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Book Review: Dissecting OJK's challenges

Paul Sutaryono
Paul Sutaryono

The Jakarta Post

Jakarta | Mon, April 30, 2018 | 08:39 am
Book Review: Dissecting OJK's challenges

Otoritas Jasa Keuangan dan Konglomerasi Keuangan, Suatu Tinjauan Ekonomi-Politik (Financial Services Authority and Financial Conglomeration, An Economic-Political Review), written by a team consisting of Makmur Keliat, Asra Virgianita, Agus Catur Putro Aryanto, Fina Astriana, Indah Gilang Pusparani and Dewa Ayu Putu Eva Wishanti. (Shutterstock/File)

The year 2018 is one of fierce competition in financial services, especially for banks, hedge funds and insurance companies.

The book entitled Otoritas Jasa Keuangan dan Konglomerasi Keuangan, Suatu Tinjauan Ekonomi-Politik (Financial Services Authority and Financial Conglomeration, An Economic-Political Review) has been published at an important time, addressing financial related issues that require close cooperation across various sectors.

The book presents the research findings of the School of Social and Political Sciences at the University of Indonesia, written by a team consisting of Makmur Keliat, Asra Virgianita, Agus Catur Putro Aryanto, Fina Astriana, Indah Gilang Pusparani and Dewa Ayu Putu Eva Wishanti.

The book outlines the chronology of the transfer of some of Bank Indonesia’s (BI) authority to the Financial Services Authority (OJK), within the context of the political economy of the supervision of the financial industry, as well as comparative models of supervision in other countries.

In addition, the book describes recent developments in the financial industry in Indonesia by looking at the anatomy of the industry after the birth of the OJK.

The authors also predict that Islamic finance will grow rapidly for two reasons. First, as the majority of people in the country are Muslim, the awareness of conducting economic activities based on Islamic principles is increasing.

Second, Islamic finance provides just as many benefits as the conventional financial system. Islamic financial practices also apply to banking, capital markets, insurance and even pawnshops.

This book also presents the OJK’s challenges, including innovative financial products from market players such as financial technology.

Financial technology requires cross-sectoral arrangements between the central authorities that regulate and supervise it such as the OJK, BI, the Deposit Insurance Corporation, relevant ministries such as the Communications and Information Ministry, Trade Ministry and Industry Ministry, and authorities at the local level such as regional development banks or rural banks. Good cooperation is important in providing optimal results in terms of economic development.

The authors also agree on the importance of financial inclusion and literacy. Financial inclusion is the ability to access financial services in accordance with the needs and capabilities of a community, in order to improve its welfare. Financial literacy is the knowledge, skills and beliefs that affect the quality of decision making and financial management.

According to the OJK’s research, financial inclusion increased from 59.7 percent in 2013 to 67.8 percent in 2016. Meanwhile, measures of adequate financial knowledge among the population indicated a rise, from 21.8 to 29.6 percent in the same period.

The book offers three important conclusions. First is that there is a need for further studies on strengthening coordination between the OJK and BI. Policy coordination between the OJK and BI is important as the latter’s authority has been diminished.

Second, there is a need to identify policy measures that strengthen BI’s microprudential supervision. Third, it recommends further studies on specific competencies such as derivative financial markets that are required to streamline the OJK’s supervision.

By examining various studies, identifying challenges and providing recommendations, the book is worth reading by people who work in financial services, the public and even the OJK.

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Otoritas Jasa Keuangan & Konglomerasi Keuangan, Suatu Tinjauan Ekonomi-Politik  (Financial Services Authority & Financial Conglomeration, An Economic-Political Review)

(Pustaka Sempu, Yogyakarta, 176 pages)

Authors: Makmur Keliat, Asra Virgianita, Agus Catur Putro Aryanto, Fina Astriana, Indah Gilang Pusparani and Dewa Ayu Putu Eva Wishanti.

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