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Journal of Legal, Ethical and Regulatory Issues • Volume , Issue , Pages - • June

ADOPTION OF FINANCIAL TECHNOLOGY IN CROWDFUNDING AS BUSINESS FINANCING IN INDONESIA

Prananingtyas P.

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Universitas Diponegoro Irawati Irawati, Universitas Diponegoro

Abstract Author keywords SciVal Topics

Abstract

Crowfunding is a type of financial technology platform that funding a project or venture by raising money from a large number of people. There are three actors in crowdfunding, first is the project owner, second is the crowdfunder and third is the donator. As a new way of raising money for business financing crowdfunding is very interesting subject to discuss. This paper is a research paper, to analyze the utilization of crowdfunding in business financing in Indonesia and to analyze the obstacle of crowdfunding in business financing in Indonesia. The methodology of this research is an empirical legal research. The research finding are Indonesian business association already utilized the

crowdfunding platform to finance several business sectors such as realestate, modern store franchise, movie production etc. The obstacle of crowdfunding utilization was the absence of financial technology regulation, including the crowdfunding regulation, many investors did not understand about the crowdfunding platform scheme and its risk. © 2021. All Rights Reserved.

Author keywords

Business-Financing; Crowdfunding; Financial-Technology; Regulation SciVal Topics

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Journal of Legal, Ethical and Regulatory Issues (Print ISSN: 1544-0036; Online ISSN: 1544-0044)

Research Article: 2021 Vol: 24 Issue: 6

Adoption of Financial Technology in Crowdfunding as Business Financing in Indonesia

Paramita Prananingtyas, Universitas Diponegoro Irawati Irawati, Universitas Diponegoro

Abstract

Crowfunding is a type of financial technology platform that funding a project or venture by raising money from a large number of people. There are three actors in crowdfunding, first is the project owner, second is the crowdfunder and third is the donator. As a new way of raising money for business financing crowdfunding is very interesting subject to discuss. This paper is a research paper, to analyze the utilization of crowdfunding in business financing in Indonesia and to analyze the obstacle of crowdfunding in business financing in Indonesia. The methodology of this research is an empirical legal research. The research finding are Indonesian business association already utilized the crowdfunding platform to finance several business sectors such as realestate, modern store franchise, movie production etc.

The obstacle of crowdfunding utilization was the absence of financial technology regulation, including the crowdfunding regulation, many investors did not understand about the crowdfunding platform scheme and its risk.

Keywords: Crowdfunding, Business-Financing, Financial-Technology, Regulation.

INTRODUCTION

Indonesian state financial institutions consist of three institutions, namely banking financial institutions, non-banking financial institutions, and other financial institutions. Banking financial institutions alone are not enough to answer the economic problems that occur because there are still many entrepreneurs in Indonesia who experience capital constraints in developing their businesses (Cumming et al., 2019; Garcia-Teruel, 2019). Entrepreneurs need investment credit as a supporter of the costs of developing a business but getting investment credit from a bank is not easy because the bank asks for sufficient collateral in loan lending (Gleasure, 2015; Brown et al., 2019; Rupeika-Apoga & Danovi, 2015). Banks need to be accompanied by other financing services so that all sectors are accommodated to their needs (Cumming et al., 2019). This relates to the limitations of banking, namely the limited funds channeled, limited outreach and limited opportunities to enter other financing sectors. This problem can be overcome by non-banking financial institutions, namely funding institutions that have a risk level for debtors tend to be smaller than banking financial institutions. Non-banking financial institutions are known as financial institutions that offer new formulation models in channeling funds to those who need them. These financial institutions, including finance companies, venture capital companies, and infrastructure financing (Brent & Lorah, 2019; Bento et al., 2019).

However, even though business financing has made maximum use of the existence of banks and financial institutions, the comunity as business actors still face difficulties in meeting their capital needs. Until finally emerged a revolutionary modern concept, namely crowdfunding, which developed along with technological advances (Presenza et al., 2019; Vismara, 2019; Petruzzelli et al., 2019). Crowdfunding is a funding technique for projects or business units that involve the wider community (Gooch et al., 2020; Mollick, 2014). The crowdfunding concept was first coined in the United States in 2003 with the launch of a site called Artistshare, on that site, musicians sought to raise funds from their fans to produce a work. This initiated the emergence of other Crowdfunding sites such as kickstarter which was involved in funding creative industries in 2009 and Gofundme which managed funding of various events and businesses in 2010. Crowdfunding itself is already quite well known internationally and is estimated to have managed to raise $16.2 billion dollar in 2014.

In Indonesia, crowdfunding is still not very popular, but it has huge potential to become an investment fund collection instrument. Its use is relatively easy and is already internet-based so that it can be accessed by everyone. In practice, a person or business unit that needs funding in his project will submit a proposal along with the amount of funds they need to work on the project through the crowdfunding management website (Ibrahim, 2012). The community will study the proposal submitted, and if the project is considered attractive, then they will deposit capital to fund the project. In crowdfunding, there is usually no limit on the minimum amount to make a capital deposit so that everyone can participate, although of course there are differences in return according to the nominal that the donor makes the deposit.

Objectives

This paper is written based on preliminary research that has been done before (Prananingtyas & Irawati, 2018). The main problems of this paper are 1) can the use of crowdfunding as a source of business financing be done in Indonesia? 2) what are the obstacles in using crowdfunding as a source of business financing in Indonesia?

LITERATURE REVIEW

Mutual Cooperation as Culture in Indonesia

Humans are social creatures who cannot live alone but need help from others. Basically humans are inseparable from social interaction by each other. So it needs to be done in cooperation and mutual cooperation in solving all activities and problems. Collaboration carried out by a group of people and continuously is the attitude and culture of mutual cooperation. Every nation in a country must have a distinctive culture that distinguishes it from other nations. Mutual cooperation is a unique culture in Indonesia that has been carried out by the community since the days of our ancestors. Even mutual cooperation is also one of the ways in expelling invaders in the context of fighting for Indonesian independence. The struggle of ancestors in achieving independence proves the harmony of life in respecting and maintaining the values of life. This mutual cooperation attitude can be said as a cultural heritage that is expected to continue to be carried on from generation to generation by the successors of the Indonesian nation. Mutual cooperation is a national identity that must be maintained in order to maintain the integrity of the Indonesian nation. Development can be based on identity and cultural values possessed by Indonesia. The attitude of cooperation which is entrenched does not mean without benefits. The benefits contained in mutual cooperation can be seen from the presence of togetherness in completing an activity or a problem, something difficult and complicated can be solved if done together, as well as related to time efficiency because every job done together will be completed faster.

Mutual cooperation is the basis of Indonesian philosophy. Mutual cooperation as philosophy is used as a guide in living a social and state life. Mutual cooperation is an activity carried out together and is voluntary so that the activities carried out can run smoothly, easily lightly. The principle of kinship and mutual cooperation in economic business activities is used the principle of cooperation, mutual assistance in an atmosphere of economic democracy to achieve shared prosperity fairly and justly in prosperity in the economic field the principle of mutual cooperation and kinship is seen in Article 33 of the 1945 Constitution.

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Journal of Legal, Ethical and Regulatory Issues

(Print ISSN: 1544-0036; Online ISSN: 1544-0044)

Research Article: 2021 Vol: 24 Issue: 6

The Polluter Pays Principle in the European Union Law and in Vietnam-Selected Issues

Tran Cong Thiet, University of Warsaw

Abstract

In the overall sustainable development of a country, environmental policy and economic policy are closely related. In some countries, the principle that polluters pay is used as an official tool to control the environmental activities obligations of entities. The principle of the "polluter pays" has become popular in many countries around the world. In recent years, environmental issues have increasingly become a top concern for the sustainable development of most countries. n the current context, the scientific and systematic study of the theoretical issues of the polluter pays principle, the legal provisions express and implement the principle following the provisions of the European law, from which a solution to improve environmental laws and the effective implementation mechanism of this principle in Vietnam is needed. Therefore, the study of European legal regulations on the polluter pays principle plays an important role in considering and drawing lessons as well as orientations for application in Vietnam in environmental management to limit the negative impact of the subjects in the current environment.

Keywords: European Union Law, Environmental Damage, EU Environmental Policy, Vietnam Environmental, Environmental Costs, Environmental Impact.

INTRODUCTION

In Vietnam and other countries in the world, the polluter pays principle (PPP) is one of the key principles of environmental law in particular, but also of international environmental law in general. What is the implication of this principle?

It can be understood simply as the use of economic measures to influence the behavior of entities in an environmentally beneficial way. In other words, when an entity pollutes the environment, it will incur remedial financial obligations as a consequence of its actions. The environment is considered a special "commodity" that is circulated in the market. It is a special commodity because it is communal (not owned by any individual) and has to be used by both commercial and non- commercial users. Therefore, assigning financial obligations with regard to the environment will help to effectively manage the use and exploitation of the environment.

The basic content of the PPP is evident in its name; that is, the people that cause environmental pollution must bear the cost of remedying and improving the polluted environment. Those who exploit natural resources, those who are responsible for acts of discharging into the environment, as well as those whose acts have an adverse effect on the environment must pay. The "people" here can be understood as a specific person, individual, or enterprise that is able to pollute the environment. Companies take full responsibility for all the damage caused to the environment from their production and business activities and have to contribute to the restoration of polluted locations, while the state must ensure that the companies are held responsible for the damage caused to people, to biodiversity, and to the environment, including the atmosphere and oceans. This liability regime includes financial payment obligations for detoxification and rehabilitation activities. At the time of its inception, the PPP was a way to transfer the responsibility of treating waste from governments to the entities that caused the pollution. Regardless of the business, if toxic substances causing environmental pollution are emitted in the course of production and business activities, the entities responsible have to pay for the remedy.

The polluter pays principle (PPP) has been a cornerstone of international environmental law for almost fifty years, first being mentioned in the recommendation of the OECD of 26th May 1972 and reaffirmed in its recommendation of 14th November 1974. Since that time, it has been formalized on numerous occasions through being adopted by several international conventions, including:

1. The 1980 Athens Protocol for the Protection of the Mediterranean Sea against Pollution from Land-based Sources and Activities.

2. The 1992 Helsinki Convention on the Transboundary Effects of Industrial Accidents.

3. The 1992 Helsinki Convention on the Protection and Use of Transboundary Watercourses and International Lakes.

4. The 1993 Lugano Convention on Civil Liability for Damage Resulting from Activities Dangerous to the Environment.

5. The 1996 London Protocol to the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter.

Significantly, the PPP was widely discussed in the United Nations Conference on Environment and Development held in Rio de Janeiro in 1992. The principle was endorsed by all the attending representatives of the participating countries. Principle 16 of the Rio Declaration provides that “National authorities should endeavour to promote the internalization of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution, with due regard to the public interest and without distorting international trade and investment”. This principle can be seen as a direction to all states on how to apply the PPP and other economic instruments when adopting environmental liability schemes. Many economists claim that much environmental harm is caused by producers who “externalize” the costs of their activities (Campbell-Mohn & Cheever, 2020).

For instance: today's vehicles emit many emissions, polluting the air, especially in big cities, where there is always a lot of smog due to the exhaust of vehicles such as pollution such as car, motorbike, bus, etc. But the cost of this waste treatment comes from the state budget. Therefore, it can be easily seen that the people indirectly incur environmental rehabilitation costs in this case. Consequently, the law should require companies to manufacture vehicles with the higher use of more environmentally-friendly technologies. For example, many countries have introduced cars and buses powered by electric motors to replace gasoline engines. This will contribute to environmental protection. So these electric vehicle manufacturers enjoy a lot of support from the government. Conversely, if applying PPP, companies that do not apply advanced and environmentally friendly technologies are subject to high taxes. The PPP also guides the policies of the EU and other governments throughout the world (Campbell-Mohn & Cheever, 2019).

Through the above examples, it is clear that the earth’s environment is the typical home of all living organisms (including humans), which rely upon it to coexist and develop. Therefore, any human behaviour that causes (or has the potential to cause) environmental degradation, and by extension, threatens the world’s finely balanced ecosystem, must be called out and those responsible held to account. This should include the need to acknowledge guilt, taking responsibility for remedial and restoration measures and where appropriate, the payment of compensation or restitution. The clearly defined obligations and responsibilities of relevant parties need to be set out in legislation that is purposeful and unambiguous and enforced by a legal system that is fearless and relentless.

At this point it is also worth briefly mentioning the effect of the Pigouvian taxation system that was established to correct any market activity that generated negative externalities (costs not included in the market price). Whilst this system was introduced as a broadly-based concept, it has been shown to have a quite specific application in the case of environmental pollution.

The Regulations of the EU for the PPP

Even during the early stages of the evolution of the EU, the participating authorities were already beginning to enact numerous initiatives for the protection of the environment. These included the OECD’s recommendations in its first Environmental Action Program (1973-1976) whilst the European Community has also been committed to the PPP since 1987. Subsequently, these principles spread to numerous national legislations worldwide (Arthur, 2019). Their influence has grown over the past few decades, as the European Union has become recognised as one of the world's most progressive regions in terms of environmental protection policies, and where PPP law enforcement is effective and most rigorous. As a result, the European law on the PPP is considered the optimal model for other countries to emulate when seeking to contribute to globalization's most influential environmental protection initiatives.

As a main function of the principle, the OECD recommendations specify the allocation of costs of pollution prevention and control measures to encourage rational use of scarce environmental resources and to avoid distortions in international trade and investment. The polluter should bear the expense of carrying out the measures decided by public authorities to ensure that the environment is in an acceptable state.

While agreed implicitly, the polluter must bear the cost of implementing the actions 'decided by public bodies to ensure the atmosphere is in an appropriate condition. It has proved exceedingly difficult to ascertain definitively that 'the environment is in an acceptable state on several counts.

From the writer’s point of view, the OECD ought to have the detail of the regulation in this case because calculating the environmental damage is never ever easy in reality. When environmental damage or degradation occurs, we need to apply science and technology for defining damage. Therefore, the costs are expensive and may be higher than the ability of victims to pay. Hence, if the law has accepted the PPP, it will be the foundation for settling lawsuits involving environmental damage.

As a result, the PPP has received wide acceptance and has been adopted by many international treaties. From an economic perspective, the polluter pays principle has gradually been recognized worldwide as a basic legal principle in the legal system involving the environment. The Organization for Economic Co-operation and Development (OECD) proposed to apply the principle of polluters pay from the early 1970s. The OECD's continued efforts over a period of two decades have made the PPP principle a legal principle. The polluter pays principle was officially introduced in Europe under the One Europe Act of 1987; and internationally this principle has been recognized in Principle 16 of the 1992 United Nations Joint Declaration on Environment and Development.

The 1992 Kyoto Protocol to Respond to Climate Change is also an example of the international rules that apply the polluters pay principle. For nearly 30 years since the 1992 Rio Joint Declaration, the polluter pays principle has been applied in the environmental legal jurisdictions of many countries around the world. Indeed, it has also been expanded to monitor the substance impacts during the life cycle from the simple control of emissions at the source (i.e., extended producer responsibility). PPP is referred to as a precept of EU environmental law under Article 191 (2) of the EU Treaty. Its preventive role is founded on the premise that polluter emissions can be reduced as it becomes clear that its costs have to exceed the benefits of continued pollution. Because the future polluter has to pay for precautionary steps, he has a risk reduction opportunity and is investing inadequate risk control measures.

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