Leading the Growth of Indonesia’s Banking Sector

Leading the Growth of Indonesia’s Banking Sector

INDONESIA –  Foreign direct investments (FDI) in Southeast Asia’s largest economy continued to grow as a result of reforms introduced by former Indonesian President Yudhoyono back in 2004. President Joko Widodo’s continued focus on these FDI-friendly policies for the upcoming 2020 budget will see the government spending 2,540 trillion rupiah (US$180 billion) to further attract foreign investments and reverse the country’s persistent trade deficit. This is one of the few reasons that has made Indonesia one of the top countries for foreign investors. However, Indonesia’s GDP growth is not spared by the recent global tensions brought about by the US-China trade war and impending Brexit. Despite this, the Indonesian government’s initiative to embrace financial technology’s (FinTech) developments has helped its banking industry to continue growing exponentially, outperforming the larger economies in ASEAN.

FinTech: The Change Catalyst

Digitalisation is fast changing the landscape of the banking industry and Indonesia is at the forefront of this change.  Finance companies capitalise on FinTech by using it as a loan platform to allow untapped individuals, micro, small and medium-sized enterprises (MSMEs) to access the same banking facilities and opportunities via the peer-to-peer (P2P) platform, one that is normally inaccessible to them.  

As Indonesia adopts an innovative and technology-driven solution to create a sustainable and conducive FinTech lending environment, it is essential to address the foreseeable challenges of providing credit access to these previously untapped individuals and MSMEs.

The use of Fintech for the verification of eligibility in the absence of physical documents by using the applicant’s digital identity and footprint allow companies to lower their operational costs while the use of digital platforms opens up investment opportunities for both retail and institutional investors. 

In a bid to enhance the FinTech industry,  the Foreign Services Authority of Indonesia, also known as Otoritas Jasa Keuangan (OJK), has established an online platform to serve as an education centre for users. This is to allow FinTech stakeholders to gain access to the latest news and developments in the industry. An online registration system has also been set up to monitor the growth of FinTech in the country as Indonesia seeks to further develop the FinTech industry by encouraging partnerships with its ASEAN neighbours.

The Future of FinTech Lending

As FinTech heads into the “Third Wave” of a collaborative era in the financial industry, the establishment of the Indonesian FinTech Lenders Associations (AFPI) will see a further commitment by the government to grow this industry. It is estimated that an additional IDR19.3 trillion will be made available via FinTech lending to MSMEs, paving the way for more opportunities in acquisitions and partnerships. 

Contact DesFran Today to Obtain a Financial Licence

Digital technology will continue to transform the banking industry in Indonesia. FinTech has provided a faster and more convenient access to banking services. However, despite the convenience FinTech provides to your business, getting through with the stringent regulations and limitations of Indonesia’s financial industry may prove a challenge for many. At DesFran, we have a team of professionals equipped with in-depth knowledge backed by years of expertise in corporate secretarial services and regulatory compliance who can help you with setting up your business in Indonesia.

Contact us today.   

References

Where to Invest: Banking Sector in Indonesia, Cekindo.com

Indonesia’s Fintech Lending, Pwc.com

Fintech Lending to Drive Indonesia’s Economic Growth, Fintechnews.sg

Fintech instrumental in achieving financial inclusion target, Antaranews.com

Indonesian Regulators Makes Fintech Startup Push, Retailnews.asia

Indonesian Economy Expected to Grow at Fastest Pace in 7 Years, Bloomberg.com

U.S. and World Population Clock, Census.gov

About the Author

Terence Tay is Strategic Communications and Research Executive at DesFran. Terence has more than six years of experience in the banking industry, with a keen interest in wealth and customer relations management. Having committed more than 15 years in the entertainment and performing arts scene in Singapore, Terence wishes to develop himself further in both the finance and communications realms by pursuing career and academic opportunities related to strategic and business communications. Terence holds a Bachelor’s degree in Management and Human Resource Management, and will be studying Master of Science in Communication Management at the Singapore Management University in 2020.

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