NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, July 2, 2014

WASHINGTON, July 1 — World Bank issued the following news release:

The World Bank’sBoard of Executive Directors approved today a US$500 millionFinancial Sector Reform and Modernization Development Policy Loan for the Government of Indonesia. The loan supports Indonesia’s policies aimed at reinforcing the stability of the financial system, diversifying the financial sector, and expanding financial inclusion to reach the poor and other underserved groups.

“Global experience has shown that deepening and diversifying the financial system contributes to creating more jobs and reducing poverty,” said World Bank Country Director for Indonesia, Rodrigo A. Chaves. “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,” he added.

Indonesia’s financial system is currently dominated by banks and is highly concentrated in a few of them, while the non-bank financial sector – including insurance, mutual funds and pension funds – is underdeveloped.

The loan supports the government’s efforts to maintain stability of the financial system by improving crisis prevention, management and resolution, including the work of the Financial System Stability Coordination Forum (FKSSK), which is the new body responsible for coordinating and maintaining financial stability. Other goals include developing non-bank financial institutions, promoting microfinance development, and enhancing the micro-insurance regulatory framework.