Financial Services

An Expert's View about Banking and Finance in Indonesia

Posted on: 2 Dec 2012

Indonesia is an open market for the financial services sector. There is a huge potential growth in banking (conventional and Islamic), insurance (particularly life segment) and the capital markets.

Financial Services sector in Indonesia Indonesia is an open market for the financial services sector. There is a huge potential growth in banking (conventional and Islamic), insurance (particularly life segment) and the capital markets. The growth of Indonesia’s economy results in a higher demand for professional services e.g. legal, accountancy and management consultancy, etc. Market overview Banking Indonesia’s economic growth continues to be strong at 6.5% in 2011 and predicted to reach 6.1%-6.3% in 2012, and is South East Asia’s largest economy. Indonesia’s credit rating has reached investment grade. Long-term foreign currency rating from Fitch Ratings’ is BBB-, while Moody’s is Baa3. There are 122 banks with more than 13,000 branches in Indonesia. These consist of state-owned banks, local private banks (foreign exchange and non-foreign exchange licensed banks), foreign banks and the regional development banks. Bank Indonesia (Central Bank) has the authority to issue policy rules and regulations. In October 2011, Indonesia’s Parliament passed a long-awaited law to establish a financial services regulator (OJK) with the authority to regulate and supervise the financial services industries, and thus assuming the Ministry of Finance and Capital Market and Financial Institutions Supervisory Agency’s function in regulating and supervising the capital market, insurance, pension funds, leasing companies and other financial services institutions, as well as Bank Indonesia’s function in regulating and supervising the banking sector (as of 31 December, 2013). Bank Indonesia has recently introduced new rules on limits to bank ownership in Indonesia, to be effective on 13 July 2012. Foreign providers of professional services (legal, accountancy, etc.) wishing to practice in Indonesia are subject to a different set of requirements. Key opportunities ξ Continuous growth of middle class in recent years offers huge opportunities for priority banking product. ξ Banks are increasingly focusing on providing better services and product innovation to their customers. Consequently, many banks continue to invest in IT-based banking systems and software. ξ Considering the size of the Muslim population in Indonesia and the growth of the Islamic banking sector over the past 5 years, strategic investment and partnerships are to be found in expanding the product base that Sharia banks are able to offer to customers. Limited knowledge of more sophisticated banking products presents collaboration opportunities. ξ In spite of the current regulations, there is an increasing interest on the part of foreign providers in supplying professional services in Indonesia to support the activities of international and Indonesian clients. Latest export opportunities in the Financial & Professional Services sector Latest export opportunities in Indonesia Getting into the market There are various methods of entry into: Indonesia’s Banking Sector: ξ Purchase of shares in banking entities; ξ Acquiring an existing bank; ξ Opening up a branch of a foreign bank; ξ Establishing a new bank; ξ Investing in Islamic banks. Indonesia’s Professional Services Sector: ξ Establish presence in association with Indonesian firms; ξ Open a representative office; ξ Enter an MOU with relevant institutions. More about doing business in Indonesia Contacts Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS). To commission research or for general advice about the market, get in touch with our specialists in country - or contact your local international trade team. ξ Lian Jap, British Embassy Jakarta, Indonesia. Tel :+62 21 2356 5265, Fax : +62 21 2356 5352 or email : lian.jap@fco.gov.uk Contact your local international trade team UKTI Events UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows. Latest events in the Financial & Professional Services sector Latest events In Indonesia Major Events None at present. Useful links More about OMIS and other UKTI services for exporters
Posted: 02 December 2012

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