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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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Global coal oversupply and falling prices have prompted the Indonesian government to cut domestic coal production this year in an effort to stabilize the market. The move has raised concern among coal producers, who warn that smaller operational scales could reduce employment and non-tax state revenue (PNBP). At the same time, to secure coal supply for state-owned electricity company PT PLN, the government plans to increase the domestic market obligation (DMO). This dual pressure on producers raises an important question: will the production cut outlined in the 2026 annual work plan (RKAB) for the mining sector help restore prices, or will it create further challenges?
The Energy and Mineral Resources (ESDM) Ministry announced in January that Indonesia’s coal production target for 2026 has been reduced to 600 million tonnes (Mt), down from the 750-790 Mt realized in 2025, in response to weakening commodity prices. According to ESDM data, total coal production in 2025 consisted of 254 Mt for domestic consumption and mostly, 514 Mt, for exports. The remaining 22 Mt are stockpiled.
The Coal 2025 annual market report published in December 2025 by the International Energy Agency forecast global coal production to plateau from 9.1 billion tonnes in 2024 to 9.11 billion tonnes in 2025. Global coal trade is projected to decline by 5 percent year-on-year (yoy), reversing the positive growth from a record 1.54 billion tonnes in 2024 to nearly 1.47 billion tonnes in 2025. Indonesia’s coal export volume, dominated by thermal coal, is expected to fall by about 9 percent yoy from 555 Mt in 2024 to 505 Mt in 2025. As a result, Indonesia’s share of global coal trade would decline from 35.95 percent in 2024 to 34.4 percent in 2025, according to the IEA.
Thermal coal used for power generation is classified by calorific value into low CV below 4,200 kilocalories per kilogram, mid CV between 4,200 and 5,700 kcal/kg, and high CV above 5,700 kcal/kg. During January to August 2025, average prices stood at US$45 per tonne for low CV coal, $71 per tonne for mid CV coal, and $104 per tonne for high CV coal. High CV prices fluctuated between $92 and $122 per tonne during the period. Meanwhile, metallurgical coal used mainly for steel production averaged $186 per tonne.
The ESDM Ministry stated that companies holding first generation coal contracts of work (PKP2B) and state-owned enterprises with mining business permits (IUP) will not be subject to the 2026 production quota reduction. In exchange, these companies are required to fulfill their DMO commitments in the first half of 2026 to ensure sufficient supply for PLN, as many companies have not yet finalized their 2026 RKAB submissions.
Seven first generation PKP2B holders have converted their contracts into special mining business permits (IUPK), namely Adaro Indonesia, Arutmin Indonesia, Berau Coal, Kaltim Prima Coal, Kendilo Coal Indonesia, Kideco Jaya Agung, Multi Harapan Utama and Tanito Harum. Only Indominco Mandiri remains under a first generation PKP2B contract until October 4, 2028.
The ministry expects coal supply from first generation PKP2B companies and state-owned enterprises to reach 75 Mt in the first half of 2026. However, the government does not plan to increase DMO prices, which have remained at $70 per tonne for the electricity sector and $90 per tonne for the cement and fertilizer sectors since 2018.
The ESDM Ministry has also floated the possibility of raising the DMO requirement from 25 percent, as stipulated in Ministerial Decree No. 267.K/2022, to 30 percent. The ministry argues that the increase may be necessary to meet PLN’s thermal coal requirement of 240 Mt. With production capped at 600 Mt, a 25 percent DMO would fall short. Previously, Commission XII of the House of Representatives urged the ministry to raise the DMO to 30 percent for 2026.
The Indonesian Coal Mining Association (APBI-ICMA) reported that companies not exempted from the 2026 RKAB could reduce production by 40 to 70 percent. Some analysts estimate that the production cut could shave 0.09 percentage points off Indonesia’s 2026 gross domestic product growth. Non-tax revenue from the minerals and coal sector could decline by 19 percent year on year, equivalent to Rp 26.6 trillion. The reduction also risks job losses for approximately 16,000 workers in the coal sector and up to 610,000 workers across the broader economy.
The government should consider implementing a more moderate production cut to limit adverse impacts on the coal sector. It should also either maintain the DMO at 25 percent or increase DMO prices to better reflect market conditions. Given that the primary objective of the DMO is to secure supply for PLN, preferential pricing for the cement and fertilizer industries should be gradually reduced and eventually phased out. At the same time, the production adjustment presents an opportunity to accelerate Indonesia’s energy transition, which the government should strategically leverage.
