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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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Financial Services Authority (OJK) Jambi Province noted that financial services sector performance in the province improved, contributing to regional economic growth. Commercial banks' disbursed loans rose by 9.26 percent year-on-year (yoy) to Rp54.37 trillion as of November.
Conventional loans grew by 7.84 percent yoy to Rp48.12 trillion, while sharia financing grew by 21.62 percent to Rp6.25 trillion. Banks' third-party funds (TPF) grew by 6.21 percent yoy. The breakdown include conventional banking TPF increasing by 5.79 percent yoy to Rp42.29 trillion and sharia banking TPF rising by 10.68 percent yoy to Rp.16 trillion.
Commercial banks' loan to deposit Ratio (LDR) in November 2024 was recorded at 117.06 percent, or higher than the national commercial banks LDR of 88.46 percent. This happened because loan disbursement by commercial banks in Jambi was greater than the TPF they successfully collected. Meanwhile, the non-performing loan (NPL) ratio in Jambi was maintained at 1.81 percent, which is lower than 2.16 percent national NPL ratio.
Based on type of use, commercial bank loans in Jambi are still dominated by consumption loans at 42.38 percent, followed by working capital loans at 28.82 percent and investment loans at 28.8 percent. Based on the debtor category, the portion of loans disbursed to micro, small, and medium enterprises (MSMEs) and non-MSMEs were recorded at 46.35 percent and 53.65 percent, respectively.
The disbursed loan trend is in line with the fact that the largest portion of disbursed loans in Jambi is to the non-household business sector (including multipurpose loans) at 28.78 percent, followed by the agriculture, hunting, and forestry sector at 27.96 percent as well as wholesale and retail trade at 15.9 percent.
Loans disbursed by Bank Perekonomian Rakyat (BPR) secondary banks in Jambi grew by 6.37 percent yoy to Rp1.1 trillion in November 2024, and their TPF rose by 2.16 percent yoy to Rp1.02 trillion. The LDR of BPR in Jambi reached 85.4 percent in November 2024, while their non NPL ratio of 15.56 percent.
Working capital loans accounted for 55.72 percent of BPRs' total disbursed loans, followed by investment loans at 29.6 percent and consumption loans at 14.68 percent. Furthermore, loans disbursed to MSMEs accounted for 83.36 percent of total loans disbursed by BPRs. Based on business sector, loans to the construction sector accounted for the most at 22.69 percent, followed by the agriculture, hunting and forestry sector at 19.03 percent.
For the non-banking institutions financial services subsector, islamic microfinance institutions saw their disbursed financing surge by 31.61 percent yoy in November 2024. Non-banking institutions had disbursed Rp2.86 billion of funds to 1,519 customers with non-performing financing (NPF) ratio of 7.3 percent.
Disbursed financing increases 0.41 percent yoy and NPF of 3.83 percent yoy. The number of financing contracts also rose by Performance of Financing Companies in Jambi in October 2024 with financing distribution of IDR 8.97 trillion or an increase of 0.41 percent (yoy) with Non-Performing Financing (NPF) at 3.83 percent. There was an increase in the number of financing contracts by 18.55 percent yoy to 1,063,940 contracts.
Meanwhile, the venture capital industry recorded total financing rising 16.3 percent yoy to Rp113.01 billion in October 2024 with their NPF ratio down 2.49 percent yoy to 2.75 percent. There is also new pawn company entity established July 2024 in Jambi Province, namely PT Gadai Mandiri Sentosa. The company's assets and total disbursed loans reached Rp2.22 billion and Rp950 million, respectively, based on its 3rd quarter (Q3) of 2024 report.
For the insurance industry, conventional general insurance premiums surged by 25.7 percent yoy to Rp982.06 billion in September 2024, while conventional life insurance premiums decreased by 69.14 percent yoy to Rp196.29 billion. Separately, the combined total assets and total investments in the pension fund subsector grew by 5.68 percent yoy to Rp229.61 billion and 9.91 percent yoy to Rp222.65 billion, respectively, in September 2024.
Furthermore, financial technology peer-to-peer lending (fintech P2P) saw its accumulated financing soar by 53.94 percent yoy to nearly Rp6.31 trillion in September 2024, and several active recipient accounts experiencing significant growth of 30.2 percent yoy and followed by outstanding financing experiencing positive growth of 50.43 percent yoy to Rp735.96 billion..
