Sustainable Finance in Indonesia - INDOEBTKECONEX2017 · About Indonesia Financial Services Authority (OJK) •The Indonesia Financial Services Authority (IFSA) (Indonesian: Otoritas
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Sustainable Finance in Indonesia
Indonesia Financial Services Authority Jakarta, 2015
About Indonesia Financial Services Authority (OJK)
• The Indonesia Financial Services Authority (IFSA) (Indonesian: Otoritas Jasa Keuangan/OJK) is a state agency and an independent institution in carrying out its duties and responsibilities established under Act No. 21 of 2011.
• OJK is aiming that the overall activities within the financial services sector are: Implemented in an organized, fair, transparent and accountable manner, Able to realize the financial system that grows in a sustainable and stable manner and Capable of protecting the interests of consumers and the society.
• OJK performs its regulatory and supervisory duties over: (a) financial services activities in the banking sector; (b) financial services activities in the capital market sector; and (c) financial services activities in the sectors of insurance, pension funds, financing institutions, and other financial services institutions.
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BANK INDONESIA
Payment System
Monetary Policy
Banking
GOVERNMENT OF INDONESIA
CAPITAL MARKET INSURANCE OTHER
FINANCIAL INSTITUTION
BANK INDONESIA
Macro Prudential
Payment System
Monetary Policy
OJK
BANKING CAPITAL MARKET INSURANCE OTHER FINANCIAL
INSTITUTION
.... - 2011 2012 - ....
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• Micro prudential • Integrated supervision • Market discipline • Customer protection
IN INDONESIAN BANKING SYSTEM THERE IS NO DEVELOPMENT BANK; FINANCIAL SERVICES IS CONDUCTED BY
COMMERCIAL BANK AND RURAL BANK ( BOTH CONVENTIONAL AND SHARIA/ISLAMIC BANK).
THE ROLE OF BANKING IS STILL DOMINANT REPRESENTING 69% OF NATIONAL FINANCIAL INDUSTRY
Indonesia Financial Market
Banking*InsuranceCapital MarketNon Bank Financial
69%
8%
16%
9%
FINANCIAL AND BANKING SYSTEM IN INDONESIA 3
NOTE: - *Indonesia Banking Statistics, April 2015
- Total assets in IDR: Banking 4581 T, Insurance 556 T, Capital Market 1083 T, Non bank FI 433 million T (Sources
OJK, August 2013).
118 commercial banks 1.642 rural banks
12 Islamic Commercial banks
22 Islamic Windows
162 Islamic Rural banks
INDONESIA AFTER 2008, TOWARD FINANCIAL SERVICES INDUSTRY MORE CONTRIBUTIVE, JUSTICE, AND STABLE
1. As member of G-20, OJK launched Roadmap to implement Basel III, 2013-2019
2. Alignment sustainable development into National MediumTerm Development Plan, 2009-2014, 2015-2019 (Priority sectors). OJK preparing Masterplan for Financial Services Industry
3. Commitment to Reduce GHG emission National Action Plan, 2011, reduce GHGE 26% in 2020. OJK launched Sustainable Finance Roadmap, 2015-2024
4. Established National Strategy on Financial Inclusion, in 2014 OJK launched Branchless Banking Policy “Laku Pandai”
5. OJK, starting to implement integrated supervision, 2013
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Development Sustainable Finance in Indonesia
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Green Index in Capital Market
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Objectives, Definition and Principles of Sustainable Finance in Indonesia
Objective of the Roadmap This roadmap sets forth the detailed work plan on the sustainable finance program (2015-2024) for the financial service. This roadmap on sustainable finance will constitute as part of the Master Plan for Indonesia’s Financial Service Sector (MPSJKI) which is scheduled to be published by 2015 and will serve as a reference for other stakeholders in the sustainable finance program.
Sustainable finance in Indonesia is defined as comprehensive support from the financial service industry to achieve sustainable development resulted from a harmonious relationship between economic, social and environmental interests. Sustainable finance comprised of the following dimensions: 1. Achieve industry, social and economic superiority in order to address the threats of global
warming and mitigate other environmental and social issues; 2. Aims to encourage the shifting of the target towards a competitive low carbon economy; 3. Strategically promoting environmentally friendly investment in various business/ economic
sectors; and 4. Supporting the principles of development in Indonesia as stated in the National Medium Term
Development Plan (RPJM), namely the 4P (pro-growth, pro-jobs, pro-poor, and pro-environment).
Principles of sustainable finance covers Risk Management Principle, Sustainable Priority Economic Sector Development Principle, Environmental and Social Governance and Reporting Principle, Capacity Enhancement and Collaborative Partnership Principle.
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Sustainable Finance Institution
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Sustainable Finance Framework
DEVELOPMENT & CLIMATE CHANGE
Law No. 32 of 2009 concerning Conservation and Management
of the Environment
Indonesian commitment for climate change
National Action Plan for the Reduction of Green
House Gas Emission (RAN – GRK)
1. Sectors Contribution towards the Targeted GHG emissions reduction
2. Financing needs for GHG emissions reduction
Long Term Development Plan (RPJPM)
1. Green Economy 2. Priority Economic Sectors 3. Financing needs for economic
development Compliance
environmental economic
instruments
Competitive
Contribution to Climate Change
Road Map
Readiness of Financial
Services Industry
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Contribution to Financial System Stability
1. Better risk management
2. Long term vision
1. Product development & innovation
2. Increase corporate value
Contribution to economic development
Resilience
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Sustainable Finance Roadmap
Basis for Implementation of SF:
1. Policy on SF Principles
2. Policy on Increase on SF portfolio
3. Policy on SF supervision
Incentives: 1. Prudential incentives
2. Information Hub
3. SF Award
4. Policy on SF reporting
Incentives in collaboration with Government:
1. Fiscal incentives
2. Non-Fiscal incentives
Strengthening Resiliency:
Strengthening of risk management and
corporate governance in environmental and
social aspects
2015 2016 2017-2018 2019-2024
2015-2019 : Campaign, Environmental Analyst Trainings, Development of Green Products, Green Bond, Green Index, and Green Insurances, FSIs access to Global Public Funds, Coordination on SF policy
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Website : http://www.ojk.go.id/keuangan-berkelanjutan
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Increase supply of sustainable financing to strengthen
competitiveness of Indonesian financial service industry
Increase oversight and coordination of sustainable finance
implementation
Increase demand of environmentally friendly financing
products
Through the strengthening of risk management, corporate governance in environmental and social aspects, as well as the acceleration of the implementation of the Environmental Law
Through public awareness and education on green investment and green financing
Through provision of incentives to FSI to increase green products portfolio, encourage innovation, increase competency, information sharing and increase access to global public fund
Strategic Goals and Activities to Implement Sustainable Finance
Strategic Goals Strategic Activities
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© 2015
OJK Survey on Sustainable Financing, 2015
FSIs* Financing/Loan (Billion) Dec 2014
Bank IDR 33,565.02 (1,66% of total Conventional bank loan porfolio and 1,97% of total Shariah bank financing porfolio)
Financing Institution IDR 954.60
Pension Fund IDR 736.00
Total IDR 35,255.62
*32 FSIs includes: 27 Bank, 2 special purpose Finance institution, 3 Pension Funds.
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© 2015
The Implementation Plan of 2015 Sustainable Finance Roadmap
1. Sustainable Finance regulation preparation. 2. Sustainable Financing guidelines for renewable energy (2014) and energy
conservation (2015) 3. Research preparation on green bonds and green index, green insurance. 4. Awareness program for financial services industry practitioners which includes:
Seminar, Workshop & FGD 5. Capacity building : + 400 banker (risk manager, business manager) 6. Joint research on Challenges, Incentives and Disincentives in the Implementation
of Sustainable Finance in Indonesia 7. Preparation for the establishment of an Information hub 8. Establishment of jury for Sustainable Finance Award 9. Sustainable Finance Coordination forum
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© 2015
The Way Forwar d
1. The roadmap is just the begining, the implementation phase will define the result
2. Inovation and coordination will play a significant role 3. Create sinergy may open up new opportunity
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Thank You
Thank You
1.Bank Indonesia Regulation No. 14/15/2012 (Asset Quality Assessment for Commercial Banks)
1.Business growth potential; 2.Market conditions and debtor position
within competition; 3.Management quality and labor problems; 4.Supports from group/affiliations; and 5.Business performed by the debtor in the
context of environmental preservation efforts (for debtors who are obliged to conduct environmental management efforts according to the applied laws)
1.Profitability; 2.Capital Structure; 3.Cash Flow; and 4.Sensitivity to The
Market Risks.
1.Prompt payment of debt and its interests;
2.The availability and the accuracy of debtors’ financial information;
3.Completeness of loan documentations;
4.Obedience to the credit agreement; 5.The suitability of the use of funds;
and 6.The fairness source of liability
payment
Credit Quality Assessment
1. BUSINESS PROSPECTS 2. DEBTOR PERFORMANCE 3. ABILITY TO PAY
The credit quality assessment considers the significance and the materiality of every assessment factors and components; as well as the relevance of the assessment and components of the debtor
Banking Regulation on Assest Quality
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Indonesia General Figures
• The Republic of Indonesia is the world’s largest
archipelagic nation, consisting of over 17,508 islands
stretching 5,120 km from east to west equal from
London to New york, and 1,760 km from north to south
equal from Beirut to Dubai.
• Population +251 million (July 2013 est) of which about
more 85% are Muslims. 66,9% productive age
population. the world’s 4th most populated country
after China, India and US.
• GDP PPP $1.237 trillion, 16th rank in the World (2012 )
• G-20 member
• Top 4 Prospective Host Economies for 2013-2015, after
China, USA and India (WIR 2015)
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Baa3
Baa2
Ba2
Ba1
Ba3
B1
B2
B3
Caa
Ca
BB
BB+
B+
BB-
B
B-
CCC+
CCC
CCC-
SD
BBB-
BBB
S&P & Fitch
Moody’s
Inve
stm
ent
Gra
de
N
on
Inve
stm
ent G
rad
e
Moody’s upgrade to Baa3 as of January 18, 2012
S&P affirmed at BB+ & revised rating outlook as of May, 2013
Fitch affirmed at BBB- as of November 15, 2013
= S&P = Moody’s = Fitch
Sovereign Rating History
Asian financial crisis
Data : BPS 2015
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