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The ultimate guide about debt collection in Indonesia

Embark on your debt collection journey in Indonesia with Debitura as your guide. Armed with local expertise and international experience, we simplify the process. Use this guide to overcome debt recovery challenges in Indonesia efficiently and effectively.

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Specify your requirements and we’ll align you with up to 3 leading collection agencies in under 48 hours. Each agency will offer a tailored, competitive rate, empowering you to make an informed decision.

Most of our partners offer a No Cre, No Pay pricing model for amicable debt recovery. This means that you Pay only upon successful recovery—ensuring the best value. Success fees range from 7.5% to 30%, payable only upon claim recovery. Create a free account, upload your claim, and get a tailored quote.

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The debt collection process in Indonesia

Grasp debt collection in Indonesia through our simplified guide. From friendly reminders to legal enforcement, we'll break down every step. Opting to delegate your debt recovery task? Let us, at Debitura, aid you every step of the way. Dive into our "Ultimate Guide to Debt Collection in Indonesia".

Amicable Collection Phase

Initiate with a friendly, out-of-court collection aimed at an amicable resolution. This phase generally includes: Direct Communication, Reach out to your debtor to understand the payment delay. Payment Reminders: Use various communication methods (email, SMS, letters) for sending reminders. Formal Notice: Issue a formal notice letter, outlining the debt and the consequences of non-payment.

Court Proceedings

If the amicable approach fails, escalate the matter through legal proceedings to obtain a court judgment, essential for debt enforcement.

Debt Enforcement

With a court judgment in hand, you can pursue coercive measures like asset seizure and sale, referred to as debt enforcement.

Bankruptcy Proceedings

In cases where the debtor has no assets for seizure, consider filing for bankruptcy. If the debtor is already bankrupt, submit your claim promptly for verification.

Get streamlined, effective recovery support at every stage. Start your claim quickly with our hassle-free, no-fee service.

Navigating Indonesia's Debt Recovery Landscape: Key Performers

Grasping the complex structure of Indonesia's debt recovery ecosystem is imperative. This involves knowing the crucial roles and obligations of key players such as debt collection agencies, bailiffs, and lawyers. Each contributes significantly to the arduous task of debt recovery within Indonesia's strict legal parameters.

Debt Collection Agencies in Indonesia

In Indonesia, debt collection agencies, or "agen penagihan utang", play a pivotal role in the financial ecosystem by aiding creditors in the recovery of outstanding debts. Entities typically resort to these agencies when internal collection efforts fail, leveraging the agencies' specialized strategies to optimize recovery rates. These agencies perform a variety of tasks, including debtor communication, negotiation of payment plans, and, if necessary, initiation of pre-legal actions to secure debt repayment. However, their operations are tightly regulated under Indonesian law, emphasizing ethical practices to protect debtors' rights and dignity. Guidelines from the Financial Services Authority (OJK) and other relevant regulations stipulate clear boundaries for their activities—prohibiting the use of intimidation, invasion of privacy, or any forms of harassment. This regulatory framework ensures that collection efforts are conducted professionally and respectfully, balancing the interests of creditors with the protection of consumer rights.

The Role of Bailiffs in Indonesia

In the sphere of debt collection in Indonesia, "Juru Sita", or court bailiffs, play an essential role particularly when it comes to enforcing judicial decisions related to debt recovery. Unlike debt collectors who handle the pre-legal collection process, bailiffs step in when a court order is in place, ensuring the law's involvement in debt recovery.

A bailiff's involvement is required when a debtor fails to comply with tax obligations or ignores preliminary notices. Their role extends to scenarios indicating a debtor’s intention to relocate assets or evade payments, such as attempting to leave the country or transferring assets deceitfully. The tasks performed by bailiffs include notifying debtors about forced collection letters, executing asset seizures, and conducting auctions of seized goods to satisfy debts, making them pivotal in the judicial collection phase.

Laws governing bailiffs, particularly Law No. 19 of 2000 concerning Tax Collection with Forced Letters, underline their right to execute immediate collection actions, issue forced letters, and oversee the auctioning of seized assets to recover outstanding debts.

However, the scope of a bailiff's duties is strictly regulated, focusing exclusively on the enforcement of debt collection and asset seizure. Creditors must first pursue all preliminary legal steps, including obtaining a court order, before involving a bailiff in the debt collection process, ensuring a methodical and lawful approach to debt recovery in Indonesia.

Source: Indonesian Law No. 19 of 2000

Debt Collection Lawyers in Indonesia

In Indonesia, navigating through the maze of debt collection can be intricate, often requiring the expertise of a debt collection lawyer. These legal professionals play a pivotal role in mediating and resolving disputes that arise from the debt collection process, serving both creditors and debtors. When direct negotiations falter, and complex legal issues emerge, it's time to involve a lawyer specialized in debt collection.

Debt collection lawyers are not only adept at understanding the legal landscape surrounding debts but also excel in filing legal actions against defaulting debtors. Their tasks extend to representing their clients in court, facilitating mediation and negotiation processes, and ensuring an amicable settlement is reached. However, it's crucial to note that their activities are bound by the legal framework, particularly the Indonesian Civil Code, which outlines the boundaries within which they operate.

Before involving a lawyer, creditors should exhaust all preliminary recovery efforts, including direct communication and negotiation with the debtor. The intervention of a lawyer is a significant step, symbolizing a shift towards formal legal proceedings. Choosing this path mandates a thorough consideration of existing regulations and an understanding of the limitations to the activities that debt collection lawyers can undertake in Indonesia.

Tap into Debitura's expert network of local debt recovery bailiffs and lawyers. Start your claim now.

Navigating Out-of-Court Debt Collection in Indonesia

Out-of-court debt collection emphasizes a strategy centered on relationships to recuperate owed amounts, focusing on understanding and negotiation rather than dispute. This approach seeks to keep a constructive connection between the creditor and debtor, aiming for agreements that acknowledge the debtor's circumstances while ensuring the creditor's retrieval of funds. It adopts a cooperative stance, ideal for undisputed claims, sidestepping the intricacies and expenses associated with legal proceedings.

We advise beginning with out-of-court debt collection for straightforward claims not entangled in legal complexities.

The Crucial Role of Collection Agencies in Out-of-Court Recovery in Indonesia

In the context of out-of-court recovery, collection agencies play a crucial role, especially when creditors are short on time or lack the necessary expertise for effective debt recovery. Firms such as Debitura provide targeted services, commencing with accurate debt and debtor identification, and proceeding with engagement through reminders or official communications. Their neutral perspective, free from emotional involvement, often results in more effective debt resolution, offering fair, professional arbitration.

Benefits of Out-of-Court Debt Settlement

Choosing out-of-court settlement is advantageous for both sides; creditors avoid the expenses associated with legal proceedings and maintain important business relationships thanks to the process's respectful approach. Debtors benefit from more feasible repayment options, alleviating financial pressure and promoting goodwill towards the creditor. This method highlights mutual respect and empathy, fostering an environment conducive to meeting financial commitments.

Shifting from Out-of-Court to Legal Debt Collection

Although out-of-court collection presents numerous advantages, certain conditions may warrant the consideration of legal action. Indicators for transitioning towards legal collection include lack of communication, continuous failure to honor commitments, or intentional avoidance by the debtor. Opting for legal recourse should be a well-thought-out final option, due to the considerable costs and duration associated with legal actions, and is generally considered after out-of-court remedies have been fully explored.

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The debt collection process in Indonesia

Grasp debt collection in Indonesia through our simplified guide. From friendly reminders to legal enforcement, we'll break down every step. Opting to delegate your debt recovery task? Let us, at Debitura, aid you every step of the way. Dive into our "Ultimate Guide to Debt Collection in Indonesia".

Amicable Debt Collection in Indonesia

An overview of pre-legal, or amicable, debt collection in Indonesia, where agencies strive to reconcile debts without resorting to court. This streamlined, less convoluted method serves to expedite the process efficiently. Explore the sequence, tactics, and vital aspects to navigate this system effectively.

Amicable Collection - Key Takeways
  • Legal Framework: Governed by the Indonesian Civil Code, focusing on negotiations and agreements.
  • Statute of Limitations: Set at five years for most debt collection claims, with specific actions able to reset this period.
  • Interest and Fees: Must align with ethical guidelines, avoiding usury or unfair practices despite lack of explicit caps.
  • Essential Documents: Clear contractual agreements and proof of debt are critical for supporting the creditor's claim.
  • Costs: Generally less expensive than litigation, including potential interest or agency fees.
  • Timeline: Varies based on various factors but is typically faster than judicial proceedings.
  • Preferability: Advisable for preserving relationships or when costs of legal action are unjustifiable.
  • Transition to Judicial Recovery: Recommended if amicable efforts fail or the statute of limitations is near.
  • Communication Guidelines: Requires ethical, respectful communication within stipulated hours to avoid undue disturbance.
  • Rights and Obligations: Clear, consensual repayment agreements are vital, with respect for both parties' rights.

Navigating Out-of-Court Debt Collection in Indonesia

Out-of-court debt collection emphasizes a strategy centered on relationships to recuperate owed amounts, focusing on understanding and negotiation rather than dispute. This approach seeks to keep a constructive connection between the creditor and debtor, aiming for agreements that acknowledge the debtor's circumstances while ensuring the creditor's retrieval of funds. It adopts a cooperative stance, ideal for undisputed claims, sidestepping the intricacies and expenses associated with legal proceedings.

We advise beginning with out-of-court debt collection for straightforward claims not entangled in legal complexities.

The Crucial Role of Collection Agencies in Out-of-Court Recovery in Indonesia

In the context of out-of-court recovery, collection agencies play a crucial role, especially when creditors are short on time or lack the necessary expertise for effective debt recovery. Firms such as Debitura provide targeted services, commencing with accurate debt and debtor identification, and proceeding with engagement through reminders or official communications. Their neutral perspective, free from emotional involvement, often results in more effective debt resolution, offering fair, professional arbitration.

Benefits of Out-of-Court Debt Settlement

Choosing out-of-court settlement is advantageous for both sides; creditors avoid the expenses associated with legal proceedings and maintain important business relationships thanks to the process's respectful approach. Debtors benefit from more feasible repayment options, alleviating financial pressure and promoting goodwill towards the creditor. This method highlights mutual respect and empathy, fostering an environment conducive to meeting financial commitments.

Shifting from Out-of-Court to Legal Debt Collection

Although out-of-court collection presents numerous advantages, certain conditions may warrant the consideration of legal action. Indicators for transitioning towards legal collection include lack of communication, continuous failure to honor commitments, or intentional avoidance by the debtor. Opting for legal recourse should be a well-thought-out final option, due to the considerable costs and duration associated with legal actions, and is generally considered after out-of-court remedies have been fully explored.

Explore our step-by-step guide for amicable debt collection

Step 1: Laying the Groundwork for Debt Recovery in Indonesia

Effective debt collection in Indonesia begins with meticulous preparation. Understanding the nuances of local law and ensuring all documentation is in order significantly increases the chances of successful debt recovery, reducing potential disputes and legal challenges.

Verify the Validity of Payment Terms

Payment terms establish the timeline and conditions under which payments should be made for goods or services. In Indonesia, the most common payment terms for B2B (Business-to-Business), B2C (Business-to-Consumer), and B2G (Business-to-Government) transactions include:

  • Immediate Payment: Payment is made at the time of purchase or delivery of services.
  • Net 30 Days: Payment is due within 30 days from the invoice date.
  • 2/10 Net 30: A 2% discount is offered if payment is made within 10 days; otherwise, the full amount is due by the 30th day.
  • End of Month (EOM): Payment is due at the end of the month in which the invoice was issued.

Under Indonesian law, payment terms must comply with the regulations set by the Financial Services Authority (OJK) and the Ministry of Finance. Specifically, Indonesian commercial laws regard tax invoices as crucial evidence of transactions for VAT (Value Added Tax) purposes. Formal agreements and invoices should clearly state payment terms to avoid misunderstandings and disputes.

Check the Statute of Limitations

The statute of limitations refers to the maximum time after an event within which legal proceedings may be initiated. In Indonesia, the general statute of limitations for debt claims is 30 years, except for claims related to land, which have a limitation period of five years. Notably, the limitation period can be interrupted by:

  • Acknowledgment of the debt by the debtor.
  • A legal action or lawsuit filed by the creditor.

To interrupt the statute of limitations, a creditor can send a formal notification letter to the debtor. This letter should include:

  • The amount of debt owed
  • Reference to the original agreement or invoice
  • A clear statement that the creditor is preserving their rights to the debt
  • Date and signature

Such a letter must be delivered in a manner that can be traced and verified, ensuring the debtor has received the notice.

Assembling Essential Documents

To effectively collect a debt in Indonesia, the following documents are generally required:

  • Identity Card of the debt collector for verification.
  • Professional Certification to prove the debt collector’s qualifications.
  • Assignment Letter from the creditor authorizing the collection.
  • Fiduciary Guarantee Certificate, if applicable, to validate secured debts.

Maintaining a comprehensive communications record with the debtor is also crucial. This includes keeping copies of all written correspondence, records of telephone conversations, and any responses from the debtor. Utilizing registered mail or electronic communication with read receipts can provide proof of receipt and content of communication.

Preparing your case meticulously with due attention to Indonesian law and proper documentation will establish a strong foundation for successful debt collection.

Step 1: Laying the Groundwork for Debt Recovery in Indonesia

Thorough preparation is the cornerstone of successful debt collection in Indonesia. By fully understanding the legal and procedural framework, creditors can navigate the pre-legal collection process efficiently, enhancing the likelihood of debt recovery while minimizing financial and reputational risks.

Verify the Validity of Payment Terms

Payment terms are crucial in determining the timeline and conditions under which payments must be made. In Indonesia, common payment terms across B2B, B2C, and B2G transactions include immediate payments, net 30 days, 2/10 net 30, and end of month (EOM). These terms are important for ensuring clarity between parties and planning cash flows. Notably, under Indonesian commercial law, payment terms and the issuance of tax invoices are regulated to confirm transactions for VAT purposes. It's essential for formal agreements and invoices to unambiguously state these terms to prevent disputes and establish a clear basis for debt collection.

Check the Statute of Limitations

The statute of limitations is a legal concept defining the time within which actions must be taken to enforce rights or seek redress following a breach of contract or wrongdoing. In Indonesia, the general limitation period for claims is 30 years, adjusting under specific circumstances such as land-related debts. This period can be interrupted by actions like acknowledgment of debt by the debtor or initiation of legal proceedings by the creditor. To interrupt the statute, creditors can send a formal notification, specifying the debt amount, referencing the original agreement, and asserting the preservation of rights over the debt, ensuring that the document's delivery is verifiable.

Assembling Essential Documents

Gather crucial documents including the identity card of the debt collector, their professional certification, an assignment letter from the creditor, and the fiduciary guarantee certificate, if relevant. These documents legitimize the debt collection process and support legal and ethical compliance. Documenting all communications with debtors meticulously, utilizing traceable delivery methods for written correspondence, and recording telephonic or electronic communications, are critical steps. This creates a robust evidence trail that can be invaluable in subsequent collection stages or legal processes.

By meticulously preparing your case, following Indonesian laws, and ensuring all documentation is in order, you solidify your stance for the amicable recovery of debt. Thorough preparation not only streamlines the collection process but also significantly increases the likelihood of successful recovery, marking a positive step towards safeguarding your business interests in Indonesia.

Step 2: Initiating a Call with Your Debtor

One of the pivotal aspects of amicable debt collection involves establishing personalized communication channels with debtors. Engaging in direct dialogue is not just effective but crucial for cultivating a constructive relationship. Among various channels, phone calls stand as the most efficacious, fostering an environment conducive to developing mutually agreeable solutions.

Preparing to Call Your Debtor:

  • Understanding Legal Frameworks: Familiarizing yourself with the regulations governing extrajudicial debt collection communication in Indonesia is paramount. This preparation ensures that all interactions with your debtor remain within the bounds of transparency and fairness, wholly respecting the legal groundwork laid by Indonesian authorities.
  • Documenting Debt Details: Before initiating the call, it's essential to compile all relevant information regarding the debt. This data comprises the debt's origin, a detailed breakdown of amounts due (principal, interest, fees), and a log of past communications. Having this information at your fingertips simplifies the process and supports transparency.

Best Practices When Calling Your Debtors:


  • Maintain a respectful and professional tone throughout the conversation to promote understanding and empathy towards the debtor's situation.
  • Clearly articulate the purpose of the call, elucidating the debt details without ambiguity.
  • Seek amicable resolutions, favoring payment arrangements aligned with the debtor's financial realities.


  • Avoid using aggressive or menacing language, ensuring the dialogue remains free of harassment accusations.
  • Steer clear of imposing unrealistic demands or making assurances that exceed the legal parameters set by Indonesian regulations.

Documenting the Call:

  • Keeping Records: The importance of capturing the nuances of the conversation cannot be overstated. Detailed documentation of the dialogue serves a dual purpose: it not only reinforces the transparency of the process but also prepares the groundwork should the case escalate to judicial proceedings.
  • Follow-up Communication: Subsequent to the call, it's wise to encapsulate the discussion's key points and any agreed resolutions in a written communication to the debtor. This documentation solidifies the outcomes and maintains a clear trail of interaction, pivotal for upholding accountability and clarity in amicable debt collection.

Through our decade-long experience, Debitura underscores the criticality of personalized, respectful, and legally compliant communication in the debt collection process. Embedding these practices into your strategy not only enhances the prospects of debt recovery but also preserves the dignity and rights of all parties involved.

Step 3: Implementing Payment Reminders with Efficiency (Free Template Available)

In the journey of debt collection, sending a payment reminder acts as a gentle nudge to debtors, reminding them of their obligations in a professional manner. This step, crucial in the amicable collection phase, allows for the preservation of client relationships while ensuring due diligence in debt recovery practices in Indonesia.

Understanding Payment Reminders in Indonesia

Within the Indonesian debt collection framework, a payment reminder serves as an informal notice sent to the debtor, emphasizing the outstanding payments. It bridges the gap between a casual reminder and a formal dunning process, adhering to the local regulations and ethical standards guiding debt recovery efforts.

Legal Framework for Payment Reminders

The Indonesian Civil Code and local debt collection guidelines underline the necessity of adhering to a formal yet respectful approach when issuing payment reminders. It is imperative to consider the debtor's default status, which becomes officially recognized upon the failure to meet the payment deadline.

Preparing to Send a Payment Reminder

To ensure compliance with Indonesian law, certain crucial details must be included in the payment reminder:

  • Debtor's full name and contact information
  • Invoice number and date of issuance
  • Due date and amount outstanding
  • Previous communication attempts regarding the debt

Additionally, it's essential to verify the accuracy of the debt claimed, ensuring all communications are transparent and precise.

Crafting an Effective Payment Reminder

The tone and wording of the reminder should be professional yet considerate, fostering a positive relationship with the debtor. To construct an effective reminder, the following details should be prominently included:

  • A polite introduction and reminder of the overdue payment
  • Specific details about the debt, including invoice number and outstanding amount
  • A clear call to action, instructing the debtor on how to settle the debt
  • Information concerning available payment methods

Sending the Reminder

When it comes to dispatching the payment reminder, options include email and postal mail, each with its advantages. Email is instant and provides a digital footprint, while postal mail offers a tactile reminder and is beneficial for verifying the delivery in legal scenarios.

Follow-Up After Sending a Reminder

If the initial reminder goes unanswered, it's advised to follow up with subsequent reminders, steadily increasing in urgency. Should the debtor respond but be incapable of full payment, negotiation for installment plans becomes a viable solution, maintaining good faith while ensuring debt recovery.

Documentation and Record-Keeping

Meticulous documentation of all interactions with the debtor is crucial, including dates, communication methods, and responses. This practice not only supports the legal integrity of the collection process but also provides an invaluable log for assessing the effectiveness of various communication strategies.

At Debitura, we understand the nuances of debt collection in Indonesia. By adhering to these guidelines and using the free payment reminder template we provide, you can ensure your collection efforts are respectful, compliant, and ultimately more successful.

Free Payment Reminder Template - Indonesia

Dear [Debtor's Name],

I hope this message finds you well. We are writing to remind you of an outstanding payment for [Invoice Number] issued on [Date]. Despite our previous communications, we have yet to receive the payment of IDR [Amount] that was due on [Due Date].

We understand that oversights happen and circumstances may arise, but we kindly request that you address this matter at your earliest convenience. Please find the details of the invoice below:

  • Invoice Number: [Invoice Number]
  • Issue Date: [Date]
  • Due Date: [Due Date]
  • Amount Due: IDR [Amount]

To make the payment process as smooth as possible, you can use one of the following payment methods:

  • Bank Transfer to [Bank Account Details]
  • Online Payment via [Online Payment Platform]

If you have already made the payment, please disregard this reminder and accept our thanks. However, if there are any issues or concerns about this payment, we encourage you to contact us immediately to discuss a suitable arrangement.

Your prompt attention to this matter will not only help in settling this obligation but also ensure that your services with us remain uninterrupted. We value our relationship and are keen to resolve this amicably.

Thank you for your cooperation and understanding.


[Your Name or Department]
[Your Company]
Contact: [Your Contact Information]

Step 4: Send a Letter of Formal Notice

Demand letters play a crucial role in debt collection, serving as a formal notice to debtors about their outstanding payments.

Legal Foundations for Demand Letters

In Indonesia, the validity of a demand letter, or "Surat Tuntutan Pembayaran Terlambat," hinges on legal criteria defined under Indonesian law. Such criteria include providing factual information regarding the goods or services and adherence to the initial agreement. A demand letter legally formalizes the creditor's claim against the debtor, detailing the amount owed and the deadline for payment, thereby preceding more severe legal actions if ignored. The inclusion of legal references enhances the seriousness of the letter and clarifies the legal standing for both parties involved.

Preparing a Demand Letter

To prepare a demand letter, creditors should first consolidate all pertinent details, including the debt amount, previous communications, and agreed payment terms. It is essential to reference the initial contract or agreement, emphasizing the debtor's obligation to pay by a specified date. Verification of the debtor's current contact information ensures the letter reaches the intended recipient without delay. A demand letter prepared with precision not only underscores the creditor's commitment to recovering the debt but also sets the stage for potential legal proceedings.

Crafting an Effective Demand Letter

An effective demand letter must clearly and concisely outline the payment obligations, including the specific amount due and the deadline for settlement. It should express the serious nature of the situation while maintaining a professional and respectful tone to preserve goodwill. Incorporating references to prior attempts to resolve the payment and highlighting the consequences of non-payment, including potential legal actions, can motivate the debtor to fulfil their obligations. Formulating such letters with care reinforces the creditor's position, ensuring that the debtor fully grasits the implications of further delay.

How to Send and Follow Up on a Demand Letter

To ensure receipt, sending the demand letter via a method that provides proof of delivery, such as registered mail or courier service, is crucial. Documenting this step is essential for any potential legal processes. Following up on the letter, if there is no response within the set timeframe, signals the creditor's seriousness about pursuing the debt. A structured follow-up plan, escalating from reminders to potential legal actions, systematically reinforces the creditor's resolve to recover the owed amount while granting the debtor opportunities to rectify the situation.

Step 5: Calculate Collection Costs and Late Payment Fees

Detailed Overview of Permissible Fees

In the landscape of debt collection in Indonesia, creditors can impose certain fees to cover costs associated with delayed payments and the collection process. Here is an overview of permissible fees:

  • Late Payment Fees: Charges applied due to the delay in payment, aiming to compensate for the inconvenience and potential financial impact on the creditor.
  • Debt Collection Fees: Costs that may be incurred if a third-party agency is enlisted to assist in the recovery of debts.

It’s important to note that while the legal framework provides for the operation of debt collectors and outlines ethical guidelines, there is a lack of detailed information on specific costs and fees. This means that any fees charged must align with general legal standards and contractual agreements between parties. Typically, differences in fee structures between Business-to-Business (B2B) and Business-to-Consumer (B2C) transactions are subject to the terms agreed upon within individual contracts, emphasizing the need for clarity and agreement on potential fees during the contract formation phase.


For illustration, let’s consider a debt where the principal amount is 5000 EUR.

  • Assuming the creditor and debtor have agreed upon a late payment fee of 2% of the overdue amount per month, and the payment is 3 months late, the late payment fee would be 300 EUR (2% of 5000 EUR = 100 EUR per month).
  • If the services of a debt collection agency are required, and the agency charges a fixed fee of 10% of the debt recovered, this would add an additional 500 EUR to the costs (10% of 5000 EUR).

Total additional charges on the debt would therefore be 800 EUR. It is crucial to have these potential fees explicitly outlined in the contract to avoid surprises and ensure both parties are on the same page regarding possible additional costs.

Regulatory Framework and Limitations on Fees

The regulatory framework in Indonesia provides the basis for the operation of debt collectors and outlines ethical guidelines for collection practices; however, detailed regulations on the specific costs and fees that can be added to the debt amount are not extensively provided. As a result, any collection costs and late payment fees must be justifiable, transparent, and agreed upon between the creditor and debtor to ensure compliance with ethical practices and legal standards. Furthermore, stakeholders should keep abreast of any statutory updates or regulatory changes that may impact the permissible fees.

Through adhering to these guidelines, creditors safeguard their operations against potential legal challenges while ensuring fair treatment and protection of debtors’ rights. As debt collection specialists with extensive experience in Indonesia, Debitura champions transparency, ethical practice, and compliance in all aspects of debt recovery, offering peace of mind to both creditors and debtors.

Step 6: Calculate Interest Rates

Understanding and accurately applying interest rates for late payments is a critical aspect of debt collection in Indonesia. Whether it’s a B2C (Business-to-Consumer), B2B (Business-to-Business), or B2G (Business-to-Government) transaction, the statutory interest rates set forth by Indonesian regulations serve as the framework for calculating late payment interest. The ability to charge interest on top of the principal amount owed is not only a deterrent against late payments but also compensates creditors for the delay. This section aims to provide clear and actionable guidelines to ensure that creditors can enforce late payment interests fairly and within the bounds of Indonesian law.

Statutory Interest Rates for Late Payments

  • B2C Transactions: The specific statutory interest rates for consumer debts are not directly detailed within Indonesian regulations. However, it generally follows the Bank Indonesia (BI) Reference Rate or agreements among parties.
  • B2B Transactions: Like in B2C, B2B transactions do not have a set statutory rate explicitly mentioned. The prevailing practice includes reference to the BI Reference Rate or pre-agreed terms between the business entities involved.
  • B2G Transactions: Statutory interest rates for late payments to and from government entities typically align with those for B2C and B2B, relying on the BI Reference Rate or specific contractual agreements.

Calculation of these interest rates involves the principal amount, the applicable interest rate per agreement or by reference to the BI Rate, and the duration of the delay. Parties can mutually agree on different rates as long as they remain lawful and not deemed usurious or unfair.

Example: Calculating Interest on B2B Debt

Consider a scenario where a business owes another business (B2B) a principal amount of 5000 EUR, and the agreed-upon interest rate for late payments is equivalent to the BI Reference Rate + 2%. Assuming the BI Rate at the time of computation is 4.5%, the total interest rate applied would be 6.5%. If the payment is delayed by three months, the interest calculation would be as follows:

Interest Calculation: (5000 EUR * 6.5% * 3) / 12 = 81.25 EUR

Thus, the debtor would owe an additional 81.25 EUR on top of the principal amount for the three-month delay.

Regulatory Framework and Limitations on Interests

While the flexibility offered by Indonesian regulations regarding interest rates provides a base for creditors to compensate for late payments, it is essential to remain within ethical and legal boundaries. The legal caps and regulatory guidelines ensure that these interest rates remain fair and not exploitatively high. It is imperative for parties to adhere to agreed terms embedded within contractual agreements, which should be made in compliance with Indonesian law to avoid legal consequences.

Given the lack of detailed regulations specifying maximum allowable interest rates, it is advised to keep interests reasonable and justify any charges beyond the BI Reference Rate. In all instances, the imposition of interest must align with the principles of fairness, seeking to balance the rights of creditors with the welfare of debtors.

Based on our decade of experience, Debitura recommends consulting with a legal professional familiar with Indonesian law to ensure compliance and to tailor interest rate terms fitting both parties' interests.

Step 7: Settle the Debt with a Payment Plan

Offering a settlement or payment plan often stands as a pragmatic approach towards amicable debt recovery. It not only facilitates a smoother negotiation path but can also serve as a demonstration of goodwill, further encouraging the debtor to fulfill their obligations. Based on Debitura's vast experience in Indonesian debt collection, this step-by-step guideline underlines the importance of establishing a legally compliant and mutually beneficial payment plan.

Formalities of a Payment Plan

Acknowledging the legal underpinning offered by Article 1754 of the Indonesian Civil Code (KUHPerdata), it's crucial for creditors to recognize that a well-structured payment plan can effectively reset the statute of limitations on the debt, thereby preserving their right to enforce it. Here are essential formalities to ensure your payment plan stands solid both in intent and legality:

  • Documented Agreement: Ensure all terms are laid down in a written format, duly signed by both parties. This documentation acts as proof of the debtor's acknowledgment of the debt and their consent to the repayment terms.
  • Clear Terms: Specify the loan amount, installment amounts, payment due dates, and any interest or fees applied, in clear and unambiguous language.
  • Legal Compliance: Your agreement should adhere to Indonesian civil law requirements, including mutual consent, a lawful cause, and a specific object of the agreement.
Icon - Elements Webflow Library - BRIX Templates

Free Demand Letter Template

Free Demand Letter Template Indonesia

Jakarta, [current date]

[Debtor's Address]

[City, Postal Code]

Dear [Debtor's Name],

We are writing this letter in regard to the overdue payment referenced in Invoice No. [Invoice Number], dated [Invoice Date], for [Description of Goods/Services]. As of today, the outstanding balance of IDR [Amount Owed] remains unpaid. Despite our previous communications and generous extensions, we have not received this payment nor any explanation for the delay.

Please be advised that this letter serves as the final reminder for the settlement of the aforementioned debt. According to the initial agreement dated [Agreement Date], you are obligated to pay the specified amount by [Original Due Date]. Failure to meet these terms constitutes a breach of our agreement and may provoke legal actions to recover the owed amount.

We kindly request that you settle the overdue payment by [Extended Due Date]. If the payment is not received by this date, we will be forced to initiate legal proceedings to recover the debt without further notice to you. This action may include filing a lawsuit for breach of contract which could result in additional costs for interest, legal fees, and damages.

To avoid such proceedings, please make the payment directly to the following bank account:

Account Name: [Account Name]

Account Number: [Account Number]

If you are facing financial difficulties or if there is another reason why you have been unable to pay your invoice, we encourage you to contact us at [Creditor's Phone Number] or [Creditor's Email] by [Reply Deadline] to discuss a potential payment plan.

We hope for your immediate attention to this matter and expect a prompt resolution to avoid any unpleasant legal actions. Please consider this letter as a serious demand for payment and take the necessary steps to rectify this situation promptly.

Yours sincerely,

[Your Position or Creditor's Position]

[Company Name]

[Company Address]

[City, Postal Code]

[Your Email]

[Your Phone Number]

Understanding Retention of Title and Reclamation Rights in Indonesia

Understand how the Indonesian legal system ensures protection to sellers through retention of title and the reclamation right. Embedding these clauses in your contracts is a potent tool to secure your financial interests until full payment for goods is secured.

Retention of Title in Indonesia

In the landscape of trade and commerce in Indonesia, the practice of retaining title—also known as Retention of Title (RoT)—offers a safeguard mechanism for sellers against unpaid debts. This legal principle allows the seller to retain ownership over goods until full payment has been made by the buyer. This ensures a level of security for creditors that extends beyond traditional debt collection procedures and mitigates risk in transactions.

Under Indonesian law, the implementation of retention of title clauses is governed by the principles of contractual freedom; however, it requires explicit agreement between the parties involved. These clauses need to be precisely drafted and incorporated into the sales contract or the terms and conditions of the sale. Failure to clearly specify these terms can result in the clause being unenforceable, potentially leaving the seller vulnerable.

Retention of title is particularly advantageous in scenarios where debt collection becomes inevitable. Should a buyer default on their payment obligations, the retention of title clause provides a straightforward legal basis for the seller to reclaim the goods. This is facilitated by the fact that, until full payment is received, the goods legally remain the property of the seller. This stands in contrast to a scenario where ownership transfers upon delivery, leaving the seller to navigate the more complex and time-consuming process of debt collection through legal means.

It’s vital to note, however, that the effectiveness of retention of title clauses may be impacted by Indonesian bankruptcy law. In cases of bankruptcy or insolvency, the overall rights of creditors and the treatment of unsecured debts can complicate the recovery of goods unless the retention of title has been appropriately established and documented.

To maximize the protection provided by retention of title in Indonesia, sellers should ensure that their contractual documentation is robust, clearly worded, and compliant with local laws. It is advisable to consult with legal experts specializing in Indonesian commercial law to draft and review these critical clauses. By implementing clear retention of title agreements, sellers can significantly enhance their security in transactions, improving their financial stability and reducing the risk associated with unpaid debts.

Based on our decade of experience at Debitura, we've observed that retention of title, when effectively utilized, can be a potent tool in the creditors' arsenal, particularly in a challenging and dynamic market like Indonesia. By understanding and applying these legal provisions, creditors can better navigate the intricacies of debt collection, ensuring their operations remain resilient and profitable.

Right of Reclamation in Indonesia

Understanding the right of reclamation in Indonesia is crucial for creditors aiming to navigate the complex landscape of debt collection. This legal framework provides a safety net for sellers, offering a mechanism to reclaim goods in the event of non-payment by the buyer. The right of reclamation is anchored in Indonesian law, particularly where retention of title (RoT) clauses are concerned. These clauses ensure the seller retains ownership of the goods until payment is fully completed, offering a layer of protection in debt-related disputes.

In Indonesia, the implementation of RoT and right of reclamation clauses must be clear, well-documented, and in compliance with Indonesian contract law. These clauses act as a powerful tool for creditors, especially in situations where a debtor is unable to fulfill their payment obligations. Properly structured, these clauses allow the creditor not only to seek legal redress for the unpaid goods but also to repossess the goods as a form of compensation.

However, the effectiveness of RoT and reclamation rights hinges on the precise wording in contracts and agreements. It's imperative for creditors to explicitly outline the conditions under which ownership is transferred—or retained—in case of payment defaults. This includes specifying the actions that can be taken, the timeline for reclamation, and the process for enforcing these rights through the Indonesian legal system if necessary.

The implications of these rights on the debt collection process are significant. When a debtor defaults, the creditor can potentially avoid lengthy and costly legal processes by reclaiming goods directly, provided that their rights are adequately protected in the sales agreement. It's a straightforward means of mitigating losses stemming from unpaid debts. Yet, it's essential for creditors to consult with local legal experts to ensure that their contracts are enforceable under Indonesian law and that they're prepared to navigate potential challenges in the reclamation process.

In conclusion, the right of reclamation under Indonesian law serves as a crucial protective measure for sellers in debt collection scenarios. By leveraging RoT clauses effectively, creditors can safeguard their interests and enhance their chances of recovering debts. Debitura, with its decade-long experience in the Indonesian market, underscores the importance of meticulous contract drafting and a deep understanding of local legal nuances in harnessing the full potential of reclamation rights in debt recovery strategies.

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Find a Debt Collection Lawyer

Finding the right lawyer for judicial debt collection is crucial. Debitura offers a streamlined 'Find a Lawyer' service, drawing from our network of 500+ local attorneys across the globe. Describe your needs and quickly get tailored proposals from up to three top lawyers.

Your Benefits at a Glance:

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Explore the profiles of our esteemed local partners below and take the first step towards securing your legal advantage with Debitura.

Multivision Tower, 5th Floor, Jl. Kuningan Mulia Lot. 9B, Komplek Kuningan Persada, Jakarta Selatan, 12980
Debt Recovery Indonesia

Debt Recovery Indonesia is a service brand of HADS Partnership which was established in 2005. We focus to help the company in collecting and returning commercial outstanding receivable against bad customer with the most practical, legal and ethic way.

Legal collection
Debt enforcement
Law firm
Graha Arda, Lt. 5, RT.5/RW.2, Kuningan, Kecamatan Setiabudi, Kota Jakarta Selatan, Daerah Khusus Ibukota Jakarta 12910
PT. Collectius Asset Management

South East Asia’s leading Fintech company in debt management services. Collectius uses technology and empathy to create the best customer experience and operational excellence to support our customers in becoming debt free. Together with IFC (a member of the World Bank Group and minority shareholder in Collectius), Collectius is actively working on improving industry practices and promoting best resolution practices.

Legal collection
Debt enforcement
Debt collection agency
Gedung Graha Krama Yudha Lt. 4 Unit B Jl. Warung Jati Barat No. 43, Jakarta Selatan, DKI Jakarta, Indonesia
Sarvasuksma Attorneys at Law

Sarvasūkṣma is an Indonesian law firm specializing in white-collar crime, corporate and bank finance, capital market and dispute resolution. Our lawyers have been working with domestic and international clients for more than a decade and are recognized by our clients as strategic partners with deep commercial instincts and a commitment to creatively anticipating their needs and delivering excellence in everything we do. Recently, Sarvasūkṣma is being selected as one of Indonesia’s Firms to Watch by ALB Thomson Reuters and a finalist of Dispute Resolution Boutique Law Firm of the Year for the ALB Indonesia Law Award 2022.

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Debt enforcement
Law firm
Menara Cakrawala 12th Floor, Unit 1205A, Jl. M.H. Thamrin No.9, RT.002 / RW.001, Kelurahan Kebon Sirih, Kecamatan Menteng, Kota Jakarta Pusat 10340 - Indonesia.
Prayogo Advocaten Law Firm (DHPLawyers)

PRAYOGO ADVOCATEN is an Indonesian law firm that focuses on offering effective and up-to-date legal services to both individuals and organizations. PRAYOGO ADVOCATEN can offer the best resources and referrals, as well as be by your side in situations when you are in way over your head.

Legal collection
Debt enforcement
Law firm
Firma Hukum Amir Hamzah & Rekan Law Office RUKO SENTRA NIAGA SQUARE JL. SENTRA NIAGA BLOK 8A/29 KOTA JABABEKA - CIKARANG BEKASI - JAWA BARAT. 17530 Phone : +62-21-8932-5608
Law Office of Amir Hamzah & Rekan

Amir Hamzah & Rekan Law Office ("AHR") is a commercial law office based in West Java, Indonesia, focusing on cross-border corporate commercial and business registration, trade and investment, commercial litigation, IP protection, labour and employment, tax advisory & compliance and customs law, etc.

Legal collection
Debt enforcement
Law firm
Trust Building Jl. Kramat II No. 52A, Kwitang, Jakarta Pusat, DKI Jakarta 10420, Indonesia
Lawyerindo Legal and Business Support Center

Lawyerindo is the one-stop shop platform for all necessary legal and business support for businesses. We are committed to rendering client-oriented, high-standard services with the values of excellence, integrity, and reliability.

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Debt enforcement
Debt collection agency
Summitmas I, 16th & 17th floors Jl. Jend. Sudirman Kav. 61-62 Jakarta 12190 Jakarta, Indonesia
Makarim & Taira S.

Established in 1980 by two Harvard graduates, Nono Anwar Makarim and Frank Taira Supit, Makarim & Taira S. (M&T) is one of Indonesia’s leading business law firms, offering a full range of corporate, banking, litigation and specialist legal services to national and international clients.

Legal collection
Debt enforcement
Law firm
DHP Law Firm

DHP Law Firm is a well-known law firm based in Jakarta, Indonesia, with over 25 years of experience in providing legal services to clients from various industries. Our team consist of experienced lawyers that committed to delivering effective and efficient legal solutions to meet our client’s need.

Legal collection
Debt enforcement
Law firm
Tower 88, 10th floor, Jl. Kasablanca Kav 88, Jakarta Selatan, Indonesia
Soengkar & Partners

Indonesian law firm with global partnership

Legal collection
Debt enforcement
Law firm
Equity Tower 37th Floor, SCBD, Jl. Jend. Sudirman kav 52-53, Kota Jakarta Selatan, Daerah Khusus Ibukota Jakarta 12190 Jakarta Selatan, Indonesia
RSBP & Co. Law Firm

Discover law firm Jakarta Selatan, RSBP & Co. Est. 2022, where legal prowess meets exceptional service. Trust our dedicated team of attorneys to provide intelligent solutions and personalized guidance for your unique legal challenges.

Legal collection
Debt enforcement
Law firm

Grasping Debt Enforcement in Indonesia's Legal Framework

Embarking on the judicial debt collection journey in Indonesia equips you with the power for debt enforcement. Proctored by official bailiffs, this process facilitates the seizure of a debtor's assets to satisfy your claim. This guide will illuminate the legal pathways for adeptly enforcing your claim in Indonesia.

Debt Enforcement - Key Takeways
  • Court Judgment Necessity: Court orders are required for formal debt enforcement proceedings in Indonesia.
  • Authorized Enforcers: Bailiffs (juru sita) are officially authorized to enforce debt, requiring legal documentation.
  • Bailiff Act and Regulations: Debt enforcement and bailiff activities are governed under Indonesian Civil Procedure Code and specific laws protecting debtor rights.
  • Role of Bailiffs: Bailiffs execute court orders, seize assets, and are central to the debt recovery process, with adherence to legal boundaries.
  • Financial Considerations for Creditors: Hiring bailiffs incurs costs, but they play a crucial role in ensuring ROI through effective debt recovery.
  • Debtor Asset Tracing: Businesses must legally trace debtors and evaluate hidden assets before initiating enforcement to identify recoverable debts.
  • Debt Enforcement Timeline: The process typically spans several months, depending on case complexity and judicial efficiency.
  • Asset Seizure Framework: Involves detailed legal procedures, ensuring certain types of debtor assets can be seized under court order.
  • Salary Attachments: Legal provisions exist for garnishment, emphasizing protections for debtors' basic financial needs.

The Role of Bailiffs in Debt Enforcement

In Indonesia, the enforcement of debt through judicial processes often involves the critical role of bailiffs (juru sita). Their responsibilities extend from notifying debtors about enforcement actions to executing asset seizures and orchestrating the auction of these assets to repay debts. Here are key insights into their role:

  • Bailiffs execute forced collection measures for outstanding taxes and other financial dues without a court order, as mandated by Law No. 19 of 1959.
  • Their duties include seizing both movable and immovable property of the debtor, conducting auctions of seized assets, and, if necessary, implementing forced detention of taxpayers who fail to meet their tax obligations.
  • Forced detention is a serious measure applied under specific conditions, highlighting the severe implications of failing to meet debt obligations in Indonesia.

The Process of Debt Enforcement

Debt enforcement in Indonesia intertwines civil and criminal legal frameworks, highlighting a nuanced approach to debt recovery. From initiating civil suits to engaging in pre-enforcement actions, the process is thorough and multifaceted:

  • Loan agreements and breaches of contract are primarily governed by the Indonesian Civil Code (KUHPerdata), necessitating civil suits for breach of contract at District Courts.
  • In instances of alleged fraud or embezzlement, criminal charges can be filed, though imprisonment for inability to fulfill debt obligations is prohibited under Article 19(2) of the Human Rights Law No. 39/1999.
  • Misuse of law enforcement in debt collection is explicitly prohibited, ensuring protection against unethical debt recovery practices.

Legal Framework for Bailiff Operations and Debt Enforcement

The operational and ethical guidelines of clerks and bailiffs in the debt enforcement process adhere to a strict ethical code, as outlined by the Tembilahan District Court. This ensures professionalism and integrity in their conduct:

  • The ethical code aims to maintain the honor, dignity, and self-esteem of clerks and bailiffs, ensuring fair and unbiased service to all parties involved in the judicial process.
  • Clerks and bailiffs assist the judiciary in preparing accurate court records, serving the public diligently, and fostering trust in the judicial system.
  • Sanctions are recommended by the Honor Council of Clerks and Bailiffs for those who violate the ethical code, emphasizing accountability in their operations.

Pre-Enforcement Actions

Prior to engaging in the formal judicial process of debt enforcement, there are several pre-enforcement actions and strategies that can be utilized. These preliminary steps are crucial for ensuring that all parties are aware of the impending procedures and understand the legal consequences of failing to meet debt obligations:

  • Sending a formal warning or demand letter to the debtor, offering a final opportunity to settle the debt willingly.
  • Engaging in negotiation or mediation to find an amicable solution that serves the interests of both creditor and debtor.
  • Conducting a thorough investigation into the debtor’s assets, to prepare for potential asset seizure or garnishment should legal enforcement become necessary.

Based on our decade of experience, Debitura understands the complexities of the Indonesian debt enforcement landscape. Engaging in these pre-enforcement actions not only complies with Indonesian regulations but also fosters a professional and respectful process for debt recovery.

Explore the cost and time frame for debt enforcement

Time Frame for Debt Enforcement in Indonesia

Debt enforcement in Indonesia involves a multi-step process that includes both pre-legal and legal actions, following a structured timeframe. Navigating through the Indonesian legal framework requires understanding and patience, as the process involves several stages, from sending demand letters to obtaining and enforcing court judgments.

  • Demand Letter (Somasi): 1-14 days after the debt falls due. This is the initial step where creditors officially notify the debtor of their obligation and intent to pursue legal actions if the debt is not settled.
  • Negotiation and Settlement: Variable, can last from a few days to several weeks, depending on the willingness of both parties to come to an agreement.
  • Filing a Lawsuit: Upon failure to reach an agreement, the next step is filing a lawsuit at the District Court. Preparing and filing can take approximately 1-2 months.
  • Court Proceedings: 6-12 months, but can extend depending on the complexity of the case and backlog in the court system.
  • Obtaining a Court Judgment: After the court proceedings conclude, obtaining a final judgment may take an additional few weeks to a month.
  • Enforcement of the Judgment: Once a favorable judgment is obtained, enforcing it can take another 2-6 months, involving bailiffs for execution against the debtor’s assets.

It’s crucial to note that while these timeframes provide a general guideline, the actual duration can vary significantly based on the complexity of the case, debtor’s response, and the efficiency of the legal system at any given time.

Cost of Debt Enforcement in Indonesia

The cost of debt enforcement in Indonesia varies widely, subject to the complexity of the case, the value of the debt, and the strategies employed in recovering the debt. Below is a breakdown of the types of costs typically involved in the debt enforcement process:

  • Legal Representation Fees: Variable, depending on the law firm and the complexity of the case. These can be fixed fees or percentage-based.
  • Court Fees: About 0.5% to 1% of the claim amount, with minimum and maximum limits set by the court.
  • Administrative Fees: Including costs for filing documents, photocopying, and other miscellaneous court expenses.
  • Bailiff Fees: For the enforcement of judgments, including asset seizure and auction. These fees can vary depending on the type and value of assets being seized.
  • Other Expenses: May include costs for asset valuation, storage, and transportation, especially in cases involving physical assets.

Given the variables involved, it’s advisable for creditors to consult with legal professionals to get an accurate estimate of the costs entailed in pursuing debt enforcement in Indonesia. Proactive negotiation and settlement efforts before entering the legal phase can also significantly reduce these costs.

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Seizure of Assets in Indonesia

Seizure of assets is a powerful tool in debt enforcement, allowing creditors to claim the debtor's property to settle unpaid debts. This procedure is typically initiated as a last resort when all other collection efforts, including negotiation and mediation, have failed. Seizure of assets underscores the seriousness of debt obligations and serves as a deterrent against non-payment.

  • When to Use: Employed after obtaining a court judgment against the debtor, indicating failure to satisfy debt obligations through voluntary means.
  • Advantages: Provides a tangible means for creditors to recover debts, discouraging intentional default by debtors.
  • Assets That Can Be Seized: Includes both movable (vehicles, inventory) and immovable property (real estate), financial assets (bank accounts), and income sources, depending on the court’s judgment.

Process of Seizure

  1. Court Judgment: Obtain a court order affirming the creditor's right to seize assets due to the debtor's failure to pay.
  2. Identification of Assets: Identify assets under the debtor's name that can cover the debt value.
  3. Request for Seizure: File a request with the court for the seizure of identified assets.
  4. Execution: Upon court approval, a bailiff executes the seizure of assets, with the process governed by regulations to ensure fairness and legality.
  5. Auction: Seized assets may be auctioned under court supervision, with proceeds going towards debt settlement.

It's crucial that creditors pursuing asset seizure in Indonesia adhere to strict legal procedures to ensure enforcement actions are both effective and legally compliant. Awareness of debtor rights and the ethical considerations involved in asset seizure is paramount in navigating the complex landscape of debt collection in Indonesia.

Garnishment Rights and Salary Attachments in Indonesia

Garnishment and salary attachments represent legal procedures allowing creditors to intercept portions of a debtor's income - most commonly wages - directly from the source (e.g., employer) to satisfy outstanding debts. This method is used when debtors consistently fail to meet payment obligations, offering an alternative means of debt collection.

  • When to Use: Utilized as a court-sanctioned method after other debt collection efforts have proved unsuccessful.
  • Advantages: Provides a continuous source of debt repayment and discourages evasion of payment obligations by the debtor.
  • Debtor Protection: Indonesian law includes provisions to protect debtors, ensuring a portion of income remains untouchable to maintain a basic standard of living.

Process of Garnishment and Salary Attachments

  1. Court Application: Creditor files an application for garnishment/salary attachment, demonstrating the debtor’s failure to pay.
  2. Judicial Review: The court reviews the application and assesses the debtor's financial situation, ensuring the garnishment does not infringe on basic living standards.
  3. Issuance of Order: If approved, the court issues a garnishment order to the debtor's employer or source of income.
  4. Implementation: The employer directly remits part of the debtor's salary or wage to the creditor until the debt is fully settled.

In implementing garnishment and salary attachments in Indonesia, it's essential for creditors to navigate the legalities with care, ensuring compliance with Indonesian law and respecting the balance between effective debt recovery and debtor protection. As always, consulting with legal professionals experienced in Indonesian debt collection laws is advisable to achieve optimal outcomes.

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Reclaim Your Debt through Insolvency Procedures in Indonesia

In the face of debtor insolvency, when traditional methods of enforcement fall short, creditors can often find recourse in initiating insolvency procedures. This last-resort measure allows creditor's claims to be settled from the debtor's assets, structured by priority rights. As a creditor, this method warrants evaluation for its viability, especially when holding high-priority secured debt with considerable coverage anticipated from debtor's assets. It's crucial to act swiftly, should insolvency be triggered by the debtor or another creditor, to register your claim and actively engage in proceedings. In the following section, we unravel the complexities of insolvency procedures in Indonesia, providing an in-depth guide for creditors on the path to debt recovery.

Insolvency Proceedings - Key Takeways
  • Utilization for Debt Collection: Bankruptcy as a strategic tool for debt recovery, governed by Law No. 37 of 2004.
  • Filing Requirements: Debtors with two or more creditors and at least one unpaid, collectible, matured debt are eligible for bankruptcy.
  • Priority Rules: Worker wages, state taxes, secured creditors, in that order, affecting debt recovery chances.
  • Costs: Includes court fees (e.g., about Rp5 million outside Jakarta) and attorney fees, beyond civil case charges.
  • Timeframe: Court decision on bankruptcy petitions mandated within 60 days from filing.
  • Expected Outcomes: Restructuring proposals that may include debt-to-equity conversions, operational adjustments, approval from majority creditors.
  • Petition Process: Filing to the Commercial Court by eligible parties, followed by hearing and court evaluation.
  • Creditor Rights: Secured versus unsecured creditor privileges, with challenges to claim priority through legal means.
  • Post-Bankruptcy Scenarios: Settlement through operational cash flow, restructuring of contracts, creditor involvement in approval processes.
  • Required Documentation: Not explicitly detailed but necessary for claims filing in bankruptcy cases.
  • Legal Recourse: Opportunities for opposition, appeal, and judicial review post-bankruptcy decision.
  • Creditor Role: Active participation in bankruptcy processes, including voting on proposed PKPUs, to protect interests and claims.

The Legal Framework for Insolvency Procedures in Indonesia

Indonesia’s insolvency procedures are primarily governed under Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligations. This framework was established to address financial distress within businesses, fostering a structured approach to bankruptcy that balances the interests of debtors and creditors. It also introduces the possibility of suspension of debt payment obligations, providing a lifeline to businesses facing temporary liquidity issues. Importantly, this law has been partially amended by subsequent legislation, including Law No. 4 of 2023, which addresses financial sector stability and recovery.

Types of insolvency proceedings

Indonesia recognizes several insolvency proceedings, including:

  • Regular insolvency proceedings (Bankruptcy): Initiated when a business cannot fulfill its debt obligations to two or more creditors, leading to its assets being liquidated to pay off debts.
  • Suspension of Debt Payment Obligations (PKPU): Allows companies in distress to negotiate with creditors and restructure debts, aiming to avoid bankruptcy and facilitate business continuity.
  • Self-administration and protective shield procedure: Although not directly termed as such in Indonesian law, the concept is similar to PKPU, where the debtor retains control over business operations while attempting to restore financial health under supervisory guidance.

Thresholds and conditions

The essential criteria for initiating insolvency procedures in Indonesia are:

  • Failure to pay off at least one matured and collectible debt.
  • Having two or more creditors.
  • The court decision on a bankruptcy petition must be made within 60 days of its registration.

Cost and timeframe vary depending on the complexity of the case, with a notable high entry threshold due to significant filing fees and legal costs.

Creditor's Rights and Priorities in Insolvency Proceedings

In Indonesian insolvency proceedings, creditors' claims are prioritized as follows:

  • Primary Worker Wages and taxes take precedence, ensuring employee and state dues are settled first.
  • Secured creditors hold priviliged positions regarding rights over specific collaterals.
  • Unsecured creditors come next, with their claims addressed after satisfying secured debts and primary obligations.

Creditors must register their claims within the insolvency table to be considered for repayment, with specifics governed under the appointed curator's administration.

Explore our step-by-step guide for insolvency proceedings

Step 1: Check the Conditions for Filing for Bankruptcy (Filing Your Debtor)

Before initiating bankruptcy proceedings in Indonesia, it's crucial to ensure that your debtor meets the conditions outlined in Law No. 37 of 2004. Notably, the debtor must have at least two creditors and fail to pay a matured debt. This step involves a comprehensive review of the debtor's financial obligations, ensuring there's clear evidence of unpaid debt. Besides demonstrating the debtor's inability to fulfill payment obligations, this prerequisite safeguards against unwarranted bankruptcy filings. For international creditors, understanding these conditions is essential to navigate Indonesia's unique legal landscape effectively.

Step 2: Filing a Bankruptcy Petition

Filing a bankruptcy petition is a formal process that involves submitting a request to the Commercial Court in Indonesia. Creditors, including international entities like you, can initiate this filing. It is imperative to prepare and submit comprehensive documentation, including evidence of the debtor's failure to pay debts and the existence of multiple creditors. Upon submission, the court sets a timeline for the hearing, generally within 60 days, to ensure timely adjudication. This step is crucial in formally commencing the bankruptcy proceedings against a debtor.

Step 3: Notice of the Hearing

After the bankruptcy petition is filed, notice of the hearing is sent to all relevant parties, including the debtor and known creditors. This notification outlines the details of the upcoming hearing, including the date, time, and location. It's essential for creditors to be vigilant in monitoring for this notice to ensure participation in the hearing process. Attendance or legal representation at this stage is crucial for voicing any claims or supporting the bankruptcy petition. The notice phase is foundational for ensuring that all parties are informed and have the opportunity to prepare adequately.

Step 4: Your Debtor Can Object to Your Application (Defence)

During the bankruptcy process, the debtor has the right to file an objection to the bankruptcy petition. This defense is their opportunity to present evidence or arguments against the declaration of bankruptcy, possibly including proof of payment plans or disputing the existence of outstanding debts. Creditors should be prepared to counter these defenses effectively, necessitating a strong foundation of evidence and legal arguments. The ability of the debtor to object underscores the importance of a well-prepared bankruptcy petition by creditors.

Step 5: The Hearing

The hearing serves as the central stage in the bankruptcy proceedings, where both creditors and the debtor present their cases before the Commercial Court. This step involves elaborate legal proceedings, including the presentation of evidence, testimonies, and legal arguments. Creditors need to articulate their claims clearly and convincingly, highlighting the debtor's failure to settle mature debts. This stage demands meticulous preparation and possibly, the engagement of legal counsel experienced in Indonesian bankruptcy law to navigate the complexities of the legal process effectively.

Step 6: Decision

Following the hearing, the court renders its decision on the bankruptcy petition. This verdict is based on the evidence presented, including the debtor's inability to pay debts and the presence of multiple creditors. If the court declares the debtor bankrupt, the administration of the debtor's assets is transitioned to a court-appointed curator. This stage marks a significant shift in the process, as the curator's role becomes central in managing and liquidating assets for debt repayment. Creditors should stay informed on the decision and prepare for the subsequent stages of asset liquidation.

Step 7: Opposition, Appeal, and Judicial Review

Once a bankruptcy decision is issued, both the debtor and creditors have options for legal recourse, including filing an opposition, appeal, or requesting a judicial review if they disagree with the court's ruling. These avenues provide a mechanism to contest the decision, requiring a comprehensive understanding of the legal arguments and evidence that can alter the outcome. Engaging with a legal expert in Indonesian bankruptcy law is advisable to navigate this complex legal landscape effectively. This step is critical for ensuring that all parties can seek redress and ensure fairness in the process.

Step 8: Post-Bankruptcy Scenarios for Creditors

In the event of a debtor's bankruptcy declaration, the landscape for creditors significantly changes, transitioning towards asset liquidation and debt recovery. The curator leads this phase, overseeing the distribution of assets among creditors based on prioritized claims outlined in Indonesian law. Creditors must file proof of their claims to participate in the distribution of proceeds. It's paramount for creditors to closely monitor this process and assert their rights to ensure the optimal recovery of their claims. Understanding the curator's role and actively engaging in the asset liquidation process is essential for maximizing debt recovery in post-bankruptcy scenarios.

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Navigating Debt Recovery in Indonesia for International Creditors

Undertaking a debt recovery process in Indonesia from overseas often requires an intricate comprehension of international debt collection laws and local regulations. For international creditors, the assistance of a trusted local agency like Debitura can significantly boost chances of successful recompense. Leveraging over ten years' experience and powerful alliances with local legal practitioners, Debitura stands as the go-to expert in unraveling the intricacies of the Indonesian cultural and legal landscape.

Collecting cross border claims - Key Takeways
  • Local Collaboration: Partnering with agencies like Debitura for local understanding boosts recovery success.
  • Legal Variability: Acknowledging Indonesia's distinct legal framework ensures compliance and effective collection.
  • Cultural Sensitivity: Tailoring approaches to align with local cultural practices is crucial in Indonesia.
  • Language Competence: Utilizing bilingual or native-speaking collectors aids in overcoming communication barriers.
  • Research Importance: Investigating the debtor's background informs strategy and increases recovery likelihood.
  • Patience is Key: International collections in Indonesia require patience due to procedural complexities.
  • Professional Assistance: Employing experienced agencies maximizes recovery while navigating regulatory intricacies.
  • Understand Regulations: Familiarity with local regulations, including GDPR implications, protects against legal risks.
  • Success Rate: Evaluating an agency's record in international cases informs selection for better outcomes.
  • Cost Considerations: Understanding fee structures of collection agencies ensures budget adherence and transparency.
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Challenges for International Creditors Recovering Debt in Indonesia

Recovering debts from overseas debtors presents a unique set of challenges, particularly when the debtor is based in Indonesia. Based on Debitura's decade of experience, we have identified several hurdles international creditors often face:

  • Legal and Regulatory Divergence: Indonesia's legal framework for debt collection can significantly differ from that of the creditor's country, complicating understanding and navigation of the process.
  • Cultural Nuances: Cultural differences play a substantial role in business practices and communication. Approaches considered appropriate in one country might not be effective or welcomed in Indonesia.
  • Language Barriers: The language gap can lead to miscommunications, making it challenging to resolve debts amicably or understand legal documents without professional translation services.
  • Jurisdictional Issues: Enforcing foreign judgments in Indonesia can be a lengthy and complex process, often requiring re-litigation of cases in Indonesian courts.
  • Reliance on Local Expertise: Successfully navigating the debt collection process in Indonesia generally necessitates local legal and financial expertise, significantly increasing the costs for international creditors.

Despite these challenges, recovery is not impossible. With the right approach and support from a knowledgeable partner like Debitura, international creditors can effectively navigate Indonesia’s unique landscape.

Enforcing Cross-border Claims in Indonesia

When it comes to enforcing cross-border claims in Indonesia, creditors must be prepared to navigate a legal landscape that is markedly different from what they might be used to. Here are some key points to understand:

  • Local Litigation: International creditors often need to initiate litigation proceedings in Indonesian courts to enforce debts, which requires understanding local laws and procedures.
  • Hiring Local Representation: It is generally necessary to hire local legal counsel who are familiar with Indonesian debt collection laws and can navigate the court system effectively.
  • Recognition of Foreign Judgments: Indonesia does not have a streamlined process for recognizing and enforcing foreign judgments, often necessitating a new lawsuit in the Indonesian legal system.
  • Arbitration: Indonesia recognizes and enforces foreign arbitral awards under the New York Convention. This can often be a more efficient path for creditors than litigation.

To maximize the likelihood of successful debt recovery in Indonesia, international creditors should consider engaging with a debt collection agency such as Debitura, which has local expertise and an understanding of the nuances involved in the Indonesian legal system.

Recover Uncontested Monetary Cross-border Claims

For the recovery of uncontested monetary claims from debtors in Indonesia, international creditors face several specific challenges, including the need to understand and navigate the local legal landscape. Here's a concise guide:

  • Documentation: Properly documenting the debt and any agreements between the creditor and debtor is crucial, as is ensuring that all communications are translated and understood by both parties.
  • Local Legal System: The creditor may need to utilize the Indonesian legal system to recognize the debt officially and proceed with enforcement actions.
  • Negotiation and Settlement: Often, the most efficient path to recovering uncontested debts in Indonesia involves negotiating directly with the debtor to reach a mutually acceptable settlement.
  • Local Expertise: Utilizing agencies with local knowledge and expertise, such as Debitura, can significantly streamline the recovery process and improve outcomes.

While Indonesia does not participate in certain mechanisms like the European Order for Payment directly, similar principles of clear communication, proper documentation, and local legal action apply.

Resolve Minor Cross-border Disputes

Resolving minor cross-border disputes with debtors in Indonesia requires a strategic approach that considers the complexity of international jurisdictions and local practices:

  • Mediation: Attempting mediation or other forms of alternative dispute resolution can offer a faster, more cost-effective solution than court proceedings.
  • Understanding Legal Frameworks: Familiarity with both the legal system of the creditor’s country and that of Indonesia is crucial for navigating cross-border disputes effectively.
  • Cultural Sensitivity: Approaching disputes with an awareness of cultural differences and adapting negotiation tactics accordingly can lead to better outcomes.
  • Local Representation: Engaging local legal experts or a specialized agency like Debitura can be invaluable in overcoming jurisdictional and procedural hurdles.

Though the European Small Claims Procedure does not apply, similar strategies of resolution, focused on efficiency and mutual understanding, are recommended for disputes involving Indonesian debtors.

Asset Freezing in Indonesia

Freezing a debtor's assets in Indonesia to secure debt recovery is a complex process that requires an in-depth understanding of local laws and international practice:

  • Legal Action: Creditors may need to initiate legal proceedings in Indonesia to obtain an order for asset freezing.
  • Local Expertise: Navigating the legal requirements necessitates the involvement of legal professionals with specific experience in Indonesian law.
  • Finding Assets: Identifying and locating the debtor's assets within Indonesia can be challenging and often requires investigative resources.
  • Enforcement: Even with an asset freezing order, the process of actually enforcing the order and recovering assets requires detailed legal knowledge.

While the European Account Preservation Order (EAPO) does not apply in Indonesia, employing a similar mindset focused on legal precision and local expertise can aid creditors in safeguarding their potential for recovery.

Debitura's deep understanding of the complexities involved in international debt collection in Indonesia positions us as a trusted partner for creditors confronting these challenges.

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Country Risk Rating

Mastering Business Risks in Indonesia: A Primer for International Creditors

Entering the Indonesian market is not just about discovering opportunities; it also involves grasping the specific business terrain and related risks. In this concise guide, we dissect the complexities of operating in Indonesia, providing crucial insights specifically designed for foreign creditors. By examining payment practices, interpreting corporate structures, and evaluating economic, political and financial risks, we empower you with the wisdom to successfully steer through the Indonesian commercial landscape.

Our analysis has shown that the risk of doing business in Indonesia is medium-low. Based on this medium-low score, we recommend being careful providing credit and considering charging upfront payment or using credit insurance when trading if you don't know the customer in Indonesia well. If possible, provide a short credit period or even better upfront payment. The medium-low risk score is based on the following factors:

Low risk
Medium-low risk
Medium risk
Medium-high risk
High risk
Low risk
Medium-low risk
Medium risk
Medium-high risk
High risk
Low risk
Medium-low risk
Medium risk
Medium-high risk
High risk
Low risk
Medium-low risk
Medium risk
Medium-high risk
High risk
Low risk
Medium-low risk
Medium risk
Medium-high risk
High risk
Key Takeways
  • Trade Credit Usage: Around 49% of all B2B sales in Indonesia are conducted on credit.
  • Shorter Payment Terms: Payment terms have tightened to average 46 days, reducing by one week year-on-year.
  • Increased Late Payments: Late payments have affected 48% of all B2B invoiced sales within the past year.
  • Bad Debt Impact: Bad debts impact an average of 7% of all B2B invoiced sales, with a 9% incidence in the agri-food sector.
  • Late Payment Causes: Main reasons include insolvencies, invoice disputes, and liquidity shortfalls among B2B customers.
  • Chasing Unpaid Invoices: To address late payments, 55% of companies invest additional time and resources.
  • Bank Loans Preference: Favored by 59% of businesses as a strategy for managing customer credit risk.
  • DSO Stabilization: Days Sales Outstanding now averages 67 days, with 48% of companies reporting improvement.
  • Corporate Structures: Shareholders, Board of Commissioners, and Board of Directors play crucial roles in governance.
  • Credit Risk Management: Understanding corporate structures is vital for assessing credit risk efficiency.
Explore Payment Trends and DSO

Understanding DSO and Payment Behaviour in Indonesia

In Indonesia, Days Sales Outstanding (DSO) and payment behaviour have critical impacts on the liquidity and financial health of businesses. With an average DSO of 67 days and nearly half of all B2B sales made on credit terms, Indonesian companies face unique challenges in managing their receivables. The use of trade credit remains a prevalent practice, accounting for 49% of B2B transactions, reflecting the significance of credit sales in the business landscape.

The chemicals sector, in particular, stands out for setting industry-standard payment terms, often influenced by credit insurance policies. Factors such as capital's cost and availability, alongside customers' creditworthiness, play pivotal roles in defining payment terms. However, with late payments affecting 48% of all B2B invoiced sales and bad debts stabilizing at 7%, Indonesian businesses are prompted to tighten payment terms and explore effective risk mitigation strategies.

Key Challenges

  • Late Payments: An average of 48% of all B2B invoiced sales were reported late, increasing workloads as businesses allocate more resources to chasing unpaid invoices.
  • Bad Debts: Bad debts have remained stable, impacting an average of 7% of all B2B invoiced sales, with the agri-food sector experiencing a higher incidence at 9%.
  • Credit Risk: Insolvencies, invoice disputes, and temporary liquidity shortfalls among B2B customers are primary reasons for payment delays, exacerbating credit risk concerns.

These challenges highlight the necessity for Indonesian businesses to adopt comprehensive credit management strategies to safeguard their financial stability.

Exploring Solutions

To tackle these challenges, Indonesian companies are implementing a variety of solutions aimed at enhancing payment behaviour and reducing credit risk:

  • Credit Checks: Conducting thorough credit assessments prior to engaging in credit sales to understand the creditworthiness of potential B2B customers.
  • Credit Insurance: Utilizing credit insurance, especially in sectors like chemicals, to manage credit risk more efficiently and ensure cash flow stability.
  • Proactive Receivables Management: Implementing proactive accounts receivable management practices, including the adoption of electronic invoicing, automated payment reminders, and offering early payment incentives.
  • External Financing: Seeking external short-term finance, with 59% of businesses favoring bank loans and trade credit proving popular in sectors like electronics and ICT.

By adopting these strategies, Indonesian businesses are not only managing credit risk more effectively but are also seeing improvements in their DSO, signaling a positive shift towards healthier payment behaviors and financial resilience.

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Explore main corporate structures

Corporate Structures in Indonesia

Understanding the corporate structure of your customers in Indonesia is not merely a procedural step—it's a strategic lever for successful debt collection and risk management. The choice of company type directly influences who holds liability for the company's debts, delineating the pathways creditors can pursue in debt recovery efforts. With Indonesia's vibrant economy and diverse business structures, it's essential for international creditors to grasp the nuances of each corporate form. Here, we'll explore the different company types in Indonesia, unraveling the characteristics, liabilities, and implications for creditors.

PT (Perseroan Terbatas) – Limited Liability Company

The PT, or Limited Liability Company, is the most common corporate structure in Indonesia, preferred for its clear distinction in liability. Shareholders' liability is limited to the value of their share capital, shielding personal assets from company debts. This type encapsulates most foreign investment ventures, given its ability to limit fiscal exposure. Creditors should note that debt collection predominantly impacts the company's assets, rarely extending to shareholders’ personal assets unless exceptional conditions, like fraudulent activities, are proven.

CV (Commanditaire Vennootschap) – Limited Partnership

CV structures combine active partners, responsible for the company's management and liable with their personal assets, with silent partners, whose liability is confined to their capital contributions. This structure offers a double-edged sword for debt collection. While silent partners' exposure is predictable and capped, active partners’ personal assets present an additional avenue for debt recovery, complicating the process but potentially increasing recuperation channels.


Firms in Indonesia operate as partnerships wherein all partners share unlimited liability for company debts. This structure results in a straightforward target for creditors since partners' personal assets are viable for satisfying company debts. However, the challenge lies in identifying the financial stability and asset liquidation threshold of each partner, as their personal financial health directly impacts their capacity to settle the company’s liabilities.

PT PMA (Perseroan Terbatas Penanaman Modal Asing) – Foreign Investment Company

PT PMA is specifically designed for foreign entities investing in Indonesia, providing a reassuring structure that limits liability to the amount of invested capital. For international creditors, this means that reclaiming debts requires a meticulous analysis of the company's assets in Indonesia, as their framework mirrors the PT model. Understanding the implications of international treaties and Indonesian investment policies becomes crucial in navigating debt collection for PT PMAs.

State-Owned Enterprises (BUMN) and Regional-Owned Enterprises (BUMD)

BUMN and BUMD entities offer unique challenges and opportunities for creditors. As government-owned companies, their liabilities might be implicitly backed by governmental resources, presenting an ostensibly secure footing for creditors. However, debt collection processes can be entangled with political, bureaucratic, and regulatory considerations, necessitating an adept navigation strategy that aligns with Indonesian laws and international diplomatic norms.

Understanding these corporate structures provides a foundational view of the intricate web of responsibilities, liabilities, and protections within the Indonesian business landscape. For creditors, this knowledge is paramount in crafting sophisticated, legally sound debt recovery strategies that align with the specificities of each company type. At Debitura, with our decade of experience in Indonesia, we harness this nuanced understanding to guide our clients through the complexities of debt collection, ensuring clarity, compliance, and optimised outcomes in every venture.

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Explore detailed country risk analysis

The economic risk in Indonesia

Our conclusion based on the economic risk factors, is that the economic risk in Indonesia is medium-high (4 out of 6). An economic risk of 4 out of 6 is pretty average in Asia.

GDP and economic growth are critical drivers for economic risk.
The GDP of Indonesia is 1186.09 bn. USD (2021), growing by 3.69% per year.

In terms of the size of its economy, Indonesia ranks #17 out of 183 countries and has a large economy.

Having a view at the growth rate, it is ranked #109 out of 183 countries and is therefore considered an excellent growing economy.

GDP per capita is 4292 USD, ranking Indonesia number #106 out of 183 countries. The result of this is purchasing power of citizens in Indonesia is around the average compared to all other countries.

You can see a more throughout picture of GDP and economic growth in Indonesia in the table below:

GDP and economic growthLatest value
Economic growth: the rate of change of real GDP3.69%
Gross Domestic Product, billions of U.S. dollars1186.09
GDP per capita, current U.S. dollars4291.81
GDP per capita, Purchasing Power Parity11746.22

Another critical driver for the economic risk score is the inflation rate and the interest rates. You can see a more throughout picture of monetary KPIs in Indonesia in the table below:

Monetary KPI'sLatest value
Inflation: percent change in the Consumer Price Index1.6%
Business credit interest rate, percent8.92%

The inflation in Indonesia was 1.6% in 2021 which is considered a very low inflation rate.

Businesses has an interest rate which is 8.92%.

The business environment risk in Indonesia

Our analysis shows that the business environment risk in Indonesia is medium-high (4 out of 6), which is a pretty average risk score in Asia.

Economic freedom and rights determine the business environment risk in a country. You can see the critical facts for Indonesia in the table below:

Economic freedom indexLatest value
Property rights index (0-100)59
Freedom from corruption index (0-100)39
Fiscal freedom index (0-100)84
Business freedom index (0-100)71
Monetary freedom index (0-100)79
Trade freedom index (0-100)79
Investment freedom index (0-100)50
Financial freedom index (0-100)60
Economic freedom, overall index (0-100)67

As you can see in the table, the property rights index is 59 in Indonesia, which is considered quite low in Asia.

The business freedom index is based on 10 indicators, using data from the World Bank’s Doing Business study. The Index is 71 in Indonesia, a pretty average score for a country in Asia.

Indonesia's overall economic freedom index is 67 out of 100 and is based on factors such as the rule of law, regulatory efficiency, and market openness.

The political risk in Indonesia

The political risk in Indonesia is medium-high, with a score of 4/6. This is a pretty average political risk score in Asia.

The governance and political stability indicators are critical drivers for political risk. An overview of Indonesia can be seen in the table below:

Governance and political stability indicators Latest value
Rule of law index (-2.5 weak; 2.5 strong)-0.22
Government effectiveness index (-2.5 weak; 2.5 strong)0.38
Control of corruption (-2.5 weak; 2.5 strong)-0.43
Political stability index (-2.5 weak; 2.5 strong)-0.51
Corruption Perceptions Index, 100 = no corruption38
Shadow economy, percent of GDP21.76%

The rule of law index analyses to which extent agents have confidence in and abide by the rules of society, in particular the quality of contract enforcement, property rights, the quality of the courts, and the police's ability to enforce court orders.

When doing business in a country, the rule of law index is critical as it describes your ability to enforce commercial contracts.

In Indonesia, the rule of law index is at -0.22 points, with the score going from -2.5 (weak) to 2.5 (strong). Indonesia has, therefore, a low rule of law index, which means it often is very difficult to enforce your contracts. We, therefore, recommend avoiding credits and recommend charging upfront payment instead.

Other drivers for the medium-high political risks are the very weak control of corruption, the very weak political stability index, and the medium-large shadow economy that is 21.76% of Indonesia's GDP.

The commercial risk in Indonesia

In Indonesia, the commercial risk score is 1/4, which in our model is a very low score. This very low commercial risk score is low compared to the average in Asia.

The commercial risk is impacted by a country's international trade relationships. You can see some of the key facts for Indonesia in the table below:

International trade and investment Latest value
Exports of goods and services as percent of GDP21.56%
Exports of goods and services, annual growth24.04%
Imports of goods and services as percent of GDP18.86%
Trade balance as percent of GDP2.7
Trade balance, billion USD29.13
Foreign exchange reserves, billion currency units144.91

Indonesia has a foreign exchange reserve of 144.91 bn. USD.

Indonesia has a positive trade balance of 2.7% of GDP. This means that Indonesia imports fewer goods and services than the country exports.

The annual growth of exports of goods and services has been growing 24.04% annually - now 21.56% of GDP. Import of goods and services represents 18.86% of the GDP in Indonesia.

The financing risk in Indonesia

We have calculated the financing risk to be 2/4, which equals a low risk. A low financing risk score is relatively low for countries in Asia.

The country's banking system, efficiency, and stability influence the financing risk. Additional facts and info can be found for Indonesia in the table below:

Banking system efficiency and stabilityLatest value
Interest rates on bank credit to the private sector8.92%
Real interest rate: Bank lending rate minus inflation2.74%
Index of legal rights for creditors and borrowers (0 = weak to 12 = strong)6
Credit information sharing index, 0 (low) - 8 (high)8

In Indonesia, the credit information sharing index is 8 on a scale from 0 (low) to 8 (high). The result of this is accessibility and quality of credit information available in Indonesia is high.

This makes it easy for you to understand the credit risk of your counterpart in Indonesia. You would be able to find a good local credit rating agency that can help you analyse the creditworthiness of your specific customers.

Your legal rights as a creditor (and as a borrower) are 6 out of 12 and, therefore, weak.

The low financing risk for creditors also impacts the high interest rate in the private sector of 8.92%.

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Why Debitura is Your Trusted Authority in Debt Collection

At Debitura, we uphold the highest standards of impartiality and precision to bring you comprehensive guides on international debt collection. Our editorial team boasts over a decade of specialized experience in this domain.

By the Numbers:

  • Over 10 years of expertise in international debt collection.
  • Network strength: More than 100 local attorneys worldwide.
  • Recovery success: $100 million in debt recovered for our clients in the last 18 months alone.
  • Client trust: An exceptional average rating of 4.97 out of 5, reflecting feedback from over 600 satisfied clients.

Meet the Author: Robin Tam is the cornerstone of our content's credibility. With 16 years dedicated to international debt collection, Robin's expertise is unparalleled. As a leading partner at Debitura, Robin embodies the knowledge and integrity we stand for.

Contributors to This Guide: In our commitment to accuracy, this article has been reviewed and enhanced by esteemed local attorneys, each bringing their specialized legal insights to ensure the information we provide is thoroughly vetted and current:

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