T

he Financial Services Authority (OJK) has officially given its permission for domestic multi-finance companies to start expanding their business into several new sectors in an effort to help spur the country'€™s lackluster economy.

OJK chairman Muliaman D. Hadad said the financial regulator was fully supportive of non-bank finance companies expanding themselves by venturing into other sectors beyond their existing automotive and heavy equipment financing portfolios.

Muliaman said that there were at least seven sectors that were traditionally financed by banks, namely agriculture, farming, horticulture, plantation, tourism, infrastructure and electricity. These sectors will now be open to new financial avenues.

'€œThere will be a consortium of multi-finance companies and an establishment of several working groups comprising the firms as well as guarantors and related ministries to study the potential of financing in those sectors,'€ Muliaman said on Friday.

The OJK and related ministries, such as the Agriculture Ministry, as well as multi-finance companies and guarantors are scheduled to sign a memorandum of understanding (MoU) on the task forces soon.

Muliaman said the task forces were expected to identify potential sub-sectors and resolve issues and gather insights on financing mechanisms in those sectors.

'€œWe have been supporting the maritime sector lately and will continue to push others as we have also issued guidance on venture capital and creative industry recently,'€ he said, adding that the OJK had yet to set a target for the program.

On May 11, the OJK initiated a program called '€œJaring'€, in which a number of lenders and non-bank finance firms participated in providing credit to fisheries and maritime-related businesses. The program was developed in response to Preside Joko '€œJokowi'€ Widodo'€™s prioritization of the maritime sector.

In creative industry, the OJK also endorsed an MoU signed in September by the Indonesian Financing Firms Association (APPI), the Indonesian Association of Guarantor Companies (Asippindo) and state financial firm Indonesia Eximbank to boost financing commitments and credit insurance for players in that sector.

Also on Friday, APPI secretary-general Efrinal Sinaga said the OJK'€™s endorsement for multi-finance companies to enter new sectors would help the industry'€™s players diversify their business.

The industry is suffering from the country'€™s declining sales in vehicles and heavy equipment due to a weak economy and falls in global commodity prices.

'€œOut of Rp 462 trillion [US$34.15 billion] in our total assets as of now, about 67 percent and 31 percent are contributed by the financing of vehicles and heavy equipment, while the rest comes from electronics and others. We cannot grow well if we limit our financing to certain sectors,'€ Efrinal said.

To map out efforts for the new program, Efrinal said multi-finance firms involved in the task forces would invite stakeholders in related sectors to seek insight on potential fields to be financed.

As for sources of funding to support financing to wider sectors, Efrinal said the multi-finance industry had various alternatives aside from bank loans to raise fresh funds such as issuing debt papers or becoming publicly listed companies so as to enlarge equities.