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Finance
Indonesia’s financial sector has been flourishing over the past half decade. The COVID-19 pandemic period, while being a time of austerity for most sectors, led to revolutionary innovations in Indonesia’s financial services industry, particularly in fintech. From December 2020 to December 2022, total assets of the fintech sector grew by 48.54 percent from 2020 to 2022. This growing trend continued even after the pandemic lockdowns ended, as total assets in fintech grew by 30.8 percent from December 2022 to December 2023.
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Finance
Indonesia’s financial sector has been flourishing over the past half decade. The COVID-19 pandemic period, while being a time of austerity for most sectors, led to revolutionary innovations in Indonesia’s financial services industry, particularly in fintech. From December 2020 to December 2022, total assets of the fintech sector grew by 48.54 percent from 2020 to 2022. This growing trend continued even after the pandemic lockdowns ended, as total assets in fintech grew by 30.8 percent from December 2022 to December 2023.
With fintech paving the way forward, traditional banking followed suit by revolutionizing its services. From 2022 to 2023, the banking industry’s fund distribution increased by 6.28 percent, source of funds increased by 6.33 percent, and total assets in the industry grew by 6.98 percent, reaching a total of US$8.22 trillion. Moreover, even regional banks have been benefitting from this wave of innovation. For the same period from 2022 to 2023, the regional banking sector saw a 7.67 percent in distributed funds, an 8.08 percent increase in source of funds, and a 7.52 percent increase in total assets, reaching a total of US$137.96 billion.
Innovations in Indonesia’s finance sector extend beyond financial services. On September 2023, the Indonesian monetary authority, Bank Indonesia (BI), introduced three pro-market monetary instruments that function as short-term fixed income securities with high coupon rates. The three instruments, SRBI, SUVBI, and SUVBI, were able to collect Rp 409 trillion (US$25.2 billion), US$2.31 billion, and US$387 million, respectively.
Particularly in the case of the SRBI, this instrument represented an innovative way to attract capital flow from abroad during a period of high credit costs and slow investment. Approximately 20.77 percent, or Rp 85.02 trillion (US$ 5.26 billion), of the total outstanding SRBI were owned by non-Indonesian residents, underscoring the SRBI’s success as a monetary instrument.
Even when compared to other countries in the same region, the Indonesian finance sector stands out for its stability against fluctuations. Throughout 2023, the global cost of credit was high due to hawkish Fed policies made to curb US inflation, resulting in a stagnation of capital flow on a global scale. Entering the second quarter of 2024, the composite index of many Southeast Asian countries such as Singapore and Thailand recorded price decreases compared to the same period last year, reaching -3.96 percent and -13.9 percent on the Straits Times Index (STI) and the Bangkok SET index, respectively. Meanwhile, the Jakarta Stock Exchange Composite Index (JKSE) recorded a price increase of 5.18 percent for the same one-year period.
In summary, the Indonesian financial sector stands out for its stability and consistency, maintaining growth through innovation even during periods of austerity or global uncertainty. This consistency is also reflected in its GDP, which grew by 7.4 percent from 2022 to 2023, contributing roughly 4.16 percent to the national GDP in 2023.
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As the government scrambles to shore up tax and excise revenues, a wave of corruption arrests targeting tax and customs officials has exposed deep governance problems within Indonesia’s revenue-collecting agencies. The Corruption Eradication Commission’s (KPK) recent raids have prompted Finance Minister Purbaya Yudhi Sadewa to carry out large-scale bureaucratic rotations at both the tax and customs offices. Yet questions remain over whether these measures can deliver lasting reform or meaningfully improve revenue collection.
Over the past weeks, the KPK has conducted a series of operations across multiple regions. On Wednesday last week, investigators arrested three officials in Banjarmasin, South Kalimantan, including the head of the medium tax office (KPP Madya), on suspicion of bribery and gratification. The alleged payments were intended to facilitate the approval of multibillion-rupiah tax restitution claims submitted by palm oil plantation companies.
On the same day, the KPK also arrested customs and excise officials in Jakarta and Lampung over alleged irregularities in import inspection activities. Investigators seized evidence including 3 kilograms of gold and Rp 8.19 billion (US$496,000) in cash. Among those detained was the head of the West Sumatra customs and excise office, a former director of customs investigation and enforcement.
The latest cases follow earlier arrests this year involving eight officials from the North Jakarta regional tax office. The officials were accused of accepting bribes worth Rp 6 billion in exchange for allowing PT Wanatiara Persada to pay only Rp 15.7 billion in taxes and Rp 4 billion in fees, far below its original tax obligation of Rp 75 billion.
In response to the string of scandals, Purbaya has pledged sweeping internal reforms to restore credibility within the Finance Ministry. He recently rotated 50 high-ranking officials at the Directorate General of Taxes (DJP) and reassigned 30 officers at the Directorate General of Customs and Excise (DJBC), a move aimed at tightening governance and boosting revenue performance.
The large-scale reshuffle, according to Purbaya, was unavoidable. Under existing regulations, he said, officials implicated in misconduct cannot be immediately dismissed before legal proceedings are concluded, leaving reassignment to lower-risk positions the only short-term option to limit further damage.
The renewed reform push comes at a critical fiscal juncture. In 2025, tax revenue reached only 87.6 percent of its target, amounting to Rp 1,917.6 trillion out of Rp 2,189.3 trillion target. As a result of weaker-than-expected revenue, the budget deficit widened to Rp695 trillion, or 2.92 percent of gross domestic product, close to the legal ceiling of 3 percent. Despite this shortfall, the 2026 state budget sets an ambitious tax revenue target of Rp 2,357.7 trillion, a 22.9 percent increase from last year’s realization.
With global geopolitical uncertainty intensifying and Indonesia’s economic growth stuck at around 5 percent for much of the past decade, meeting this year’s revenue target will be a formidable challenge. Purbaya has sought to reassure markets and the public that governance reforms at the tax and customs offices will gradually strengthen revenue performance, expressing confidence that the deficit will remain below the 3 percent threshold. Many economists and investors, however, remain cautious.
