Note: The data are provided for informational purposes only and in some cases, the information may be incomplete, not fully accurate or out of date. For more information on how data are compiled, see "A Note About Sources." The date of the last update for each country is marked in the section "Country Indicators." We welcome updates and comments. Click here to write to us.
Indonesia
Country Indicators
Information Last Updated
August 2007
Information Compiled by
Sumantoro Martowijoyo, Consultant
Information Verified by
Not yet verified
Population (Millions)
223 million [2006] (World Development Indicators Online)
Population Density (per sq km)
123 [2006] (World Development Indicators Online)
GNI per capita (US$)
USD 1,420 [2006] (World Development Indicators Online)
GNI per capita (PPP US$)
USD 3,950 [2006] (World Development Indicators Online)
Total Unemployment (% of labor force)
10% [2004] (World Development Indicators Online)
Employment in Agriculture (% of total employment)
44% [2005] (World Development Indicators Online)
Gross domestic saving (% of GDP)
25% [2006] (World Development Indicators Online)
% Population under $2/day (PPP)
52% [2002] (World Development Indicators Online)
Size of informal sector
To be determined.
Depth of Financial Sector (M2/GDP)
39% [2006] (World Development Indicators Online)
Exchange rate
The average exchange rate in 2006 was 1 USD=IDR 9,167 (BI, 2006). The rate on August 25, 2007 was 1 USD=IDR 9,405. In this report, an exchange rate of 1 USD = IDR 9,000 is used for simplicity.
Percentage of population with access to banking services
Ownership structure of banks (and financial institutions if available)
COMMERCIAL BANKS: There are 130 commercial banks, of which 5 are state-owned, 26 are provincial government-owned, 71 are private, 17 are joint venture, and 11 are foreign. RURAL BANKS: There are 1,835 People's Credit Banks (Rural Banks or "BPRs"), of which 1,347 are private, 442 are regional government-owned, 45 are owned by cooperatives, and 1 is owned by a local society (BI, Indonesian Banking Statistics, May 2007). NBFIs: There are also 84 non-bank financial institutions, mostly privately-owned, and one state-owned pawn company. (BI, Economic Report on Indonesia 2006)
Formal and Semi-Formal Sources of Microfinance
BRI Units (a part of Bank Rakyat Indonesia, which is subject to commercial banking regulation); People’s Credit Banks (BPRs); Village Banks (BKDs); and Savings and Loans Cooperatives (KSPs) and Savings and Loans Units of Cooperatives (USPs), both of which include licensed credit unions and licensed BMTs (Muslim MFIs).
Non-bank non-coop MFIs (Rural Funds and Loans Institutions (LDKPs)), NGOs, unlicensed Grameen Bank replicators, unlicensed credit unions, and unlicensed BMTs.
ROSCAs (arisan), self-help groups, moneylenders, traders and shopkeepers
Wholesale Lender(s)
The Indonesian Credit Union League (Inkopdit) lends to 33 regional/local credit union apex organizations (Puskopdit/BK3D). BRI branch offices lend to BKDs. Under a linkage program supported by Bank Indonesia, 54 commercial banks have channeled funds to 1,105 rural banks (BPRs) (as of May, 2007). PNM (Permodalan Nasional Madani) is a state-owned enterprise tasked with lending liquidity credits collected by BI from BPRs, as well as from other program loans. Bank Bukopin’s Swamitra program provides loans and technical assistance to partner cooperatives.
Definitions of microfinance or microcredit
There is no legal definition, but the Central Bank (BI, Bank Indonesia) defines micro-credit as loans of up to IDR 50 million (approx. USD 5,500), and BRI set IDR 100 million (approx. USD 11,110) as the ceiling for its "commercial Kupedes" rural loan scheme (BRI Annual Report 2006). In practice, micro-credits are often much smaller. As a comparison, in 1999, a micro-credit project funded by the Asian Development Bank (ADB) and BI set a micro-credit limit of IDR 2 million (approx. USD 200).
NGO microfinance provider formalization or transformation issues
Only one NGO has become a commercial bank (Bank Purba Danarta). Some NGOs have chosen to found People’s Credit Banks (BPRs). As of June 2005, 533 non-bank non-coop MFIs (LDKPs) had converted to BPR status. While all LDKPs were supposed to transform into BPRs, the remaining 1,620 LDKPs either failed to successfully convert or chose to remain as LDKPs.
Ongoing microfinance policy development status
The draft Microfinance Bill sponsored by BI has failed to be passed on to the Parliament. The transfer of banking supervision from BI to a financial service authority to be created for this purpose (OJK) has been postponed until 2010 by the Parliament.
Safety net availability: insurance, pension, etc.
Health Insurance for the poor (Askeskin), direct cash aid to poor families (BLT).
Microfinance Regulation in Seven Countries, A Comparative Study
Meagher, Patrick ,et.al., 2006
SaDhan –Iris Center, University of Maryland,
The Microfinance Revolution, Volume 2: Lessons from Indonesia, Robinson, Margeurite. (2004)
The World Bank, Washington, DC.
General Participation in the Financial Services Market
No. of institutions
No. of clients
Total Assets
Deposits
Target Market
Constraints to provision of microfinance services
Banks
Commercial Banks
130, with 9,303 outlets, of which 4,229 are BRI units (BI, IBS, May, 2007) (BRI, 2006)
BORROWERS: 19 million, (MSME borrowers, of which 18 million are micro borrowers) (BI/ Bureau of Credits, Micro, Small and Medium (MSM) Credits, June 2007)
TOTAL ASSETS: USD 191 billion (IDR 1,721 trillion) LOANS: USD 91.5 billion (IDR 824 Trillion) (BI, IBS, May, 2007)
USD 145 billion (IDR1,306 trillion)
(BI, IBS, May 2007)
Largely serve larger industries and urban households. BRI and Bank Danamon have micro-finance units. BPDs (Provincial Development Banks) have a greater portion of the small & micro market because of their more limited operation.
No formal constraints. However, most of the commercial banks do not reach out to those who would use microfinance services.
TOTAL ASSETS (LDKPs): approx. USD 60 million. (IDR 5.4 trillion) TOTAL ASSETS (BKKs ONLY): approx. 40 million. (IDR 3.6 trillion) TOTAL LOANS (BKKs ONLY): approx. 26 million (BPD, Dec. 2004)
FOR ALL LDKPs: approx. USD 42 million (IDR 3.78 trillion). FOR BKKs ONLY: approx. USD 18 million (IDR 1.62 trillion) (BPD, Dec. 2004)
LDKPs operate at sub-district and village level. They serve poorer households than do BRI Units, but wealthier households than those served by BKDs.
Unclear legal status has had a psychological impact and discouraged operations.
Cooperatives/Credit Unions
Credit Unions
1,041 (Inkopdit, Dec. 2004).
479,531
USD 136 million (IDR 1.3 trillion)
USD 105 million (IDR 940 billion)
Generally, credit unions serve people with a common bond, but some of the larger CUs have expanded beyond that limitation and essentially serve the general public.
Large credit unions' minimum requirements for shares and savings may be too high for the poorest citizens; small CUs lack adequate liquidity.
Commercial banks offering a full range of commercial banking services, including deposits, loans, payment services, guarantees, and foreign exchange transactions.
Bank of Indonesia is responsible for licensing, regulation, supervision (until 2010), and imposing sanctions.
Mobilizing deposits from public, payment services, foreign exchange transactions.
Banks owned by the village, which offer credit, mandatory savings, and voluntary savings
Bank of Indonesia. BI pays BRI to supervise BKDs on BI's behalf.
Providing loans and mobilizing mandatory savings deducted from the loans. Since the enactment of the Banking Law of 1992, BKDs have been deemed to be BPRs and have been required to comply with BPR regulatory requirements. However, they have been exempted indefinitely from compliance with these requirements.
Non-bank Financial Institutions
Rural Fund and Credit Institutions (LDKP)
Provincial Government regulations
Sub-district/village level MFIs offering loans and savings that were established by provincial/district governments prior to the 1998 banking deregulation.
Regulated by the provincial governments, supervised by Provincial Development Banks (BPDs) or the District Government Auditor's Office.
Mobilize mandatory and voluntary savings from clients within sub-district/village area. Like BKDs, LDKPs were required to obtain BPR status following enactment of Banking Law of 1992.
Cooperatives/Credit Unions
Credit Unions
Cooperatives Law; guidelines established by the CU's regional apex institution (Puskopdit/BK3D)
A savings and loan business of a group of people having a common bond.
Regional Office of Ministry of Cooperatives and regional apex institution.
Mobilizing savings from members; note that some large CUs draw members from throughout a district or municipality.
Savings and Loan Cooperatives
Law No. 25 of 1992 on Cooperatives; Government Regulation No. 9 of 1995 on Saving and Lending Activities of Cooperatives
A business enterprise comprised of individuals or primary cooperatives as members that is a people's economic movement based upon principles of brotherhood (Law No. 9/1995, Art. 1).
State Ministry of Cooperatives and Small & Medium Enterprises
Mobilizing savings from members and certain non-members using a cooperative form.
Muslim MFIs
Cooperatives Law; guidelines issued by the Sharia Council
Integrated business focused on improving people's standard of living that provides financial services in accordance with Islamic law.
Regional Office of Ministry of Cooperatives
Collecting savings from members and partners.
"Members" refers to shareholders who do not borrow; "partners" refers to targeted clients who save and borrow.
Limited liability company, cooperative, or regional development enterprise. Commercial banks may also issue shares to the stock exchange (Banking Law of 1992).
Foreign ownership up to 99% is allowed. Single major ownership principle is implemented: a person/entity/group may hold 25% or more of the shares (or less than 25% but have control in practice) in one commercial bank only (except along with a sharia commercial bank) (BI No.8/16 of 2006)
COST: No charge from BI, but evidence of paid-up capital is required. TIME: BI must issue a license or reject the application within 6 months.
Ministry of Home Affairs. However, since the 1988 deregulation and passage of the Banking Law of 1992, BKDs are no longer being registered.
Unclear -- supposed to be some form of village or local government enterprise. Some local governments now are discussing the appropriate legal form for BKDs.
No private or foreign ownership
No longer applicable, as BKDs are no longer being registered.
Non-bank Financial Institutions
Rural Fund and Credit Institutions (LDKP)
Provincial Government regulations
Provincial Government. However, since the 1988 deregulation and passage of the Banking Law of 1992, LDKPs are no longer being registered.
Provincial Government Enterprise (PD/BUMD)
No private or foreign ownership
No longer applicable, as LDKPs are no longer being registered.
Cooperatives/Credit Unions
Credit Unions
Law No.25 on Cooperatives; Government Regulation No. 5 of 1995 on the Implementation of Savings and Lending Activities by Cooperatives
Regional CU apex first, followed by State Ministry of Coops and Small & Medium Enterprises or its regional office.
Savings and loan cooperative or multi-purpose cooperative (Gov. Reg. No. 5/1995).
Prohibited: ownership by non-members. As a coop, a CU must have at least 20 members (Coop Law No. 25/1992).
COST: Registration fees with the Cooperatives Office and public notary vary, depending upon location and size of cooperative. TIME: Must issue license within 3 months of registration (Coop Law No. 25/1992).
Savings and Loan Cooperatives
Law No.25 on Cooperatives; Government Regulation No. 5 of 1995 on the Implementation of Savings and Lending Activities by Cooperatives
State Ministry of Cooperatives and Small & Medium Enterprises or its regional office
Primary or secondary cooperative (Gov. Reg. No. 5/1995)
Prohibited: ownership by non-members. Coop must have at least 20 members to form a primary coop, and at least 3 primary cooperatives to form a secondary coop (Coop Law No. 25/1992).
COST: Registration fees with the Cooperatives Office and public notary vary, depending upon location and size of cooperative. TIME: Must issue license within 3 months of registration (Coop Law No. 25/1992).
Muslim MFIs
Law No.25 on Cooperatives; Government Regulation No. 5 of 1995 on the Implementation of Savings and Lending Activities by Cooperatives
State Ministry of Coops and Small & Medium Enterprises or its regional office
Savings and loan cooperative or multi-purpose cooperative (Gov. Reg. No. 5/1995).
Ownership by non-members. As a coop, a BMT must have at least 20 members (Coop Law No. 25/1992).
COST: Registration fees with the Cooperatives Office and public notary vary, depending upon location and size of cooperative. TIME: Must issue license within 3 months of registration (Coop Law No. 25/1992).
Licensing Requirements and Standards
Standards for ownership officers
Feasibility study/business plan
Audit of Proposed Founders, Owners, Officers
Operating Manuals
Prohibited sources of funds
Banks
Commercial Banks
Both bank owners and management must meet fit and proper tests. In addition, they may not have any record or involvement in fraud or financial crime (BI No. 2/27 of 2000)
Business plan required.
Directors and owners must submit a statement stating that they were never involved in bank fraud or crime and never filed for bankruptcy. An investigation to confirm this statement will be conducted (BI No. 2/27 of 2000).
Formal operating manual required
Start-up capital may not be borrowed from other banks/parties. Commercial sharia banks are prohibited from borrowing from a number of sources considered to be "unlawful" under sharia law (BI No. 2/27 of 2000).
Rural Banks
Both bank owners and management may not have any record or involvement in fraud or financial crime. In addition, one of the two directors must have a bachelor’s degree (D3) and a certificate of proficiency as a BPR director (BI No. 8/26 of 2006).
Business plan required.
Directors and owners must submit a statement stating that they were never involved in bank fraud or crime and never filed for bankruptcy. An investigation to confirm this statement will be conducted (BI No. 8/26 of 2006).
Credit manual is required
Start-up capital may not be borrowed from other banks/parties (BI No. 8/26 of 2006).
Village Banks
Manager (Commissioner I) is ex-officio the village head. Commissioners II and III are village officials or respected residents. Bookkeeper must be a professional. Supervisor is a BRI officer (Staatsblad No. 357 of 1929).
None required.
BRI supervisor may investigate commissioners and bookkeeper, but it's difficult in the case of Commissioner I, because he is the village head.
Operating manual is standardized and known well by officials and clients.
Foreign investment.
Non-bank Financial Institutions
Rural Fund and Credit Institutions (LDKP)
Manager selected/appointed by provincial/district government
Business plan required by the supervising BPD.
District government and BPD branch office select the managers/officials of LDKPs.
LDKPs have standardized operating manuals.
All funds must be channeled through the BPD.
Cooperatives/Credit Unions
Credit Unions
Appointed by members (annual meeting)
Business plan required by supervising regional apex.
None
Regional apex provides a standardized operating manual.
No prohibition
Savings and Loan Cooperatives
One of the managers must have finance experience; managers may not have a kinship relationship with any Board member (Gov. Reg. No. 9/1995).
Business plan needed for registration.
None
Ministry of Cooperatives provides a standardized operating manual (Min. Coop. No. 96 of 2004).
No prohibition
Muslim MFIs
Appointed by board of founders and members (annual meeting)
Business plan required
None
PINBUK (an NGO assisting BMTs) provides guidelines on preparing an operating manual.
No prohibition
Capital and Reserves
Minimum capital
Minimum capital adequacy/gearing ratios
Forms of capital recognized
Risk-weighting of assets
Loan loss provisioning, write-off
Reserves, Liquidity requirements
Banks
Commercial Banks
Existing banks must increase core capital to USD 9 million (IDR 80 billion) New banks must have paid-up capital of USD 330 million (IDR 3 trillion) (BI, March 2007)
CAR must be minimum of 8% of risk weighted assets (BI No. 26/20 of 1993).
TIER I (CORE CAPITAL): Paid-up capital, donated capital, reserves, retained earnings, profit of previous and current year. TIER II (SUPPLEMENTARY CAPITAL): Loan loss provision, assets revaluation provision, borrowings, subordinated loans (BI 26/1/BPPP of 1993).
0%: Cash, gold and coins; claims or securities guaranteed by the central government or the central bank; claims on (or guranteed by) cash, money, gold coins, and deposits at the same bank. 20%: Claims on (or guaranteed by) domestic banks, regional governments, non-ministrial institutions, multilateral donor agencies, or foreign prime banks; securities issued or guaranteed by domestic banks, regional governments, non-ministrial institutions, multilateral donor agencies, or foreign prime banks. 50%: Housing loans guaranteed by a first mortgage; claims on (or guaranteed by) Indonesian state enterprises or foreign central governments; securities issued or guaranteed by Indonesian state enterprises or foreign central governments. 100%: Claims on (or guaranteed by) regional state enterprises, individuals, private companies, cooperatives, etc.; fixed assets and office equipment; other assets. (BI 26/1/BPPP of 1993)
For small debtors, loans are weighted according to repayments only:
- Current (no late payment): 0.5%
- Special Mention (1 to 90 days overdue): 5%
- Sub-standard (>90 to 180 days overdue) :15%
- Doubtful (>180 to 270 days overdue): 50%
- Loss (>270 days overdue): 100%
(BI No. 9/16/2007) (BI No. 148/1998)
Banks are required to maintain statutory reserves in the form of demand deposits at the central bank. Reserves must equal a minimum of 5% of third-party funds for domestic currency, and 3% of third-party funds for foreign currency (BI 7/49 of 2005).
Rural Banks
Approx. US $555,000 (5 billion IDR) in capital region; US $222,000 (2 billion IDR) outside Jakarta and in provincial capitals on Bali and Java; US $111,000 (1 billion IDR) for all other towns on Bali and Java as well as provincial capitals outside these 2 islands; US $55,000 (500 million IDR) elsewhere (BI 8/5/2006)
CAR must be minimum of 8% of risk weighted assets (BI No. 26/20 of 1993).
TIER I (CORE CAPITAL): Paid-up capital, donated capital, reserves, retained earnings, profit of previous and current year. TIER II (SUPPLEMENTARY CAPITAL): Loan loss provision, assets revaluation provision, borrowings, subordinated loans (BI No. 30/12/1997) (BI 30/3/1/PPB of 1997).
0%: Cash; BI Certificates; loans guaranteed by time deposits and savings at the same bank. 20%: Deposits, savings, and other claims on other banks; loans to or guaranteed by other banks; loans to or guaranteed by regional governments. 40%: Housing loans guaranteed by a first mortgage. 50%: Claims on (or guaranteed by) government and regional government enterprises; loans to retirees. 85%: loans to micro/small/medium enterprises. 100%: fixed assets and office equipment; other assets (BI 8/28 of 2006).
1. For Loans with Less than 1 Installment per Month: Current (0 to 30 days overdue): 0.5% Sub-standard (30 to 90 days overdue): 10%. Doubtful ( 90 days to 180 days overdue): 50%. Loss (over 180 days overdue): 100%
2. For Loans with More than 1 Installment per Month: Standard (0 to 3 installments overdue): 0.5%. Sub-standard (>3 to 6 installments overdue): 10%. Doubtful (>6 to 12 installments overdue, and loan overdue 1 to 2 months): 50%. Loss (over 12 installments overdue, and loan overdue >2months): 100%.
3. For Housing Loans: Standard (0 to 6 installments overdue): 0.5%. Sub-standard (>6 to 9 installments overdue): 10%. Doubtful (>9 to 30 installments overdue, and loan overdue 1 to 2 months): 50%. Loss (over 30 installments overdue, and loan overdue >2 months): 100% (BI No. 19 of 2006, BI 8/6 of 2006)
No requirements. Reserves from profit decided internally.
Village Banks
BKDs are exempted from minimum capital requirements for BPRs.
No requirements.
N/A
No rule
No rule. The BRI has the power to decide this.
No requirements. Most profits are transferred to reserves.
Non-bank Financial Institutions
Rural Fund and Credit Institutions (LDKP)
USD 5,500 (IDR 50 million) required to be able to convert into a BPR.
No rule.
Shares from provincial/district government and BPD; reserves from profits.
No rule
No uniform rule. Each LDKP has its own rule with respect to loan loss provisioning. BKKs follow rules for BPRs, but other LDKPs have their own systems for the classification and provisioning of loans.
No requirements.
Cooperatives/Credit Unions
Credit Unions
USD 1,700 (IDR 15 million).
Min. 10% institutional capital (follows PEARLS guidelines).
Share Capital (mandatory savings); Non-Share Capital (voluntary savings).
Liquidity reserve: An amount equaling at least 15% of all short-term liabilities must be invested in the regional apex institution (follows PEARLS guidelines).
Owners’ Equity, Share Capital, and Borrowings from members/ other institutions, or securities
(Reg No. 9/1995).
No weighting of risk for assets.
Sub-standard (overdue 1 to 2 installments): 50%. Doubtful (overdue > 2 installments, and either loans can be rescued and the collateral is worth at least 75% of debt, or the loan cannot be rescued but the collateral is worth at least 100% of debt): 75%. Loss (> 21 months after loan classified as doubtful): 100% (Minister of Coops 194/1998)
No external regulations; level of reserves are decided internally by each cooperative.
Muslim MFIs
USD 1,700 (IDR 15 million).
No rule.
Members' shares; members' savings; religious donations; grants.
No rule
Varies, depending upon internal decisions. BMTs may follow guidelines for coops, for BPRs, or donor guidelines.
No external regulations; level of reserves is decided internally by each BMT cooperative.
Risk Management Guidelines
Guidelines & restrictions on financial services
Guidelines & restrictions on operational rules
Guidelines & restrictions on interest rates
Concentration of risk
Connected/insider business
Banks
Commercial Banks
PERMITTED: Savings; demand and time deposits; certificates of deposit; credit; payment services; guarantees; leasing; credit cards; PROHIBITED: insurance; investment in other commercial banks, except in sharia banks (BI, Banking Booklet, March 2007)
Branch offices require Bank Indonesia approval. Commercial banks are required to report suspicious financial transactions.
No restriction, but deposit rate indirectly limited by max. rate for deposits that will be insured by the Deposit Insurance Office (LPS), because deposits at higher interest rates are not insured. This rate varies according to institution type (LPS will insure deposits at a higher rate for BPRs than for commercial banks), and the rate is announced monthly.
MAX. LENDING TO SINGLE BORROWER OR GROUP OF BORROWERS: 20% of bank capital. (BI 31/177 of 1998)
For "affiliated parties" (shareholders owning 10% or more of the bank’s paid-up capital, board members, other executives, and relatives of executives), maximum loan size is 10% of bank capital. (BI 31/177 of 1998)
Rural Banks
PERMITTED: Savings and time deposits; PROHIBITED: demand deposits; clearing and payment services; insurance; equity investment; foreign exchange activities (except for money changing) (BI, Banking Booklet, March 2007).
Approval for opening branches provided if it is in the same province, the bank had a sound rating in the last year, the bank has fulfilled its paid-up capital requirement, and has achieved a capital adequacy ratio of 15% over the preceding three months (BI 8/5/2006)
No restriction, but deposit rate indirectly limited by max. rate for deposits that will be insured by the Deposit Insurance Office (LPS), because deposits at higher interest rates are not insured. This rate varies according to institution type (LPS will insure deposits at a higher rate for BPRs than for commercial banks), and the rate is announced monthly.
MAX. LENDING TO SINGLE BORROWER OR GROUP OF BORROWERS: 20% of bank capital (BI 31/61 of 1998).
For "affiliated parties" (shareholders owning 10% or more of the bank’s paid-up capital, board members, staff, and relatives of staff), maximum loan size is 10% of bank capital. (BI 31/61 of 1998).
Village Banks
PERMITTED: loans to and savings from village residents PROHIBITED: public deposits; time deposits.
BKDs operate within a village and exist for the benefit of the residents of the village.
Interest rates are embedded in the loan schemes, which have been practiced since colonial time. Repayments are fixed, and interest is paid upfront (Martowijoyo, 2002).
No restrictions
No specific rules. Bad debts to Commissioners and Bookkeepers sometimes occur.
Non-bank Financial Institutions
Rural Fund and Credit Institutions (LDKP)
PERMITTED: loans to and savings from clients in the operating area (sub-district/village). PROHIBITED: public deposits, demand deposits; clearing and payment services; insurance; equity investment; foreign exchange activities
Most LDKPs operate within a sub-district. Some operate within a traditional village (LPD-Bali, LPN-West Sumatra). Central Java's BKKs have village posts that are open on market days.
Loan interest rates are standardized, based upon BPD guidelines.
No restrictions
No specific rules. Bad debts to local government officials sometimes occur.
Cooperatives/Credit Unions
Credit Unions
PERMITTED: Savings and lending services to members; insurance (provided by regional and national CU apex organizations).
Operating area varies from a community (RW/parish) to a district. Operational procedures are standardized by the regional apex organization.
Lending rates are generally 0.5% - 2% higher than the rates for wholesale loans from the regional apex to the CUs.
No restrictions
No rule
Savings and Loan Cooperatives
PERMITTED: Credit; savings mobilization from members (including probationary members), other coops and their members (and their probationary members), and other institutions; issuing securities. PROHIBITED: insurance; foreign exchange.
(Government Regulation No. 9 of 1995).
Branch offices, sub-branch offices, and cash payment points may be established after two years of operations (Min. of Coop No. 351 of 1998)
None, except for government-subsidized loan programs, where the government sets the interest rate.
No restrictions
Any limits are decided at the annual members' meeting (Gov. Reg. No. 5 of 1995).
Muslim MFIs
PERMITTED: Savings mobilization from members and partners; lending to partners. PROHIBITED: Charging interest on loans (instead of interest, BMTs gain from lending using purchase and profit-sharing agreement).
Operational procedures are based upon guidelines from PINBUK (an NGO assisting BMTs). Loan schemes are standardized according to sharia rules.
Charging interest is prohibited according to sharia law. BMTs generate returns from the margins of purchasing agreements and from profit-sharing agreements.
No restrictions
Any limits are decided at the annual members' meeting (Gov. Reg. No. 5 of 1995).
Reporting and Supervision
Supervision Method
Supervision costs and fees
Disclosure and reporting requirements
Depositor protection mechanisms (e.g., deposit insurance or lender of last resort)
Banks
Commercial Banks
Commercial banks are subject to yearly on-site inspections and other on-site inspections. Off-site supervision through analysis of reports using CAMEL rating system.
Borne by Bank Indonesia. Only penalties for noncompliance and late reporting must be paid.
WEEKLY: net open positions of foreign assets (daily positions). BI-MONTHLY: cash flow projections (for liquidity purposes). MONTHLY: maturity profile (for liquidity purposes); banking report with standardized balance sheet and income statement; legal lending limit report. QUARTERLY: Published financial reports (balance sheet, income statement, commitments & contingencies, list of shareholders & board members, legal lending limit, quality of productive assets, loan loss provisions, CAR ratio). ANNUAL: Audited Financial Reports (same as published reports, but audited as of December position) (BI 176 of 1998) (BI 177 of 1998) (BI 178 of 1998) (BI 179/1998).
Government deposit protection (LPS) for commercial banks and BPRs for time deposits up to IDR 100 million (USD 11,111) (as of March 2007).
Rural Banks
Subject to yearly on-site inspections by BI regional office, but these are rarely carried out in a timely manner. Off-site supervision by BI through analysis of reports using CAMEL rating system.
Borne by Bank Indonesia. Only penalties for noncompliance and late reporting must be paid.
MONTHLY: balance sheet and off-balance sheet accounts; income statement, legal lending limits. SEMI-ANNUAL: Financial statements must be published in a newspaper or placed on the notice board at their offices. ANNUAL: Business Plan; annual Financial Statement (balance sheet; statement of commitments and contingencies; income statement; cash flow; notes to the financial statement). BPRs with total assets greater than or equal to 10 billion IDR must be audited by a public accountant (BI 19/1995) (BI 5/UPPB/1995) (BI 58/1995) (BI 61/1998) (BI 60/1998)
Government deposit protection (LPS) for commercial banks and BPRs for time deposits up to IDR 100 million (USD 11,111) (as of March 2007).
Village Banks
Visit every six weeks by BKD supervisor (BRI staff)
Bank Indonesia pays BRI to have BRI supervise BKDs on BI's behalf. BKDs also contribute to the cost of supervision by BRI Supervisors.
EVERY SIX WEEKS: Report from BKD supervisor to BRI branch office. QUARTERLY: Report from BRI head office to BI.
Supervising BRI branch acts as lender of last resort.
Non-bank Financial Institutions
Rural Fund and Credit Institutions (LDKP)
On-site visit by BPD supervisor or local government's auditor’s office
Borne by BPD and Provincial Government.
MONTHLY: Reports to the supervising BPD and the district and provincial governments.
Supervising BPD acts as lender of last resort.
Cooperatives/Credit Unions
Credit Unions
On-site inspections by the Regional Office of Cooperatives; annual audit by regional apex organization; quarterly internal audit by Board of Supervisors, using either PEARLS or CAMEL.
For annual audit by the regional apex, borne jointly by the apex and the CU.
MONTHLY: Reports to national CU apex, with copy to regional apex. QUARTERLY & ANNUALLY: Reports to regional Office of Cooperatives.
Regional CU apex acts as wholesale lender and lender of last resort, provides loan insurance in case of death of borrower.
Savings and Loan Cooperatives
On-site inspections by the Regional Office of Cooperatives allowed at any time; coops rated using CAMEL, but this is rarely done in practice.
Borne by the Ministry of Coop, but supervision is rare in practice.
QUARTERLY AND ANNUALLY: Balance sheet; income statement; notes on accounting system and explanation of balance sheet posts; report on change of net worth (Min. of Coops 351/1998).
None
Muslim MFIs
On-site inspections by the Regional Office of Cooperatives; annual internal audit by Board of Supervisors
Borne by the Ministry of Cooperatives, but supervision is rare in practice. Costs of monitoring and evaluation performed by donor agencies is borne by the donors.
QUARTERLY AND ANNUALLY: Balance sheet; income statement; notes on accounting system and explanation of balance sheet posts; report on change of net worth (Min. of Coops 351/1998).
None, but most BMTs have a good relationship with local sharia commercial banks
Tax Treatment
Taxes on Income
Taxes on Transactions
Treatment of costs, provisions, reserves
Other
General Applicability
General Applicability
Corporate income tax rate: up to 30%. Individual income tax rate: Progressive, up to 35%. Capital gains taxed as income. (MoF 392/KMK.03/2001) (DJP 39/PJ 41/2001)
Loss originating from uncollected bad debts may be deducted from loan loss provision. Excess of loan loss provision after real loss is deducted is treated as income for tax purposes (MoF204/KMK.04/2000).
Dividends, interest and royalties: 20% for time deposits larger than IDR 7.5 million (USD 830) (Min. of Finance 51/KMK. 04/2001)
MFI-specific
MFI-specific
As of Sept. 2007, BKDs have not been taxed on income.
Other Relevant Business Legislation
Debt Enforcement and Collection
Credit Rating and Reporting Requirements: Formatting requirements (e.g., CGAP, GAAP, or other international standards)
Competition/Consumer protection rules: standard disclosure formats
General Applicability
General Applicability
State-owned banks collect debts through the Government Receivables Rescue Agency (BUPN). BUPN auctions off collateral on the banks' behalf. Private banks use debt collectors and district/ municipality courts, and they also sell collateral in their custody.
There is no rating agency. However, Bank Indonesia computes ratings (based on CAMEL factors) for commercial banks and BPRs using standardized monthly reports.
Commercial banks have to set up a unit dealing with customer protection. BI regulates the transparency of information about bank products; the use of clients' personal data (BI 7/6/2005); customer-bank dispute resolution (BI 7/7/2005); and banking mediation (BI 8/5/2006). In addition, the Business Competition Supervising Committee (KPPU) monitors possible unhealthy competition in all business sectors.
