Banking industry in Indonesia - statistics & facts
With one of the highest net interest margins (NIM) in the world, the Indonesian banking industry is now one of the most profitable among ASEAN countries. The GDP of financial and insurance activities in Indonesia was forecast to grow around 4.7 percent in 2023.
Despite being the country with the highest share of Muslims worldwide, Indonesia is still an emerging market for Shariah banking. Compared to its neighboring countries, the value of Islamic banking assets in Indonesia is still relatively low, at around 46 billion U.S. dollars in 2022. Meanwhile, the value of Islamic banking assets in Malaysia reached 278 billion U.S. dollars.
Indonesia is one of the most adaptable countries to digital banking services globally. Most of the population, which is relatively young, is receptive to digital payment options as well as digital consumption in general. In 2022, the number of mobile wallet users reached almost 107 million in the country.
The Indonesian government's Medium-Term National Development Plan (2020-2024) continues to address these issues, aiming to expand access to financial services. Its main objective is to make bank accounts more accessible to MSMEs. This access makes it possible to use additional financial services like loans and credit cards, which expands the range of available economic opportunities. Additionally, this plan would emphasize regulatory change and financial literacy, enhancing product features and reducing MSMEs' cost of goods.
Additionally, key developments include the National Strategy for Financial Inclusion (SNKI), which emphasizes consumer protection and financial education as key elements. Targeted programs, such as Kredit Usaha Rakyat (KUR), give priority to small businesses and women entrepreneurs. Expanding financial inclusion will enhance the banking industry's efficiency and reduce income inequality and the gender pay gap in Indonesia.
Banking system in Indonesia
As of 2024, Indonesia has 106 commercial banks and over 24.3 thousand bank offices. Bank Rakyat Indonesia, Bank Mandiri, and Bank Negara Indonesia are Indonesia's largest banks based on assets. However, payment systems and foreign exchange supervision are regulated and managed by Bank Indonesia, the central bank of Indonesia. Meanwhile, the Financial Services Authority, Otoritas Jasa Keuangan, oversees important aspects of the banking and financial system, including bank regulation and supervision.Despite being the country with the highest share of Muslims worldwide, Indonesia is still an emerging market for Shariah banking. Compared to its neighboring countries, the value of Islamic banking assets in Indonesia is still relatively low, at around 46 billion U.S. dollars in 2022. Meanwhile, the value of Islamic banking assets in Malaysia reached 278 billion U.S. dollars.
Indonesia is one of the most adaptable countries to digital banking services globally. Most of the population, which is relatively young, is receptive to digital payment options as well as digital consumption in general. In 2022, the number of mobile wallet users reached almost 107 million in the country.
Challenges facing the Indonesian banking sector
Indonesia has the largest number of micro, small and medium-sized enterprises (MSMEs) in Southeast Asia, and these companies are the main drivers of its economy. These enterprises absorb a significant part of the workforce, with women running nearly half of these businesses. However, a lack of access to formal banking services has hindered their ability to access capital, limiting their growth potential. Many lack bank accounts, are in debt, and transact predominantly in cash, making it difficult to build a legitimate credit history that would give them access to formal funding when needed.The Indonesian government's Medium-Term National Development Plan (2020-2024) continues to address these issues, aiming to expand access to financial services. Its main objective is to make bank accounts more accessible to MSMEs. This access makes it possible to use additional financial services like loans and credit cards, which expands the range of available economic opportunities. Additionally, this plan would emphasize regulatory change and financial literacy, enhancing product features and reducing MSMEs' cost of goods.
Additionally, key developments include the National Strategy for Financial Inclusion (SNKI), which emphasizes consumer protection and financial education as key elements. Targeted programs, such as Kredit Usaha Rakyat (KUR), give priority to small businesses and women entrepreneurs. Expanding financial inclusion will enhance the banking industry's efficiency and reduce income inequality and the gender pay gap in Indonesia.
