Banking
From The Report: Indonesia 2020
View in Online Reader

Indonesia’s banking sector is large and crowded, with more than 1600 licensed commercial and rural banks. However, there remains plenty of untapped potential, given that the country has the fourth-largest unbanked population worldwide, at 83.1m people as of November 2019. Policymakers want both the number of banks and the unbanked population to shrink. As more Indonesians join the formal financial sector, it is expected that banks will consolidate, thanks to increased foreign investment and mergers. Regulators have been relaxing rules in hopes of attracting foreign entities that are keen to buy banks and create bigger players in the process. This chapter contains interviews with Jahja Setiaatmadja, President Director, Bank Central Asia; and Batara Sianturi, CEO, Citi Indonesia, and Chairperson, International Banks Association of Indonesia.

Articles from this Chapter

Overview

Solid foundations: The authorities are working to expand banking penetration and attract foreign entities
OBG
plus

Indonesia’s banking sector is large and crowded, with more than 1600 licensed commercial and rural banks. However, there remains plenty of untapped potential, given that the country has the fourth-largest-unbanked population worldwide. Indonesia is behind only China, India and Pakistan in terms of the number of people yet to access formal financial services, having 83.1m people without a bank account as of November 2019. Policymakers want both the number of banks and the unbanked population…

Interview

Modern adaptations: Jahja Setiaatmadja, President Director, Bank Central Asia, on how local banks are adjusting to global changes
OBG
plus

Interview:Jahja Setiaatmadja What is your overall assessment of the key challenges that need to be addressed? JAHJA SETIAATMADJA: If the credit growth rate can be maintained at 10-11%, banks’ liquidity will be sufficient. With the current loan-to-deposit ratio (LDR) at 94%, however, domestic bank liquidity is a concern, with some establishments having LDRs of over 100%. On the credit side, banks should shift towards riskier customers to ensure higher returns. Indonesia maintains a high…

Analysis

Encouraging consolidation: Efforts are under way to establish a stronger system that has fewer but more competitive players
OBG
plus

Consolidation is one of the biggest ongoing issues in Indonesia’s banking sector, representing a challenge for the authorities but also an opportunity for investors. The hundreds of financial sector licensees across the archipelago amount to a huge supervisory obligation for the country’s two regulators: Bank Indonesia, the country’s central bank, and the Financial Services Authority (OJK). The authorities would like to see a shorter roster of licensees, with most institutions bigger…

Interview

Ahead of the curve: Batara Sianturi, CEO, Citibank Indonesia; and Chairperson, International Banks Association of Indonesia, on international investor appetite, lending growth and digital innovations
OBG
plus

Interview:Batara Sianturi How would you assess international investor appetite for Indonesian debt and equities in 2020? BATARA SIANTURI: Since late January 2020 investors have taken a cautious stance towards emerging market assets due to concerns regarding the impact of Covid-19 on economic growth. We saw inflows into the bond market in January, but flow has since reversed, with year-todate outflows of Rp140trn ($9.9bn) as of May 2020. With the current economic uncertainties and weak risk…