Reconstructing the supervision system of pawnbroking businesses through a twin-track supervision approach

Abstract

Background: Supervision of governance within the financial services sector plays a crucial role in maintaining economic stability and safeguarding public interests, particularly in nonbank financial institutions such as pawnbroking businesses. Pawnbroking aligns with the principle of kinship enshrined in Article 33 paragraph (1) of the 1945 Constitution of the Republic of Indonesia by providing inclusive financial access and empowering the community. Although the Financial Services Authority (Otoritas Jasa Keuangan/OJK) holds regulatory and supervisory authority under Law Number 21 of 2011, Law Number 4 of 2023, and OJK Regulation Number 39 of 2024, pawnbroking practices continue to face challenges, including weak internal supervision, abuse of authority, and ineffective consumer protection. These challenges require adaptive and technology-enabled supervision to strengthen transparency and public protection. Methods: This research employs a normative juridical method using the Statute, Conceptual, and Case Approaches to analyze relevant regulations, legal principles, and practices. Findings: This study proposes the Twin-Track Supervision (T2S) approach, comprising the Supervisory Regulatory Sandbox, which emphasizes prudential supervision, governance, and internal preventive mechanisms, and the Dual-Focus Supervision Model, which prioritizes business conduct and consumer protection. The framework incorporates data-driven supervision to enhance regulatory effectiveness and public trust. The findings indicate that T2S strengthens governance through a comprehensive supervisory framework supported by an adequate legal basis. Conclusion: T2S provides an adaptive and preventive supervisory framework oriented toward consumer protection, aligned with Good Corporate Governance (GCG) and supporting the implementation of OJK's Pawnbroking Development and Strengthening Roadmap 2025–2030. Novelty/Originality of this article: This article introduces the Twin-Track Supervision (T2S) model by integrating the Supervisory Regulatory Sandbox and Dual-Focus Supervision Model into a unified framework that balances prudential supervision with consumer protection to strengthen governance, regulatory compliance, and public trust in the pawnbroking sector.