June 2026

Wednesday, 10 Jun 2026

Intellectual Property as Collateral for Creative Economy Actors and MSME Owners

 

The legal basis that movable assets can serve as collateral has been long recognized in Indonesia, lastly through Law No. 42 of 1999 (“Law 42/1999”) on fiduciary security. Meanwhile, the regulation of Intellectual Property Rights (“IPR”) as collateral, particularly for creative economy actors whom most of them are owners of Micro, Small, and Medium Enterprises (“MSMEs”) is more explicitly stated in Article 16 of Law No. 24 of 2019 on the Creative Economy and Article 1(4) of Government Regulation No. 24 of 2022 (“GR 24/2022”) on the implementation of Law No. 24 of 2019 concerning the Creative Economy. Both provisions affirm that the Government facilitates financing schemes that allow intellectual property to be used as collateral for banks or non-bank financial institutions, enabling them to provide funding to creative economy actors.

In GR 24/2022, intellectual property is defined as assets arising from human intellectual ability through creativity, taste, and initiative, which may be in the form of works in technology, science, art, and literature. In principle, all types of intellectual property can be used as collateral if (i) they can and have been recorded or registered with the related Ministry for legal affairs, and (ii) they are properly managed independently and/or their rights have been transferred to another party.

Collateral objects can be executed in the following forms:

a)   Fiduciary security over intellectual property

Registered and well-managed intellectual property such as copyrights, trademarks, patents, or industrial designs can serve as fiduciary collateral. Fiduciary means that legal ownership rights are transferred to the creditor as security, while creative economy actors may continue using the assets in their business activities.

b)   Contracts in creative economy activities

Contracts with economic value can be used as collateral because they reflect potential future income, such as licensing agreements or work contracts/orders received by creative economy actors.

c)   Receivables in creative economy activities

Receivables are claims for payments to be received, such as claims from the sale of artworks, royalties from songs and/or musical instruments for commercial use, or payments from clients for creative services. These receivables can be transferred to creditors as collateral.

To simplify the financing process, the Government issued Ministry of Creative Economy/Head of Creative Economy Agency Regulation No. 6 of 2025 on Intellectual Property Valuators, which among others regulates (i) requirements for registering intellectual property valuators, (ii) methods of intellectual property valuation, and (iii) rights and obligations of intellectual property valuators. With the presence of intellectual property valuators, the results of valuation can be used as one of the financing requirements, making it easier for creative economy actors and MSME owners to use intellectual property as collateral, similar to practices that have been applied in the United States, Japan, and the European Union.

In the United States, common practices of intellectual property-based financing are generally carried out through three mechanisms: (i) royalty monetization, where companies sell rights to royalty streams to obtain cash; (ii) securitization, where income flows from patents or trademarks are turned into financial instruments; and (iii) IP-backed loans, where companies use software code and trademarks as loan collateral(*). In Japan and the European Union, financing support is focused on providing credit facilities based on evaluation reports to assess business potential, along with policy frameworks to create a healthy IP financing market. Examples include Japan’s IP Finance Promotion Project, run by the Japan Ministry of Economy, Trade and Industry together with the Japan Patent Office(*), and the European Union’s Intellectual Property Valuation Initiative (IPVI)(*).

Meanwhile, enforcement of financing defaults involving intellectual property in the United States, Japan, and the European Union is relatively similar and can generally be pursued through civil and criminal channels, and out of court settlement. Creditors may seize and sell intellectual property rights through public auctions or private sales. If the intellectual property is in the form of royalties or licenses, creditors may take over the receivables pledged as collateral. However, because IP-based financing in Japan and the EU is focused on small businesses, governments provide additional protection to banks in the form of risk guarantees. Banks often prefer restructuring or renegotiation to help small business actors repay their debts without losing ownership of the pledged intellectual property.

In Indonesia, although Article 9(2) of Government Regulation No. 24 of 2022 has opened opportunities for IP-based financing through contracts in creative economy activities (such as licensing agreements) and receivables, as practiced in the United States, in reality its implementation more closely resembles the approach in Japan and the EU. The focus is on intellectual property evaluation by certified valuators to assist MSMEs that lack tangible assets. This condition is partly due to the limited secondary market for intellectual property in Indonesia, that is, mechanisms for resale or transfer of IP assets already used as collateral or financial instruments. The absence of a robust secondary market reduces IP liquidity, making financial institutions cautious in accepting intellectual property as collateral. As for enforcement of IP-based financing in Indonesia, since most cases are still conducted through fiduciary security, execution rules refer to Law No. 42 of 1999 on fiduciary security. If a debtor defaults, creditors may execute through fiduciary enforcement (directly or through court). Intellectual property rights may also be sold through public auctions or by way of under hands with the agreements of the debtor/owner of IPR.

Since this is still a relatively new practice, many banking and non-banking institutions in Indonesia remain unfamiliar with using intellectual property as collateral. Based on the author’s online research, banks and non-bank institutions currently treat intellectual property certificates as supporting collateral in financing applications. Generally, these institutions still consider (i) other assets owned by creative industry actors or MSME owners, and (ii) the 5C principles (character, capacity, capital, collateral, and business prospects) when granting credit. To date, State-owned banks are the ones that have opened opportunities for IP-based financing, while non-bank financial institutions regulated by the Financial Services Authority (OJK) under Regulation No. 19/2025 have accepted intellectual property as supporting collateral. Regarding enforcement of IP-based financing in Indonesia, as far as the author is aware, no cases have yet surfaced publicly.

 

 

Disclaimer: This legal news serves as general guidance only and should not be treated as legal advice. If you wish to have further information on this topic, please contact Diyah Ratnajati (dratnajati@rosetini.co.id), or Rosetini Ibrahim (ribrahim@rosetini.co.id).