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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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The administration of Prabowo Subianto is reforming the disbursement of fuel and electricity subsidies to improve state budget efficiency. These subsidies have long been criticized for disproportionately benefiting upper-middle-class households, who consume more energy, rather than the poor and vulnerable groups they are intended to support. As a result, the government now aims to better target subsidy distribution and reduce its long-standing fiscal burden. The urgency to optimize subsidy spending has also grown amid rising expenditures for several major government programs.
Finance Minister Purbaya Yudhi Sadewa outlined the subsidy reform plan during a joint working meeting with state asset fund Daya Anagata Nusantara (Danantara) and House of Representatives Commission XI on Dec. 4. He acknowledged that the well-off, and even the ultra-wealthy, remain among the beneficiaries of energy subsidies. The reform aims to significantly reduce access for households in income deciles 8–10, redirecting support toward lower-income groups in deciles 1–4.
According to the National Integrated Social Economic Data (DTSEN), income deciles 1–5 cover individuals from extreme poverty to the middle-income bracket, while deciles 6–10 range from middle- to upper-income levels. The Finance Ministry has been given six months to finalize the subsidy distribution strategy, with the entire policy reform design expected to be completed jointly with Danantara within two years. Meanwhile, the Energy and Mineral Resources Ministry revealed that the reform will cover subsidies for liquefied petroleum gas (LPG) and electricity.
The subsidy reform will be formalized through a new presidential regulation (Perpres) that amends existing frameworks, including Perpres No. 117/2021, the third revision of Perpres No. 191/2014 on fuel provision, distribution and retail pricing, and Perpres No. 70/2023, which updates Perpres No. 104/2007 on the provision, distribution and pricing of 3-kilogram LPG cylinders.
On the financial administration side, the Finance Ministry has issued Ministerial Regulation No. 73/2025 on the provision, calculation, payment and accountability for compensation funds related to fuel pricing and electricity tariffs. Previously, compensation to Pertamina and PLN was disbursed quarterly or even semi-annually. Under articles 8 and 11 of the new regulation, Pertamina and PLN may now receive up to 70 percent of their compensation for subsidized fuel and household electricity tariffs following a monthly review by the Finance Ministry's Inspector General. The remaining portion will be disbursed after an annual audit by the Development Finance Comptroller (BPKP), as stipulated under Article 28. The initial compensation portion may also be adjusted based on overall budget conditions or previous audit findings from the Supreme Audit Agency (BPK).
Danantara CEO Rosan Perkasa Roeslani emphasized that energy subsidy reform would improve the cash flow of state-owned enterprises (SOEs) tasked with public service obligations. He noted that previous cooperation between Danantara and the Finance Ministry in shifting fertilizer subsidies toward a more market-based mechanism had progressed well.
As of October, realized government spending on subsidies reached Rp 314.9 trillion (US$18.91 billion), or 66.3 percent of the 2025 state budget allocation. This includes Rp 194.9 trillion in subsidies and Rp 120 trillion in compensation payments. Distribution of subsidized fuel reached 13,915 kiloliters (kL), or 72 percent of the 19,410 kL target; subsidized 3-kg LPG distribution reached 6.35 million kg (78 percent of the target); and electricity subsidies reached 42.5 million consumers, exceeding the target of 41.3 million.
Energy subsidy reform is necessary given the fiscal burden it imposes and the resulting constraints on priority government programs. However, overly aggressive cuts, an inherent risk amid current austerity, could have negative social impacts, weaken consumer spending and dampen economic growth. The government should explore ways to curb subsidy spending without introducing additional bureaucratic costs.
