MICROCAPITAL BRIEF: Asian Development Bank (ADB) to Finance a Loan Program of $400m to Promote Financial Inclusion in Indonesia

The Asian Development Bank (ADB), a Philippines-based multilateral development finance institution, has committed to loaning USD 400 million toward its Financial Market Development and Inclusion Program (FMDIP) for Indonesia. The objective of this loan program is to promote greater financial inclusion in the country.

As of 2015, approximately “22 percent of the poorest 40 percent of Indonesians have a [bank] account and only 13 percent have saved at a financial institution”[1]. FMDIP aims to raise the provision of financial services to 25 percent of the poorest members of the population by 2020 [1].

In order to implement FMDIP, ADB will partner with Otoritas Jasa Keuangan (OJK), the financial services authority (FSA) of Indonesia. In addition to funding financial services, the program is expected to “promote financial system stability” and assist the private sector in raising capital [2]. Jim Nugent, Director General of ADB’s Southeast Asia Department, states that FMDIP will help the “newly integrated financial sector regulator, OJK, to become fully operational”[1]. While OJK was established in 2011, it has led the regulation of microfinance institutions only since January 2015.

As of 2014, ADB reported total assets of USD 33.1 billion, total loans of USD 55.9 billion and financial assistance operations of USD 22.9 billion. ADB has assisted the government of Indonesia since ADB’s establishment in 1966. As of 2015, ADB reports cumulative loans, grants and technical assistance of USD 561 million provided to Indonesia.

By Hye In Arielle Oh, Research Associate

About Asian Development Bank (ADB)

Established in 1966 and headquartered in Manila, Philippines, the Asian Development Bank (ADB) is a development finance institution that consists of 67 members. ADB has three strategic priorities: to foster inclusive growth, to facilitate regional integration and to ensure environmentally sustainable growth. To accomplish these objectives, ADB uses loans, technical assistance programs, grants, equity investments and guarantees to private companies in member countries in the region. As of 2014, ADB reported total assets of USD 33.1 billion, total loans of USD 55.9 billion and financial assistance operations of USD 22.9 billion.

About Otoritas Jasa Keuangan (OJK)

Established in 2011, Otoritas Jasa Keuangan (OJK) is a government institution in Indonesia that is responsible for the regulation of the country’s capital markets and financial services. OJK and Bank Indonesia, the central bank of Indonesia, jointly regulate the banking sector in the country. As of 2015, OJK is leading the regulation of microfinance institutions (MFIs) in Indonesia.

Sources and Additional Resources:

[1] Asian Development Bank: “ADB $400 Million Loan Helps Indonesia Create More Inclusive Financial Sector,” http://www.adb.org/news/adb-400-million-loan-helps-indonesia-create-more-inclusive-finance-sector

[2] Asian Development Bank: “Indonesia: Financial Market Development and Inclusion Program Subprogram 1,” http://www.adb.org/projects/48207-001/main

[3] Asian Development Bank: “FAQs,” http://www.adb.org/about/faqs

[4] Asian Development Bank: “ADB Annual Report 2014,” http://www.adb.org/documents/series/adb-annual-reports

[5] Asian Development Bank: “Indonesia and ADB,” http://www.adb.org/countries/indonesia/main

MicroCapital Universe Profile, “Asian Development Bank (ADB),” https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Asian+Development+Bank+%28ADB%29

MicroCapital Universe Profile, “Otoritas Jasa Keuangan (OJK)” https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Otoritas+Jasa+Keuangan+%28OJK%29

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