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Indonesia's banking sector remains attractive for foreign investment

Tempo - February 22, 2024

Jakarta – The Indonesian banking sector remains attractive to foreign investors, according to Dian Ediana Rae, the Banking Supervisory Executive Head at the Financial Services Authority (OJK). Despite facing a dynamic and competitive landscape, the sector continues to lure investors from overseas, particularly from Korea and Japan.

"In general, the investment climate for overseas investors in Indonesia's banking sector remains attractive despite the dynamics and competitive environment," Dian said on Thursday.

"Stable economic growth, a significant population base, and ample opportunities for innovation and expansion, especially in digital banking, fintech, and financial inclusion, are pivotal in maintaining investor interest," he added.

The OJK is seeing a steady flow of license applications from foreign entities, aiming to bolster banking capital through rights issues, among other initiatives. A rigorous evaluation process is in place to ensure that foreign investments contribute positively to both the banking sector and the broader Indonesian economy.

Efforts to refine policies and regulations are ongoing, focusing on striking a balance between attracting investment and safeguarding the financial system's stability and integrity. This includes setting ownership limits, facilitating technology transfers, and bolstering local capacity.

Korean and Japanese investors, in particular, continue to express keen interest in Indonesia's banking sector, driven by the country's robust economic growth and substantial market potential.

Partnerships with local banks help them tap into local knowledge, understand market needs better, and minimize operational risks.

Their direct investments and acquisitions reflect their long-term commitment to the growth and development of Indonesia's banking sector.

The banking sector's healthy Net Interest Margin (NIM), which ranges between 3-5 percent, alongside the profitable operations of Korean and Japanese affiliated banks, underscores the sector's vitality. Such financial health signals a fertile ground for portfolio diversification and reaps the benefits of Indonesia's promising economic conditions.

As Indonesia's banking sector continues to evolve, the sustained interest and investments from foreign shores underscore its pivotal role in the nation's economic fabric, promising further growth and innovation in the years to Come.

Source: https://en.tempo.co/read/1836619/indonesias-banking-sector-remains-attractive-for-foreign-investmen