World Bank Group (WBG) Loans $500m to Government of Indonesia for Financial Sector Reform

Tuesday, July 22, 2014

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].

Source: MicroCapital (link opens in a new window)

Base of the Pyramid, financial inclusion