16th & 17th floors
Jl. Jend. Sudirman Kav. 61–62
Jakarta 12190
Indonesia
+6221 5080 8300, 252 1272
+6221 252 2750, 252 2751
info@makarim.com www.makarim.comThe Latest in Indonesia’s Payment Systems
Indonesia’s payment system landscape has undergone a significant transformation over the past decade, driven by rapid technological adoption, regulatory innovation, and evolving consumer preferences. The country’s shift toward digital payments has been accelerated by the government’s and Bank Indonesia’s strategic initiatives, which aim to modernise payment infrastructure, promote financial inclusion, and facilitate payment transactions. This transformation is not just a technological change but also a socio-economic movement, as digital payment adoption increasingly shapes the way businesses operate, especially small and medium-sized enterprises (SMEs), and how consumers engage in daily transactions.
The shift toward a cashless society
Indonesia has traditionally been a cash-driven economy. However, over the past five years, the country has seen a significant rise in the adoption of non-cash payment methods, particularly mobile-based payments. This shift has been driven by several factors, including increasing smartphone penetration, improved internet connectivity, and changing consumer behaviour. Government initiatives, such as the Gerakan Nasional Non-Tunai (National Non-Cash Movement – GNNT) in 2014 by Bank Indonesia, have laid the foundation for promoting the use of electronic payments.
One of the most significant developments in this field has been the introduction of the Quick Response Code Indonesia Standard (QRIS). Launched by Bank Indonesia in 2019, QRIS sets the national standard for Quick Response (QR) code-based payment transactions. In just a few years, it has become an indispensable part of Indonesia’s payment ecosystem, enabling interoperability between different payment service providers. The result is a more accessible payment ecosystem, where consumers can use a single QR code for multiple apps and merchants can accept payments from various platforms without having to manage multiple systems.
The COVID-19 pandemic further accelerated this shift. Health concerns and physical distancing measures pushed both consumers and merchants to seek contactless payment solutions. This led to a surge in e-wallet usage, online banking transactions, and cardless ATM withdrawals. The trend continues post-pandemic, as many users who shifted to digital payments have not reverted to cash.
By 2025, QR codes are nearly ubiquitous in payment transactions across various sectors. From shopping malls and public transportation to traditional markets and street food stalls, QR code payments are widely adopted due to their convenience and ease of use. In 2024 alone, payment transactions via QR code surged by 226.54%, with the number of users reaching 50.5 million and over 32.71 million merchants accepting QR code payments.
Despite its rapid adoption, security and keeping pace with ever-evolving technology remain key challenges for QR code utilisation. Recognising this, industry players have been anticipating new regulations or guidelines from Bank Indonesia to refine the QR code regulatory framework for improving security, adaptability, and usability while accommodating technological advancements and market demands.
Regulatory developments
The payment system in Indonesia is regulated primarily by Bank Indonesia, which oversees payment service providers and ensures the safety, efficiency, and reliability of payment transactions. Over the last few years, Bank Indonesia has introduced a series of regulations that reflect the evolving nature of the payment landscape.
A key regulatory milestone was the issuance of Bank Indonesia Regulation No 23/6/PBI/2021 on Payment Service Providers (PSP), which consolidated and updated rules governing various categories of PSPs. This regulation introduced the categorisation of PSP licences into different classes based on the scope of services, such as e-wallet, payment getaway, and remittance services. The aim is to ensure that regulations remain proportionate to the level of risk and the scale of activities undertaken by each PSP.
Another notable development is Bank Indonesia’s continued focus on interoperability and standardisation. Other than QRIS, Bank Indonesia also introduced the National Payment Gateway (Gerbang Pembayaran Nasional – GPN), which is essentially aimed at integrating and interconnecting domestic payment channels and payment system providers, so that transactions within Indonesia are processed through local infrastructure rather than relying on foreign networks. These measures are designed to reduce market fragmentation and ensure that consumers and merchants benefit from greater efficiency and lower transaction costs.
More recently, Bank Indonesia expanded the framework for QR-based payments by recognising non-scanning-based QR code transactions under Members of the Board of Governors Regulation No 3 of 2025 on the Implementation of the National Standard for Quick Response Codes for Payments. Previously, QR code payments required scanning via mobile applications, but the new regulation allows non-scanning methods, such as Near-Field Communication (NFC) technology. This reduces reliance on manual scanning, enabling more efficient transactions and broader device compatibility.
The new QRIS regulation also acknowledges the role of data communication-based payment technologies, including NFC, in expanding payment options. This gives payment service providers and merchants greater flexibility to develop innovative transaction solutions that cater to diverse user needs, in line with the global shift toward contactless and digital payments. The regulation clarifies that messaging-based QR code payments and NFC technology are merely examples of the broader spectrum of potential innovations. By accommodating these technologies, Bank Indonesia signals its willingness to adapt to future advancements in payment processing, ensuring that QRIS remains implemented and relevant in an increasingly digital world.
While no immediate follow-up regulations are expected, Bank Indonesia will likely continue monitoring implementation and market response. Future regulatory refinements may address emerging challenges or gaps in the framework. Bank Indonesia’s efforts to secure digital payments while promoting economic activity underscore its commitment to maintaining a robust and adaptive payment ecosystem.
The role of e-money and e-wallets
E-money has become one of the most transformative elements of Indonesia’s payment system. Licensed e-wallet providers have rapidly expanded their user bases by offering convenient, low-cost, and often incentivised payment options. These platforms have moved beyond simple payment tools to become ecosystems in themselves, integrating services such as ride-hailing, food delivery, e-commerce, and even investment as well as charity products.
The increasing competition among e-wallet providers has also driven innovations such as loyalty programmes, instant cashback, and flexible bill payment options. However, the competition also raises questions about market consolidation, sustainability of promotional spending, and potential data privacy concerns. Notwithstanding this, for merchants (especially SMEs), integrating with e-wallets provides access to a significant amount of digitally active consumers. The benefits go beyond faster payments, as digital wallets often offer data insights that help merchants tailor promotions and improve customer engagement. While for consumers, the convenience of storing multiple payment options in one app, combined with the ability to transact both online and offline, has been a key driver of adoption.
Bank-led digital payment innovations and collaborations
While fintech companies have dominated the headlines, traditional banks in Indonesia have also been active in developing digital payment solutions. Many have upgraded their mobile banking applications, integrated QRIS payment functionality, and partnered with fintech firms to extend their reach. Even government-owned banks are leveraging their large customer bases and trust capital to roll out innovative payment services, including virtual debit cards, contactless credit cards, and biometric authentication for transactions. Some have developed “super apps” that combine banking services with lifestyle features, mimicking the approach taken by fintech platforms.
The growth of Indonesia’s payment industry has also been marked not only by technological innovation but also by new forms of collaboration between fintech companies and traditional banks. Rather than competing head-to-head, many players are discovering that partnerships can yield better results, combining the agility and innovation of fintech with the stability and compliance expertise of established financial institutions.
From the banks’ perspective, working with fintech firms allows them to offer cutting-edge products without having to develop every solution in-house. For example, banks can integrate third-party payment gateways, digital wallets, or buy-now-pay-later (BNPL) options into their existing services, giving customers more flexibility while maintaining oversight of transactions. These collaborations also help banks attract younger, tech-savvy consumers who may have been drawn to purely digital platforms.
Fintech companies, on the other hand, benefit from access to the banking sector’s infrastructure and regulatory framework. By partnering with banks, they can gain direct access to clearing and settlement systems, ensure compliance with anti-money laundering (AML) and know-your-customer (KYC) requirements, and tap into the trust that banks have built with their customer base over decades. This can be a significant advantage in a market where regulatory compliance and customer trust are as important as innovation.
Some of the most successful examples of collaboration in Indonesia have come from co-branded products and joint marketing campaigns. A digital wallet provider may launch a special rewards programme in partnership with a bank, or a bank may embed a fintech’s lending product into its mobile banking app. In both cases, customers enjoy a richer set of services, while the providers share the benefits of increased transaction volumes and broader market reach. As competition in the payment industry intensifies, such partnerships are likely to become even more important as a way to differentiate offerings and achieve sustainable growth.
Cross-border payment integration
One of the most notable developments in Indonesia’s payment landscape is the rapid progress in cross-border payment integration, particularly through the expansion of the QRIS system beyond domestic use. Bank Indonesia has been actively working to link Indonesia’s payment infrastructure with other countries in the Association of Southeast Asian Nations (ASEAN). Cross-border QR payment linkages have already been established with neighbouring countries such as Malaysia, Thailand, and Singapore, allowing travellers to use their home country’s payment apps abroad with real-time currency conversion. This initiative allows Indonesian travellers to make purchases abroad simply by scanning a QR code, with transactions settled in each party’s local currency, eliminating the need for manual currency conversion.
For the tourism sector, the impact is substantial. Indonesian visitors to popular destinations like Bangkok or Kuala Lumpur no longer need to carry large amounts of cash or rely solely on international credit cards. Likewise, tourists from those countries visiting Bali or Jakarta can use their home-grown payment apps for a seamless experience. The result is not only greater convenience for travellers but also increased spending at local merchants, particularly SMEs, that were previously unable to accept foreign payments efficiently.
Cross-border QRIS is also proving valuable for the migrant worker community. Many Indonesian workers in Malaysia and Singapore send remittances home, and the integration of payment systems is making these transfers faster and cheaper. By removing multiple intermediaries and streamlining currency conversion, cross-border QR payments reduce costs for senders and ensure that more of the transferred amount reaches their families.
Strategically, these initiatives support the broader goal of ASEAN financial integration. As more countries join the network, Indonesia’s payment ecosystem will become increasingly interconnected with regional economies, facilitating trade, investment, and tourism. For businesses, this represents an opportunity to expand their customer base across borders without the complexities of setting up separate payment channels in each country. The momentum suggests that cross-border digital payments will become a defining feature of Southeast Asia’s financial landscape in the coming years.
However, cross-border integration also raises compliance challenges, particularly in relation to anti-money laundering AML and CTF regulations. PSPs operating across borders must ensure they meet the requirements of multiple jurisdictions, which can involve complex operational and legal considerations.
The push for financial inclusion
One of the main goals of Indonesia’s payment system modernisation is to promote financial inclusion. Despite significant progress, a substantial portion of the population remains unbanked or underbanked, particularly those in rural areas. According to World Bank data from 2021, Indonesia has the world’s fourth-largest unbanked population, totalling 97.74 million people or 48% of its adult population.
Digital payment solutions offer an opportunity to bridge this gap, providing access to financial services for individuals who might not have a traditional bank account. In response, fintech and bank-led agent networks are expanding into rural areas, enabling cash-in and cash-out services that connect digital payments with local economies. This expansion of financial inclusion also creates opportunities for businesses to reach previously underserved markets. As more people gain access to digital payments, demand for goods and services is likely to increase, particularly in areas that were previously difficult to reach.
Data security and consumer protection
With the growth of digital payments comes an increased focus on data security and consumer protection. Users expect their personal and financial information to be safeguarded, and regulators have responded with stricter requirements for PSPs. The enactment of Indonesia’s Personal Data Protection Law in 2022 has introduced new compliance obligations for payment providers, including requirements for data processing, storage, and breach notification.
Cybersecurity is a key concern. Payment systems are prime targets for fraud, phishing attacks, and account takeovers. Although the shift toward digitalisation has created greater convenience for consumers, incidents of security breaches (particularly in digital banking and e-wallet platforms) remain frequent and widely reported. This has heightened public awareness that, alongside convenience, digital transactions carry inherent risks. As a result, PSPs must not only invest heavily in security infrastructure and employ advanced fraud detection systems, but also take an active role in educating users about safe transaction practices.
Consumer protection also includes ensuring transparency in fees, clear dispute resolution mechanisms, and fair handling of failed transactions. Maintaining consumer trust is essential for the continued growth of the digital payment ecosystem, and businesses that prioritise security and customer service are more likely to succeed.
Outlook and opportunities
Looking ahead, Indonesia’s payment system will continue to evolve in line with global trends. Bank Indonesia is currently exploring the potential issuance of a digital rupiah, an official digital form of the rupiah, issued and guaranteed by the central bank. This initiative could serve as the foundation for next-generation payment innovations.
For businesses, the opportunities are significant. The combination of a large, young, and tech-savvy population, supportive regulatory initiatives, and growing regional connectivity makes Indonesia an attractive market for payment-related services. However, success will depend on meeting regulatory requirements, keeping pace with rapid technological changes, and building trust with consumers.
As the market continues to transform, payment providers that can offer secure, seamless, and inclusive solutions will be well-positioned to expand their presence. Collaboration between banks, fintech, companies and regulators will remain essential to ensuring that Indonesia’s payment system continues to grow in a sustainable and inclusive manner.
Summitmas I, 16th & 17th floors
Jl. Jend. Sudirman Kav. 61-62 Jakarta 12190
Jakarta
Indonesia
+6221 5080 8300, 252 1272
+6221 252 2750, 252 2751
info@makarim.com www.makarim.com