The financial services sector has yet to become a main engine for economic growth, but it has the potential to do so, according to joint research from the National Development Planning Agency (Bappenas) and Parahyangan University. While Indonesia has seen its credit productivity increase, stakeholders lack a comprehensive understanding of the sector, hence the sluggish loan disbursement in recent years, the study says. “Indonesia is facing a huge challenge as its financial services sector is not strong enough to influence economic growth,” said Leonard VH Tampubolon, the Bappenas deputy minister for the economy, in a recent seminar in Jakarta. “The inclusion aspect is [also of concern] as many Indonesians do not receive financial services from formal institutions.” The study calculated that, for every 1 percent of economic growth, the country needs an additional 10.85 percent in credit growth. Based on credit disbursement alone, this would mean that Indonesia needs to book credit growth of 23 percent in order to achieve overall economic growth of over 6 percent. The Financial Services Authority (OJK) estimated that loan growth would reach 13 percent this year, slightly higher than the 12.45 percent it projected in 2018. About five years back, annual loan growth was… Read full this story
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