Indonesia's Financial Services Authority (OJK) has formed a new Department of Regulation and Development of Micro, Small and Medium Enterprises (UMKM) and Islamic Finance, and reorganised supervision of digital banks by creating a dedicated Directorate of Digital Banking Supervision, with the supervisory transfer set to take effect in 2026. The new department is positioned to support more inclusive UMKM financing and an integrated Islamic finance ecosystem across banking, non-bank financial institutions and capital markets. OJK noted that UMKM account for 99 percent of business units and 97 percent of employment, while UMKM lending contracted by 0.11 percent as of October 2025, and pointed to OJK Regulation Number 19 of 2025 requiring banks and non-bank financial institutions to provide inclusive and affordable UMKM financing schemes. On Islamic finance, OJK highlighted the establishment of the Islamic Finance Development Committee (KPKS) and set expectations for the new department to align national and international sharia programmes to support competitive, sharia-compliant product innovation. For digital banks, OJK cited rapid digital transformation and the projected size of Indonesia’s digital economy of USD 360 billion by 2030 as drivers for more specialised supervision. While describing digital banks as showing strong capitalisation (capital adequacy above 30 percent) and net interest margin around 2.5 times the conventional banking industry average, OJK emphasised that supervision will extend beyond financial ratios to cover seamless operations, governance and customer conduct, use of mass and social media in “banking on media”, and digital resilience including cybersecurity, third-party technology risk and customer data protection, with the new directorate becoming effective in 2026.
OJK 2025-12-19
Indonesia's Financial Services Authority establishes SME and Islamic finance development department and creates a digital banking supervision directorate
Indonesia's Financial Services Authority (OJK) has established a Department of Regulation and Development for Micro, Small and Medium Enterprises (UMKM) and Islamic Finance, and reorganised digital bank supervision with a Directorate of Digital Banking Supervision, effective 2026. The department aims to enhance UMKM financing and integrate Islamic finance, while the directorate will address digital transformation, governance, and cybersecurity in digital banks. OJK highlighted UMKM's significant economic role and the projected USD 360 billion digital economy by 2030 as key factors for these changes.