The Profit Sharing Loan Agreement is commonly used in Indonesia's financial sector as an alternative to conventional interest-bearing loans, particularly suitable for businesses seeking Shariah-compliant financing or preferring profit-sharing arrangements. This document type has gained prominence with the growth of Islamic banking and alternative financing structures in Indonesia. It provides a framework for lenders to participate in the borrower's business success while complying with Indonesian banking regulations, including Law No. 21 of 2008 on Islamic Banking and OJK regulations. The agreement is particularly valuable for SMEs and growing businesses that prefer to share profits rather than commit to fixed interest payments, offering flexibility while maintaining legal protection for all parties involved.
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1. Parties: Identification of the Lender and Borrower with complete legal names and addresses
2. Background: Context of the agreement, business relationship, and purpose of the loan
3. Definitions: Definitions of key terms including 'Profit', 'Profit Share', 'Business', 'Principal Amount', and other relevant terms
4. Loan Amount and Purpose: Specification of the principal amount and detailed purpose of the loan
5. Profit Sharing Structure: Detailed mechanism for calculating and distributing profits between parties
6. Disbursement: Terms and conditions for loan disbursement
7. Repayment Terms: Schedule and mechanics for repayment of principal amount
8. Profit Calculation and Payment: Method and timing of profit calculations and distributions
9. Representations and Warranties: Standard and specific representations by both parties
10. Covenants: Positive and negative covenants, including business operation requirements
11. Reporting Requirements: Financial and operational reporting obligations of the Borrower
12. Events of Default: Circumstances constituting default and consequences
13. Remedies: Rights and remedies available to parties upon default
14. Term and Termination: Duration of agreement and termination provisions
15. Governing Law: Specification of Indonesian law as governing law
16. Dispute Resolution: Mechanism for resolving disputes
1. Security: Include when the loan is secured by collateral or guarantees
2. Insurance: Include when specific insurance requirements are needed for the business or assets
3. Shariah Compliance: Include when the agreement needs to comply with Islamic banking principles
4. Change of Control: Include for borrowers that are companies where ownership changes could affect the agreement
5. Tax Provisions: Include when specific tax arrangements or implications need to be addressed
6. Business Operation Guidelines: Include when lender requires specific business operation standards or practices
7. Force Majeure: Include when specific force majeure provisions are needed beyond standard provisions
1. Schedule 1 - Profit Calculation Formula: Detailed methodology and examples of profit calculation
2. Schedule 2 - Business Plan: Detailed business plan and financial projections
3. Schedule 3 - Repayment Schedule: Schedule of principal repayment dates and amounts
4. Schedule 4 - Reporting Templates: Templates for required financial and operational reports
5. Schedule 5 - Security Details: Details of any security or collateral (if applicable)
6. Appendix A - Required Documents: List of documents required for disbursement and ongoing compliance
7. Appendix B - Financial Covenants: Specific financial ratios and thresholds to be maintained
Relevant legal definitions
Clauses
Relevant Industries
Financial Services
Islamic Banking
Small and Medium Enterprises
Agriculture
Manufacturing
Technology
Retail
Real Estate
Construction
Trading
Food and Beverage
E-commerce
Relevant Teams
Legal
Finance
Compliance
Treasury
Risk Management
Corporate Finance
Credit Analysis
Business Development
Shariah Advisory
Operations
Relevant Roles
Chief Financial Officer
Finance Director
Legal Counsel
Compliance Officer
Treasury Manager
Credit Risk Manager
Investment Manager
Business Development Manager
Financial Controller
Shariah Compliance Officer
Corporate Finance Manager
Banking Relationship Manager
Account Manager
Risk Assessment Officer
Corporate Secretary
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