The Financial Services Authority (Otoritas Jasa Keuangan/OJK) has confirmed that the stability of Indonesia’s financial sector remains solid despite growing global and domestic economic challenges. This was highlighted during the OJK’s Board of Commissioners Monthly Meeting on February 26, 2025.

Globally, economic growth remains stagnant, though inflation in several advanced economies shows a downward trend. However, market volatility persists due to ongoing economic policy uncertainties and geopolitical tensions.

In the United States, economic growth stays strong, supported by domestic consumption. Inflation was at 3% year-on-year in January 2025, while core CPI rose to 3.3%, reflecting price pressures outside the energy and food sectors. The unemployment rate fell to 4%, though nonfarm payroll increases were below market expectations. The Federal Reserve is expected to cut the Fed Fund Rate only once or twice this year, keeping its monetary policy neutral.

Meanwhile, China’s economy shows restrained growth, with CPI at a low 0.5% and the Producer Price Index (PPI) continuing to contract. The Purchasing Managers' Index (PMI) remains in the expansion zone but dropped to 50.1, below expectations. The central bank’s cautious stance on monetary easing, alongside stricter regulations on rare earth exports, could impact the global tech industry.

Domestically, Indonesia's inflation remained manageable at 0.76% year-on-year in January 2025, with core inflation at 2.26%, indicating steady domestic demand. However, declining vehicle and cement sales, along with a slowdown in housing prices, point to weakened consumer activity. On the supply side, the manufacturing PMI increased to 51.9 from 51.2. Indonesia’s trade surplus strengthened to USD 3.45 billion in January, up 71.71% from the previous year.

In the Financing Institutions, Venture Capital, Microfinance Institutions, and Other Financial Services (PVML) sector, financing receivables from Financing Companies grew 6.04% year-on-year in January 2025, reaching Rp504.33 trillion, driven by a 10.77% rise in investment financing.

Risk profiles remain stable, with Non-Performing Financing (NPF) gross recorded at 2.96% (December 2024: 2.70%) and NPF net at 0.93% (December 2024: 0.75%). The gearing ratio declined to 2.21x, well below the 10x maximum limit.

Venture capital financing contracted by 3.58% year-on-year, amounting to Rp15.81 trillion. However, the fintech peer-to-peer (P2P) lending sector showed robust growth, with outstanding financing increasing by 29.94% year-on-year to Rp78.50 trillion in January 2025. The aggregate default risk (TWP90) remained stable at 2.52%.

Buy Now Pay Later (BNPL) financing through financing companies surged 41.9% year-on-year, reaching Rp7.12 trillion. Despite this growth, the NPF gross for BNPL slightly rose to 3.37% from 2.99% in December.

As for Financial Service Cooperatives (open loop) under OJK’s supervision, total assets stood at Rp339.12 billion, with distributed financing reaching Rp209.77 billion. For the three open-loop cooperatives yet to obtain OJK licenses, the agency has issued letters extending the business license application process.

To enforce compliance, OJK imposed administrative sanctions in February 2025 on 74 financial institutions, including 24 financing companies, 11 venture capital firms, 32 P2P lending operators, 2 private pawnshops, 1 special financial institution, and 4 microfinance institutions. These sanctions involved business activity restrictions, fines, and written warnings.

The OJK remains committed to strengthening governance, ensuring prudence, and enforcing regulations in the PVML sector to enhance industry performance and contributions to the national economy.

PHOTO: SHUTTERSTOCK

This article was created with AI assistance.