Reduced profit, a drop in lending and an increase in the rate of non-performing loans are some of the challenges faced by Indonesian banks as we approach the close of 2015. Despite these problematic conditions, marked progress was made in the banking sector specifically in relation to banking regulations.
Benign inflation, low borrowing costs and a thriving economy helped Indonesia’s banking sector achieve remarkable growth following the 2008/2009 global financial crisis. In 2014 and beyond, Indonesian banks must cut costs and identify new growth areas, which could open up opportunities for foreign investors.
The Indonesian government is confident that the incentives offered in the amnesty programme will convince Indonesian taxpayers, particularly those with assets parked abroad to avoid tax, to come forward and declare their assets and bring them back home.
The Indonesian government in April 2014 first made public its plans to carry out a merger between Bank Mandiri and Bank Tabungan Negara. This is in keeping with a current trend towards banking sector consolidation as the country strives to develop financial institutions with the capacity to fund key infrastructure projects and compete regionally.
Indonesia’s microfinance sector performed healthily throughout 2015 with almost all financial institutions recording significant credit growth. The country’s microfinance industry has bright prospects due to the fundamentals of the country in that the majority of businesses in Indonesia are SMEs.
Contribution to GDP: 2.55% (Q3 2015)
Return on Assets: 2.31% (Q3 2015)
Number of Commercial Banks: 118; 4 State/Partially State Owned, 10 Foreign, 11 Joint Ventures, 28 Non Foreign Exchange, 39 Foreign Exchange, 26 Regional Development Banks (August 2015).
Number of Islamic Banks & Units: 12 Banks, 22 Units (2015)
Total Assets: 6,244 trillion IDR (Q3 2015)
Government Bodies: Bank Indonesia, Ministry of Finance, Financial Services Authority (OJK).
Relevant Law: Bank Indonesia Regulation No. 14/8/PBI/2012 on Share
Ownership in Commercial Banks limits ownership by a single local/foreign financial institution to 40%, by a non financial institution to 30%, and by an individual to 20%. Larger stake is possible with the approval of Bank Indonesia.