In keeping with its reputation as an institution of higher education committed to ensuring the preparedness of local banks to compete amid rising regional integration, Perbanas Institute recently published an article written by one of its lecturers, Ms Dyah Nirmalawati, titled “Are Financial Conglomerates the Correct Strategy for Indonesia in facing the ASEAN Economic Community?’’. The article’s central premise focused on the fact that the top 50 of Indonesia’s financial conglomerates control more than 70% of total assets in financial services. As such in recent years, financial conglomerates have come to play an increasingly important role in the domestic financial sector’s ability to thrive at the international level.
In the article, Ms Nirmalawati highlights that through becoming a conglomerate, banks are able to offer a variety of banking and non-banking products and services, which in turn reduce operational costs and lower lending rates. Furthermore, financial conglomerates offer customers the ‘one stop banking’ experience and can cater their transactional needs to garner greater loyalty, and ultimately, make significant contributions to the Indonesian economy.
However, Ms Nirmalawati also sought to discuss the disadvantages of financial conglomerates in an emerging market such as Indonesia. Conglomerates in Indonesia do not have easy sources of funding, technology, and skilled human resources, and their complex structure further intensifies the problem of systemic risk in the country’s financial sector. All too often, investment activities made by financial conglomerates are vulnerable to serious losses during disruptions in the market.
In presenting a comprehensive overview of an increasingly integral element of Indonesia’s financial sector, Ms Nirmalawati’s article represents the quality of human resources at the Perbanas Institute and its readiness to provide timely, impactful analysis. Her informative piece specifically highlights the sector’s potential to expand throughout the ASEAN Economic Community, with proper regulations. This showcases Perbanas' ongoing efforts to keep up to date on regional developments, and to highlight Indonesia’s potential to be a key player for international finance.