Sector
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.
View moreOther Sectors
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.
Latest News
Indonesia and Australia are moving toward clinching a new, stronger defense treaty that could potentially affect the Indo-Pacific security landscape, particularly in the South China Sea, where tension has been building in recent years due to overlapping territorial claims between China and several Southeast Asian countries.
Security dominated the discussion between Australian Prime Minister Antony Albanese and President Prabowo Subianto during his first state visit to the southern neighbor. In their joint press conference aboard the Royal Australian Navy's flagship HMAS Canberra on Nov. 12 in Sydney, the two leaders announced that, following what Albanese described as substantive negotiations, they were ready to sign an enhanced bilateral security treaty between their countries.
The signing of the treaty, which builds on the 2006 Lombok Treaty and the defense cooperation agreement Prabowo signed in 2024 when he was defense minister, is scheduled for Albanese's upcoming visit to Jakarta in January 2026.
Details of the treaty have not been released, but Albanese said it would entail regular consultations at the head of state and ministerial levels, including when the security of either country was under threat. He also mentioned exploring joint and individual measures to deal with such threats.
This marks a new achievement for Prabowo, a retired Army general with a strong grasp of geopolitical and security challenges who has taken a keen interest in foreign policy since he took office in October 2024, making a flurry of overseas tours immediately afterward to cut deals. With Australia, the focus was on security.
The revamped Indonesia-Australia defense treaty could bridge the gap between the different ways each approaches the security situation in the Indo-Pacific.
Australia has formed various alliances, including a bilateral one with the United States (US), the trilateral group known as AUKUS with the US and the United Kingdom, and the Quadrilateral Security Dialogue (Quad) with the US, Japan, and India. Their common objective is to counter the emergence of China as a global superpower.
Indonesia, under its foreign policy principle of non-alignment, relies primarily on diplomacy and maintains national security via defense cooperation agreements with just about every notable country, including China, its biggest trading partner. But it has far more defense and security cooperation, and conducts more joint military exercises, with the US and Australia.
There is a good reason for that. Indonesia's sole external security threat is likely to come from China due to ongoing tensions in the Natuna Sea, the southern part of the South China Sea in Riau Islands Province which China claims as a traditional fishing ground. The area has seen skirmishes between Indonesian Navy patrols and Chinese Coast Guard vessels escorting Chinese fishing boats, although not to the same extent as confrontations between China and the Philippines.
Although neither the joint press statement nor any documents that emerged from Prabowo and Albanese's meeting in Sydney mentions China, it is obvious that both had China in mind when discussing regional security. The goal for Australia, as well as the US, is to protect the South China Sea as a critical maritime trade route.
Indonesia and Australia have intensive bilateral security arrangements, and the two countries also participate in many multinational military drills in the region. They also conduct the "2+2" defense and foreign ministers’ meetings and an annual leadership meeting, which Albanese hosted in May 2025.
Their relationship is not without its ups and downs, often over security matters.
In 1999, president B.J. Habibie tore up the 1995 defense treaty with Australia over disputes related to Indonesian-occupied Timor Leste. In 2013, Indonesia learned that Australian intelligence had been tapping the telephone calls of Indonesian leaders, including Susilo Bambang Yudhoyono (2004-2009; 2009-2014).
President Prabowo jokingly alluded to this espionage scandal during the Sydney press conference, saying to Albanese: "I think your intelligence is very good. You know that I like bagpipes, so I am received by bagpipes."
