Strong, Stable and Independent

KOMPAS/RADITYA HELABUMI

Top-up of electronic money issued by Bank Mandiri in Jakarta, on Thursday (21/9/2017).

The strengthening and stability of the financial sector plays an important role in the national economy. No less important, the independence of the institutions which oversee it should be maintained.

The House of Representatives (DPR) approved the Draft Law on the Finance Sector Development and Strengthening during a plenary meeting on 20 Sept, 2022. The bill will amend 15 laws in the financial sector, which have a broad scope and a significant impact on the economy. The proposed omnibus law will cover, among other topics, banking, insurance, pension funds, capital markets, financial inclusion, payment systems and financial system stability.

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It means that various things in the financial ecosystem that are related to people's lives will be regulated in this bill. It will also accommodate the progress of the financial ecosystem via new arrangements. It is important because the old rules are considered no longer relevant to current progress.

The arrangements and regulations will also accommodate the progress of the established industries.

The development of financial technology (fintech), for example, will be regulated in the articles included in the Financial Sector Technology Innovation (ITSK). It is hoped that this arrangement and regulation will accommodate the rapidly growing fintech sector, without ignoring the inclusion and protection of consumers. The arrangements and regulations will also accommodate the progress of the established industries.

Based on data from the Financial Services Authority (OJK), as of August 2022, there are 102 fintech companies providing loans in the network with total assets of Rp 4.915 trillion (US$316 million). The total loans amounted to Rp 19.219 trillion, which were disbursed to 14.328 million recipient accounts.

KOMPAS/RADITYA HELABUMI

An officer shows a number of rupiah notes issued for 2016 at the cash management unit of PT Bank Mandiri (Persero) Tbk, Jakarta, on Tuesday (30/5/2016).

Meanwhile, in the banking sector, as of July 2022, there are 107 commercial banks and 1,451 rural banks (BPR). OJK data show that commercial banks have assets of Rp 10.32 quadrillion, third party funds of Rp 7.56 quadrillion, and total loans of Rp 6.15 quadrillion.

However, it may also be due to fear of missing out, so they just follow the trend without knowledge.

On the other hand, Indonesia is still struggling to improve financial inclusion and literacy so that people understand and take advantage of financial services. There are still many cases related to intimidation conducted by debt collectors of online-lending platforms to borrowers, as well as cases related to fraudulent investments using illegal-trading robots and crypto-investment scams. These cases occur because people are tempted by big returns and forget logic, or due to their ignorance. However, it may also be due to fear of missing out, so they just follow the trend without knowledge.

The most important thing is that the financial ecosystem in Indonesia must be strong so that the independence of the institutions that oversee it should be maintained. Political intervention must be prevented in order to strengthen the financial ecosystem for the Indonesian people. One more thing, the discussion of the bill should involve all people, and not be rushed, so as not to cause problems in the future.

(This article was translated by Hendarsyah Tarmizi).