MICROCAPITAL BRIEF: World Bank Group (WBG) Loans $500m to Government of Indonesia for Financial Sector Reform, Including to Boost Financial Inclusion

The World Bank Group (WBG), a US-based international financial institution, has recently approved a USD 500 million “Financial Sector Reform and Modernization Development Policy Loan”[1] (FSRM DPL) for the government of Indonesia. The loan will support the government’s efforts to “stabilize” and diversify the financial system and expand financial inclusion in the country.

The government of Indonesia recently established the Financial System Stability Coordination Forum, which is responsible for “coordinating and maintaining financial stability” in the country. The FSRM DPL will support the work of this organization and will be used for the development of microfinance institutions (MFIs) as well as for the enhancement of the “microinsurance regulatory framework”[1] in the country. The FSRM DPL also is expected to help the government to implement its National Financial Inclusion Strategy, which promotes “financial inclusion, greater financial literacy, and consumer protection”[1].

In a statement, Rodrigo A. Chaves, WBG’s Director for Indonesia said that “global experience has shown that deepening and diversifying the financial system contributes to creating more jobs and reducing poverty”[1]. He added that “access to savings instruments increases investment, while insurance services – for example, for health and natural disasters – reduce vulnerabilities of families and communities and helps them manage financial risk”[1].

The FSRM DPL builds on the “Financial Sector and Investment Climate Reform and Modernization Development Policy Loan” of USD 100 million in total value that was provided to the government of Indonesia in 2012. WBG had commitments of USD 52.6 billion in loans, grants, equity investments and guarantees as of December 2013.

By Alíz Crowley, Research Associate

About The World Bank Group (WBG)

Headquartered in the US, the World Bank Group (WBG) is a multilateral development organization whose mission is to improve living standards for people in developing countries. Owned by 188 member countries, WBG encompasses the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); the International Centre for Settlement of Investment Disputes (ICSID) and the World Bank, which consists of the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). WBG has 10,000 employees and operations in approximately 120 countries as of 2014. WBG had commitments of USD 52.6 billion in loans, grants, equity investments and guarantees as of December 2013.

Sources and Additional Resources

[1] World Bank Group Press Release, Indonesia Receives Us$500 Million from World Bank in Support of Financial Sector Reform Policies

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