JAKARTA: The Financial Services Authority (OJK) is set to finalize a rule that will allow small-scale enterprises to source funding from the capital market in a bid to boost economic activity.
OJK chairman Muliaman D. Hadad said the financial regulator and the Indonesian Stock Exchange (IDX) were currently preparing the policy, which would allow small and medium enterprises (SME) to conduct initial public offerings (IPO) and have their shares traded on the local stock exchange.
Muliaman said the OJK had previously expected to announce the new rule in the first quarter but decided to delay the issuance due to some changes in regulations.
“Based on our discussions with Pak Tito [IDX president director Tito Sulistio], we need more time to prepare. However, our commitment has not changed, and we hope that the rule could be issued perhaps in June,” he said on the sidelines of an international conference in Bali on Friday.
Muliaman said efforts to empower SMEs by giving them better access to funding, in the case of Indonesia, was one of the keys to minimizing economic volatility and restoring public confidence amid a global slowdown.
According to OJK data, SMEs in Indonesia, including start-up businesses, contribute approximately 60 percent to the country’s gross domestic product (GDP) and represent 97 percent of the nation’s total workforce.
“Startups in Indonesia, in particular, have started to become quite widespread, operating in such diverse fields as transportation, tourism and online trading. Moreover, they have now become a major employer in their own right,” Muliaman said.
Tito said the upcoming regulation was expected to provide a comprehensive structure, in which the OJK would ensure liquidity, as doubts would remain among investors about investing in SME stocks once they were traded in a regular market, given the companies’ small scale.
“We want to ensure there is an incentive for investors and prospective listed SMEs, in order to avoid high costs and increase liquidity [of the SME stocks],” he said.
Previously, OJK commissioner for the stock market Nurhaida said the OJK acknowledged the doubts among investors and was mulling a new board for SMEs to allow their shares to be traded outside the regular market.
The new board, called a “secondary board”, would be separate from the main market.
Nurhaida said it was important for shares of small companies to be traded on their own board, as their stocks were feared to be illiquid if they had to compete with bigger firms on the main board.
According to Muliaman, the OJK will seek input from the IDX regarding the best scheme to ensure liquidity of SME stocks, saying that “there are some versions in various countries, where they either form a special bourse for SMEs or manage one stock market with a number of boards”.
As an effort to promote SME access to the capital market, Muliaman said the OJK was also providing input to the International Organization of Securities Commissions (IOSCO) to create regulations where stock exchanges, especially in emerging markets, become more “SME-friendly”.
The IOSCO, consisting 170 members of governmental bodies, self-regulatory organizations (SROs) and other institutions, is recognized as the global standard-setter for the securities sector.
