he Financial Services Authority (OJK) wants to increase the ratio of bank assets to gross domestic product (GDP) by five percent per year through financial market expansion. In the next five years, the ratio is expected to reach 75 percent.
OJK chairman Muliaman Hadad said the OJK and the central bank would increase the variety of long-term securities. He predicted that financial expansion would help the ratio grow by five percent a year.
"So, it will be 75 percent within the next five years. We are still coordinating with Bank Indonesia [BI] to create securities with various tenors such as a year, two years or three years," he said in Jakarta on Friday.
Compared to neighboring countries in Asia, whose ratios of banking assets to GDP are above 100 percent, Indonesia has a low ratio of only 55 percent, Muliaman continued.
Supporting the effort, BI will develop derivatives in financial markets, namely repurchased agreement (repo) transactions. A repo transaction is a securities sale-and-purchase contract with a pledge to repurchase the securities at an agreed time and price.
"The repo transactions can rely on BI certificates and government bonds or other instruments under the OJK," BI governor Agus Martowadjojo said, adding that sharia instruments would also be developed to diversify Islamic finance in Indonesia.
Finance Minister Bambang Brodjonegoro said Indonesia's current third party funds (DPK) to GDP ratio was relatively low at 40.7 percent. Singapore’s DPK to GDP ratio is 137 percent, Malaysia’s is 94 percent, and the Philippines has a DPK to GDP ratio of 55 percent.
"These conditions result in a lack of finance propelling development," he said. (ags)
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