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.
Indonesia's Stock Exchange redoubled efforts in recent years to deepen the economy's capital markets, with stock market capitalization still low at 50% of annual GDP. Access to funding through stocks and bonds is vital for local businesses to grow stronger ahead of the launch of the AEC.
Though the IDX’s market capitalization has grown from just over a third of the country’s GDP in 2010 to almost half by 2013, Indonesia’s equity market remains small compared to regional peers. This section provides an overview of the key trends and an outlook for the future of the bourse.
Following an eventful end to 2013 that saw the postponement of several public listings, the Indonesian Stock Exchange (IDX) marked the start of a new year with the announcement of 30 companies expected to conduct an IPO in 2014. Headlining those going public are industry leaders in a host of key sectors such as infrastructure and public transport
Rapid economic development, low public debt and a young population provide Indonesia with perfect ingredients for a thriving mutual fund industry. Global investment companies, therefore, are reassessing opportunities to manage Indonesians' growing wealth.
In spite of Indonesia’s recent lacklustre economic performance, private equity investors seem to remain hopeful over the prospects in Southeast Asia’s largest market. The private equity industry is evolving slowly, but its players are focusing greater attention on the country which has seen some recent high profile successes.
Indonesia has over the last few years been heralded as the darling of Asia’s private equity market. However, a recent dip in economic performance has since worked to dampen expectations for private equity opportunities in 2014. To better understand where it stands today, it is necessary to view Indonesia’s private equity market as one on the precipice of a new cycle.
Indonesia's low insurance penetration level spells vast opportunities for foreign investors seeking to take advantage of its market. This section briefly explains the procedures and requirements for operating in this sector.
As is the case with Indonesia’s banking sector, insurance in Indonesia is on the cusp of wide-reaching change. Given the country’s large population of nearly 250m, its growing middle class and a GDP rising at approximately 5% a year, the insurance sector stands to benefit from these fundamentals in the years ahead.
Health insurance in Indonesia is still in its infancy, but changing lifestyles, rising disposable income, mounting health bills and increasing awareness about the benefits of insurance are set to change this.
Indonesia’s transition from a state funded health care system to one based on insurance and state contributions for the poor has opened up significant opportunities for the private insurance sector. This section provides an overview of the health insurance sector.
With the deadline for companies to register their employees with BPJS I fast approaching, Indonesia’s new government has yet to show any signs of deviating from the plan to overhaul the social security system. In keeping with earlier reports, businesses in Indonesia have been told to complete the registration process by 1st January 2015.
Indonesia’s Islamic banking industry remained under pressure throughout 2015 after experiencing limited growth but continued to innovate to increase their market share through various creative ways.
At a time when conventional investment products in developed economies have lost appeal due to their unattractively low yields, investors around the world are turning to sukuk. For Indonesia, this is an opportune context to carve out for itself a greater share of the global market.
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.