Presented in:

Financing SMEs: Sharing Ideas for Effective Policies Capacity Building and Training Workshop, Jakarta, 15 October 2014

OPTIMIZING ACCESS TO FINANCE IN INDONESIA THROUGH IMPROVEMENT OF

THE MOVABLE COLLATERAL FRAMEWORK & REGISTRATION SYSTEM

The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policiesof the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or thegovernments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts noresponsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB officialterms.

The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

About this Presentation

Modernization of the Movable Collateral (Fiducia) Framework and Registry in

Indonesia

Reform Results

What Lies Ahead

1

The Need to Improve MSMEs Access to Finance

DEMAND SUPPLY GAP (IDR TRILLION)

2 Source: IFCs Market Study on Movable Asset-based Financing to SMEs in Indonesia, January 2014

3

Law 42 of 1999 on Fiducia Security

Encumbrance must be set forth in a notarial deed Only one security may be registered over a particular item at any

time. Registration grants the fiduciary recipient priority rights Registration certificate is issued on the day of receipt of application

Government Regulation

Number 86/2000

Presidential Decree Number

139/2000

Regulates fiducia registration procedure and cost of deed Registry reviews completeness of the application Sets maximum cost for deed of fiducia security Registration fee stipulated by ministry

Legal Framework Supporting Movable Collateral Registration in Indonesia

Establish Regional Registry nationwide Delegates authority to issue registration

certificate to Regional Registry

Objects of Fiducia Registration

4

Accounts receivable Inventory Equipment and machinery Crops and fertilizers Commodities Livestock Negotiable instruments, etc.

Law No. 42 of 1999 on Fiducia Security:

movable assets, whether tangible or intangible immovable goods that are not subject to - Security Rights (Hak Tanggungan)

- hypothecs on ships with gross tonnage of 20 M3 or more

- hypothecs on aircraft

- pledges

Pre-Reform: Manual Process for Registration (Standard Practice)

5

In operation since year 2000

Manual and decentralized

process through 30 Fiducia registration Office (regional level) & 157 Satellite Offices nationwide

No centralized database & difficult to access

Cost relatively high

Not attractive to businesses contributing to low level of compliance

Evolution of the Fiducia Registry

Enactment of the Fiducia Law (Law No. 42/1999)

Establishment of the first Fiducia Registry at the Ministry level

1999

2000 Minister of

Finance Decree 130/2012 (mandatory registration for multi finances)

Ministrys Working Group for Fiducia Reform

2012

2013

2014

Business as usual operationalization of Fiducia Registry low compliance level

International Best Practice (Chengdu, Beijing)

2001-2011

6

Enactment of the Government Regulation 86/2000

Enactment of Presidential Regulation139/2000

Establishment of the Provincial Fiducia Registry

Intl Best Practice (Australia, Canada, New Zealand)

Fiducia Online v. 1 Launched

Supporting Ministerial Regs

Some digitization initiatives at Regional Registries

Fiducia Online v. 2 Launched

Plan for Database Digitization

Drafting of the amendment to Government Regulation 86/2000

Fiducia Online: Paperless Registration

7

Fiducia Online: Paperless Registration

8

9

Registration Certificate: 7 Minutes

Scan barcode for

authentication

purpose

Centralized Database Search Function

10

Results So Far

Clear and transparent data available on real time basis

Registration is consistently high

11

-

250,000

500,000

750,000

1,000,000

Fiducia Registration March 2013-September 2014

average 655,826 /month | max 966,883 application/month

Results So Far

Wide Range of Objects

12

Vehicle 2W 79.05%

Vehicle 4W 19.94%

Vehicle Others 0.63%

Farms Equipment

0.00% Heavy Equipments

0.02%

Stock 0.00%

Obligation 0.00%

Other Assets 0.04%

Cattle 0.00%

Company Assets 0.13%

Others 0.18%

Vehicle 2W 4.901.852

Vehicle 4W 1.236.643

Vehicle Others 39.109

Farms Equipment 80

Heavy Equipments 1.464

Stock 10

Obligation 32

Other Assets 2.552

Cattle 59

Company Assets 7.960

Others 11.145

Improved Performance & Value Add

Significantly improved Service Quality

(awarded as one of Top 9 National Public Service Innovation 2014)

Potential to provide better Access to finance by

Enable Creditor to have better information about priorities prior making decision

Improve Legal Certainty in creditors priorities

13

Reform Continues..

14

Legal Framework

Improvement

Enhancement to Fiducia Online & Finalize

Transition

Public Outreach

Payment Gateway

Mechanism

THANK YOU

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