2021 2025 THE INDONESIAN FINANCIAL SERVICES SECTOR MASTER PLAN - to Recover the National Economy and Enhance the Financial Services Sector ...

 
2021 2025 THE INDONESIAN FINANCIAL SERVICES SECTOR MASTER PLAN - to Recover the National Economy and Enhance the Financial Services Sector ...
THE INDONESIAN FINANCIAL                                                                               2021
  SERVICES SECTOR MASTER PLAN
                                to Recover the National Economy and
Enhance the Financial Services Sector Resiliency and Competitiveness                                        2025
                 TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS   i
2021 2025 THE INDONESIAN FINANCIAL SERVICES SECTOR MASTER PLAN - to Recover the National Economy and Enhance the Financial Services Sector ...
ii   2021-2025 The Indonesian Financial Services Sector Master Plan
2021 2025 THE INDONESIAN FINANCIAL SERVICES SECTOR MASTER PLAN - to Recover the National Economy and Enhance the Financial Services Sector ...
THE INDONESIAN FINANCIAL
SERVICES SECTOR MASTER PLAN
to Recover the National Economy and
Enhance the Financial Services Sector Resiliency and Competitiveness

2021-2025

Publisher:
Indonesia Financial Services Authority (OJK)
Gedung Soemitro Djojohadikusumo
Jalan Lapangan Banteng Timur 2-4
Jakarta 10710
(021) 29600 000

This publication is available on the OJK website
  www.ojk.go.id

December 2020
All rights reserved
Reproduction of this paper in the form and manner
without the written permission of the publisher is prohibited

                            TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS   iii
2021 2025 THE INDONESIAN FINANCIAL SERVICES SECTOR MASTER PLAN - to Recover the National Economy and Enhance the Financial Services Sector ...
> Executive Summary

iv                    2021-2025 The Indonesian Financial Services Sector Master Plan
2021 2025 THE INDONESIAN FINANCIAL SERVICES SECTOR MASTER PLAN - to Recover the National Economy and Enhance the Financial Services Sector ...
THE INDONESIAN FINANCIAL                                                                              2021
  SERVICES SECTOR MASTER PLAN
                                to Recover the National Economy and
Enhance the Financial Services Sector Resiliency and Competitiveness                                       2025

                                                                                                                             > Executive Summary

                  TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS   1
2021 2025 THE INDONESIAN FINANCIAL SERVICES SECTOR MASTER PLAN - to Recover the National Economy and Enhance the Financial Services Sector ...
Praise the Lord God Almighty, for the abundance of His blessings and grace on the

           Foreword          completion of the Indonesian Financial Services Sector Master Plan (MPSJKI) 2021-2025,
                             “To Recover the National Economy and Enhance the Financial Services Sector Resiliency
                             and Competitiveness” by the Indonesian Financial Services Authority (Otoritas Jasa
                             Keuangan-OJK). The theme was chosen to portray the direction in terms of advancing the
                             financial services sector (FSS) as well as OJK's future commitments which focuses on
                             the national economic recovery in the context of handling the impact from the Covid-19
                             pandemic as well as building confidence to develop resilience and preparing the FSS to
                             regional and global competition.

                             Following on Act No. 21 of 2011 concerning the Financial Services Authority, OJK
                             was established to ensure all activities in the FSS are managed in an orderly, fair,
                             transparent and accountable manner; to create a sustainable and stable financial
                             system; and to protect the interests of consumers and public alike. As a manifestation
                             of this goal, OJK needs to set a future policy direction that is in harmony with the latest
                             dynamics of the FSS.

                             The endeavours to develop the FSS are exposed with various challenges, both from
                             global and domestic economic uncertainties. Global challenges derived from the
                             slowing down of the economy, ongoing trade war, increasing signs of protectionism
                             and uncertainty in the global financial markets. Meanwhile, domestic challenges
                             emerge from the ongoing current account deficit; limited long-term economic financing
                             sources; economic and income inequality; low levels of productivity and competitiveness
                             nationally; inadequate sustainable economic financing; inconsistency in the regulation
                             and supervision of FSS; low financial literacy and inclusion; as well as the current
                             revolution because of the disruption in the digital economy era. At the same time,
                             stakeholders' expectations of the future role of the FSS have also increased as the
                             Indonesian economy has reached the welfare level which is equivalent to that of upper
                             Middle Income Countries.

                             Considering that, OJK has prepared the MPSJKI as a basis framework for the strategic
                             direction of the FSS that is align with the main national development framework as set
                             out in the 2020-2024 Medium Term National Development Plan (RPJMN). MPSJKI is
                             planned to be published in the first quarter of 2020. However, considering the impact
                             of the Covid-19 pandemic on the condition of the FSS and the economy, a revision was
                             carried out so that the structure of the MPSJKI consisted of the Short-Term FSS Policy
                             Direction (2020-2021) - FSS Support for the National Economic Recovery Program
                             (PEN) and the 2021-2025 Structural Framework which focuses on three areas, namely:
                             (1) Strengthening Resilience and Competitiveness ; (2) Financial Services Ecosystem
                             Development; and (3) Digital Transformation Acceleration. Additionally, the 2021-2025
                             MPSJKI focuses on collaboration and cooperation among stakeholders as the main
                             enablers for its targets.

                             Lastly, on behalf of the Board of Commissioners of OJK, we would like to express
                             our appreciation to all parties who participated in the preparation of this MPSJKI. We
                             sincerely hope that the 2021-2025 MPSJKI will be used as a reference for all industry
                             players and stakeholders in terms of advancing the FSS in Indonesia, thereby allowing
                             the sectors to provide greater value added to the national economy in order to improve
                             public and economic welfare while maintaining financial system stability.

                             Prof. Wimboh Santoso, SE., Msc., Ph.D
                             Chairman of the Board of Commissioner
                             Indonesia Financial Services Authority

2   2021-2025 The Indonesian Financial Services Sector Master Plan
2021 2025 THE INDONESIAN FINANCIAL SERVICES SECTOR MASTER PLAN - to Recover the National Economy and Enhance the Financial Services Sector ...
Table of Contents
                                                                       Condition of The
                                                                       Financial Services
                                                                                                                          11
                                                                       Sector
                                                                       OJK Coincidence Index                                   11
                                                                       Snapshot of The Development of                          12
                                                                       Indonesia’s Financial Services Sector
                                                                       for 2015-2019 and Quarter II 2020
Foreword                                         2
                                                                       Subsequent Events of Financial                          13
                                                                       Services Sector Conditions
Table of Contents                                3
                                                                       Micro Finance Institution, Other                        15
                                                                       Specialized Financial Service
Executive
Summary
                                               4                       Institution and Peer-to-Peer
                                                                       Lending Fintech Development
                                                                       Financial Conglomerates and Digital                     16
                                                                       Financial Innovation Development
Global and
Domestic                                      7                        Level of Financial Literacy and
                                                                       Inclusion
                                                                                                                               17

Economic Review
Global Economic Conditions and                   7
                                                                       Challenges Ahead                                   18
Domestic Before the Covid-19                                           Short-Term Challenges                                   18
Pandemic
                                                                       Structural Challenges                                   19
The Impact of the Covid-19                       8
                                                                       The Indonesian
                                                                                                                       22
Pandemic on the Global and
Domestic Economy
                                                                       Financial Services
Response to
The Impact of                           10                             Sector Master Plan
                                                                       2021-2025
Covid-19                                                               Short-Term Financial Services                          23
                                                                       Sector Policy Direction (2020-2021)
                                                                       - Financial Services Sector Support
                                                                       for the National Economic Recovery
                                                                       Program
                                                                       Structural Framework 2021-2025:                        26
                                                                       Enhance the Financial
                                                                       Services Sector Resiliency and
                                                                       Competitiveness
                                                                       Collaboration and Cooperation                          44
                                                                       between Stakeholders as Enablers

                        TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS    3
2021 2025 THE INDONESIAN FINANCIAL SERVICES SECTOR MASTER PLAN - to Recover the National Economy and Enhance the Financial Services Sector ...
Executive Summary

                      Indonesia's financial services sector (FSS) continues                                                         public pretection. As one
                      to experience positive developments despite the                                                               manifestation of these goals,
                      downturn in global and domestic economic growth                                                               OJK sets a future policy direction
                      over the past five years and the impact of the Covid-19                                                       that is consistent with the latest FSS
                      pandemic in 2020. However, this positive achievement                                                          dynamics.
                      should not lead to complacency. Moving forward, the
                      FSS will continue to face various challenges arising                                                          The future policy direction is outlined in
                      from economic uncertainty and developments in the                                                             The Indonesian Financial Services Sector Master
                      digital economy that are disrupting business models.                                                          Plan (MPSJKI). The MPSJKI consists of the basic
                      Additionally, the FSS as the mainstay of the economy                                                          framework for the strategic direction of fostering
                      is increasingly required to maintain financial system                                                         integrated and comprehensive FSS. MPSJKI serves as
                      stability and to be able to increase competitiveness, so                                                      a guideline for the development of the FSS to create a
                      that it will make an optimal contribution to support a                                                        stable, contributive and inclusive financial industry to
                      sustainable and inclusive national economic growth. To                                                        support Indonesia's economic growth.
                      face these challenges, a strategic policy direction for
                      the development of the FSS is required as a reference                                                         In 2015, OJK issued the 2015-2019 MPSJKI which aims
                      for all stakeholders.                                                                                         to strengthen the role of FSS in national economic
                                                                                                                                    activities, both in the context of providing financing
                      The Indonesia Financial Services Authority (Otoritas                                                          for the development and making Indonesia one of the
                      Jasa Keuangan or OJK) has a strong commitment in                                                              main investment destination countries. The 2015-2019
                      enhancing the role of the FSS in spurring economic                                                            MPSJKI version contains three strategic directions for
                      growth, while maintaining stability of the financial                                                          the development of the FSS, which are (1) optimizing
                      system. From the Act No. 21 of 2011 concerning the                                                            the role of the FSS in supporting the acceleration of
                      Financial Services Authority, OJK was formed with                                                             national economic growth (contributive); (2) maintaining
                      the vision that all activities within the monitoring of                                                       financial system stability as a foundation for
                      the FSS industry are carried out regularly, fairly,                                                           sustainable (stable) development; and (3) developing
                      transparently and accountable; able to develop a                                                              financial independence for the people and supporting
                      financial system that grows in a sustainable and stable                                                       efforts in decreasing inequality in country’s economic
                      manner; and upholding the principles of customer and                                                          development development (inclusive).

                                                The Goals and Directions of The Indonesia Financial Services Sector Development
                                                The Realization of a Stable FSS that Contributes Significantly to Sustainable Economic Growth to Improve the Welfare of the Indonesian People

                                                                                            Three Directions of Development in the MPSJKI
                       The 2015-2019 MPSJKI

                                                                                    CONTRIBUTIVE                              STABLE                               INCLUSIVE

                                                                                                                             ENABLER

                                                      Fulfillment of the Quantity and Quality of Human Capital                                    Utilization of technology in FSS Activities

                                              CONTRIBUTIVE                                    STABLE                                     INCLUSIVE                                  ENABLER
> Executive Summary

                                              • Financing for infrastructure and priority     • Strengthening FSS supervision            • Developing regional economic potential   • Fulfillment of the quantity and quality
                                                economic sectors                              • Strengthening and structuring the FSS    • Expanding financial access and             of human resources in the FSS and the
                                              • Strengthening the capacity of the FSS           according to standards                     strengthening consumer protection          supervision of FSS
                                              • Development of FSS products and                                                                                                     • Utilization of information in FSS
                                                services as well as increasing financial                                                                                              economic activities
                                                literacy
                                              • Strengthening the role of Sharia FSS

  4                             2021-2025 The Indonesian Financial Services Sector Master Plan
2021 2025 THE INDONESIAN FINANCIAL SERVICES SECTOR MASTER PLAN - to Recover the National Economy and Enhance the Financial Services Sector ...
Presidential Directive and the
                                                                                 National Development Agenda
Generally, the contributive pillar will be implemented
through financing towards the infrastructure sector and                             Vision & Mission of The President
priority economic sectors, including tourism, housing,
oil palm plantations, export-oriented industries and                            1
                                                                                     Improving the quality
                                                                                                                  2
                                                                                                                       A productive,
                                                                                                                       independent, and
                                                                                     of Indonesia’s human
the creative economy; increasing the role of the FSS in                              capital development               competitive economic
supporting economic activities by way of strengthening                                                                 structure

capital capacity and empowering the role of industry
                                                                                     Equitable and fair                Achieving a
association; development of FSS products and services as                        3    development
                                                                                                                  4    sustainable living
well as increasing of financial inclusion and literation; and                                                          environment

strengthening the Sharia FSS, which include establishing
Micro Waqf Bank (Bank Wakaf Mikro or BWM) to encourage                               Cultural progress that            Corruption-free,
                                                                                5                                 6    dignified, and reliable
greater equitable access to finance and public welfare,                              reflects the national
                                                                                                                       law enforcement
                                                                                     principles
especially in the area around Islamic boarding schools
(pondok pesantren). The stable pillar will be carried out
by strengthening the supervision of the FSS, including                          7
                                                                                     Protection for the entire
                                                                                                                  8
                                                                                                                       Trustworthy,
                                                                                     nation and provide a              effective, and reliable
through integrated supervision, law enforcement,                                     sense of security for all         governance by the
implementation of crisis management protocols and                                    citizens                          Government
structuring the FSS in accordance with international
                                                                                     The synergy of local regional Governments within the
standards. The inclusion pillar will be realized by                             9    framework of a united nation
fostering regional economic potential, among others by
issuing regulations on Regional Securities Company;
expanding financial access, among others, by regulating
and monitoring Peer-To-Peer (P2P) Lending (fintech)
industry, Branchless Banking (Laku Pandai), Digital                                                      l
                                                                                                                       Inf
                                                                                                     ita              De rast
Financial Innovation (Inovasi Keuangan Digital or DFI) and                                       C ap ent               ve ru
                                                                                                                           lop ctu
Equity Crowdfunding (ECF); and increasing consumer                                             an m                           me re
                                                                                             m lop
                                                                                           Hu eve                               nt
protection principles.                                                                       D

The various strategic directions outlined in the 2015-2019                                         Presidential
                                                                                    Tra

MPSJKI have been implemented and well accomplished.                                                 Directive

                                                                                                                                              on
                                                                                      Eco rmati

                                                                                                                                               n
                                                                                        nsf

                                                                                                                                Sim ulatio
                                                                                                                                         cati
This achievement has been reflected in the continued state
                                                                                          nom on
                                                                                           o

                                                                                                                                   plifi
of financial system stability, increasing assets of Financial

                                                                                                                                  Reg
                                                                                             ic

Service Institutions (FSIs) and their role in the development
of the national economic growth, as well as increasing                                                    Bureaucratic
levels of financial inclusion in supporting the endeavours to                                             Simplification
lessen the economic inequality gap and support equitable
distribution of public welfare.

However, the actions to develop the FSS remain exposed to
various challenges, both in short term as well as structural                        7 Development Agendas
longer term challenges. Short term challenges derives                                 (National Priorities)
from the uncertainty from the Covid-19 pandemic that will
influence the capacity on demand and purchasing power of                        1      Economic Resilience
                                                                                       for a quality and fair
                                                                                                                 2     Regional
                                                                                                                       development to
the consumers, as well as the production and distribution                              development                     reduce inequality

of goods and servides; financing support in the medium and
long term for the National Economic Recovery Programs
(Pemulihan Ekonomi Nasional-PEN); financial market
                                                                                3      Quality and
                                                                                       competitive human
                                                                                                                 4     Quality and
                                                                                                                       competitive
                                                                                                                       human capital
conditions that still have the potential to experience high                            capital development             development

volatility; as well as the sustainability of the Government’s
(PEN) policy incentives and the normalization stages after                      5      Infrastructure for
                                                                                       economy and basic
                                                                                                                 6     Environment,
                                                                                                                       disaster resilience,
                                                                                       public services
the pandemic.                                                                                                          and climate change

Structural longer term challenges globally derives from                                                          7     Politics, rule of
                                                                                                                                                   > Executive Summary

                                                                                                                       law, human right
                                                                                                                       stability; and
the downturn in global economic growth, the ongoing                                                                    public services
trade war, increasing signs of protectionism and                                                                       transformation

uncertainty in global financial markets.

                           TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS                5
2021 2025 THE INDONESIAN FINANCIAL SERVICES SECTOR MASTER PLAN - to Recover the National Economy and Enhance the Financial Services Sector ...
The 2020-2024                                                                                 ASEAN Financial Integration
                      RPJMN Targets                                                                                 Framework
                                                             Indonesian
                                                          Economic Growth

                                                       5,7% - 6,0%                                                                             ASEAN
                                                                                                                                         Financial Integration
                                                                                                                                             Framework
                        GDP by Production Approach
                                           Manufacturing

                                      6.2% - 6.5%                   GDP by Expenditure Approach
                                                                        Household Consumption & NPISH                                            Capital
                                             Agriculture
                                                                        5.4% - 5.6%                                       Financial
                                      3.8% - 3.9%                                                                                                Account           Capital Market
                                                                                                                           Services           Liberalization       Development
                                                                            Government Consumption                      Liberalization
                                                 Trade
                                                                            4.7% - 4.9%
                                     6.0% - 6.3%
                                                                            Investasi
                                      Financial Service
                                                                            6.6% - 7.0%
                                     6.8% - 7.2%
                                                                                                                           Other Financial Initiatives:
                        Information and Communication                         Export                                       • ASEAN Capital Markets Forum (ACMF)
                                    8.3% - 8.9%                               4.7% - 4.9%                                  • ASEAN Banking Integration Framework (ABIF)
                                                                                                                           • Payment and Settlement Systems (PSS)
                                        Construction                          Import
                                                                                                                           • Financial Inclusion (FINC)
                                   6.1% - 6.4%                                4.7% - 4.8%
                                                                                                                           • ASEAN Forum on Taxation (AFT)
                                             Mining                         Source: National Development Planning          • ASEAN Insurance Cooperation & Forum
                                   1.9% - 2.0%                                            Agency (Bappenas), 2020

                                                                                                                                                               Source: ASEAN Secretariat, 2020

                      Meanwhile, domestic challenges emerge from the                                                must improve in efficiency, variety of products and
                      ongoing current account deficit, limited long-term                                            services introduced, and excellent service, including
                      sources of economic financing, economic inequality                                            taking advantage of technological developments.
                      and income disparity, low levels of productivity and                                          Adequate capacity and capability are also keys to
                      competitiveness, inadequate sustainable economic                                              increasing the contribution and competitiveness of
                      financing, and regulatory and supervisory gaps across                                         the FSS.
                      the FSS, low financial literacy and inclusion, and
                      disruption of the revolution in the digital economy era.                                      To face various conditions and challenges outlined
                                                                                                                    above, OJK considers it necessary to formulate the
                      At the same time, stakeholders' expectations of the                                           2021-2025 MPSJKI as a basis framework for the
                      role of FSS in the future have also increased with the                                        strategic direction of the FSS's strategic policies.
                      growing Indonesian economy which has reached the                                              The MPSJKI is a response to the dynamic global and
                      level of welfare equivalent to those of upper Middle                                          domestic economy challenges, public expectations
                      Income Countries. In this case, the Government has                                            towards the FSS, and is aligned with the main
                      established the 2020-2024 Medium Term National                                                national development agenda as stated in the 2020-
                      Development Plan (Rencana Pembangunan Jangka                                                  2024 RPJMN.
                      Menengah Nasional or RPJMN) which contains national
                      development targets for the next five years. This                                             MPSJKI is planned to be published in the first quarter
                      RPJMN requires substantial financial support including                                        of 2020. However, considering the impact of the
                      from the FSS so that national economic development                                            Covid-19 pandemic on the condition of the FSS and
                      targets can be achieved.                                                                      the economy, a revision was carried out so that the
                                                                                                                    structure of the MPSJKI consisted of the Short-Term
                      Additionally, economic and financial activities in the                                        FSS Policy Direction (2020-2021) - FSS Support for
                      region are increasingly integrated with the initiative                                        the National Economic Recovery Program (PEN) and
                      of the ASEAN Economic Community. On the one hand,                                             the 2021-2025 Structural Framework which focuses
                      this integration brings opportunities by opening up                                           on three areas, namely: (1) Strengthening Resilience
                      market share in the region. On the other hand, this                                           and Competitiveness; (2) Development of Financial
                      integration will further increase the competition. As                                         Services Ecosystem; and (3) Digital Transformation
                      a consequence, high competitiveness in the domestic                                           Acceleration. In addition, MPSJKI 2021-2025 will
> Executive Summary

                      FSS is an inevitable demand for market players so                                             mainstream the collaboration and cooperation
                      that in the end Indonesia can take advantage of this                                          among stakeholders as the main enablers for its
                      economic integration. Consequently, the national FSS                                          achievements.

  6                     2021-2025 The Indonesian Financial Services Sector Master Plan
Global and
 Domestic
 Economic Review
 Global Economic Conditions and
 Domestic Before the Covid-19 Pandemic

                                                                                      Decline of Commodity Prices
                                                      Index 2016 = 100
                                                          250

         EXTERNAL                                         200

                          • Trade War
          FACTORS                                         150                                                                                                            128.06
                                                                                                                                                                         108.89
                          • Global Trade                  100
                                                                                                                                                                             99.89
                            Downturn                        50

                          • Geopolitical                     0
                                                                 Dec-08

                                                                          Dec-09

                                                                                   Dec-10

                                                                                            Dec-11

                                                                                                      Dec-12

                                                                                                               Dec-13

                                                                                                                             Dec-14

                                                                                                                                       Dec-15

                                                                                                                                                Dec-16

                                                                                                                                                           Dec-17

                                                                                                                                                                    Dec-18

                                                                                                                                                                               Dec-19
                            Dynamics
                                                                                   Non-Oil and Gas                      Agriculture               Mining

      GLOBAL ECONOMIC
          GROWTH
                                       External factors affect the economy and
      2015         2019                    domestic financial (vice versa)

     3.5%          3.3%

                    FISCAL                             FINANCIAL                                                                      MONETARY
                    POLICY                              SECTOR                                                                         POLICY                                           • Interest Rate
• Issuance of                                                                                                                                                                           • Monetary and
  Government                                                                                                                                                                              Macroprudential
  Securities                                                                                                                                                                              Policy
• State Spending                                                                                                                                                                          Transmission
• Tax

                                                                                                     • Household Consumption
                                                         REAL                                          Balance
                                                        SECTOR                                       • Inflation
                                                                                                                                                                                                            > Global and Domestic Economic Review

                                                                                                     • Credit and NPL
                                                                                                     • Market Price

                           TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS                                                                          7
The Impact of The Covid-19 Pandemic on
                                        The Global and Domestic Economy

                                                                                                          Covid-19 and Public Health
                                                                                                          Emergency
                                                                                                          At the end of 2019, the Covid-19 virus began to infect
                                                                                                          China and then spread to various countries in the
                                                                                                          world. On March 11, 2020, WHO declared Covid-19 a
                                                                                                          global pandemic. Until now, the Covid-19 pandemic is
                                                                                                          still unknown when it will end.

                                                                                                          Map of the Covid-19 Spread in Indonesia

                                                                                                                                                                  Recovered
                                                                                                            349.160        Confirmed                              78,4%
                                                                                                                                           273.661
                                                                                                               Cases                                              from
                                                                                                                                                                  Confirmed

                                                                                                                           Active Case                            Deaths
                                                                                                              63.231       18,1%            12.268                3,5%
                                                                                                                           from                                   from
                                                                                                                           Confirmed                              Confirmed

                                                                                                                                               Source: covid19.go.id (14 October 2020)

                                                                                                          Various countries including Indonesia have adopted
                                                                                                          strict social restriction policies in order to mitigate the
> Global and Domestic Economic Review

                                                                                                          spread of Covid-19.

    8                                    2021-2025 The Indonesian Financial Services Sector Master Plan
Covid-19 Encumbers the Economy
The Covid -19 pandemic pressured the economy both in terms of demand and supply. The decline in demand and
supply stemmed from problems with medical, businesses performance, and expectations.

Economic Sectors Affected by Covid-19                                                                                                                                                            Consumer Confidence Index
                                                                                                                                                                                                                                                                                                                                Index

                            IMPACT LEVELS                                                                         AFFECTED SECTORS                                                                                                                                                                                              135
                                                                                                                                                                                                                                                                                                                                130
   HIGH IMPACT                                                                              • Tourism                                                                                                                                                                      120.5
                                                                                                                                                                                                                                                                                                                                125
                                                                                                                                                                                                                                                                             120.0
   (Turnover decreased by                                                                   • Manufacture                                                                                                                                                                      119.8                                            120
   > 30%)                                                                                   • Building materials, heavy                                                                                                                                                        119.7
                                                                                                                                                                                                                                                                                                                                115
                                                                                              equipment
                                                                                                                                                                                                                                                                                                                                110
                                                                                            • Property and construction
                                                                                                                                                                                                                                                                                                                                105
                                                                                            • Pharmacy                                                                                            Optimistic
                                                                                                                                                                                                                                                                                                                                100
   MEDIUM IMPACT                                                                            • Multifinance                                                                                       Pessimistic
                                                                                                                                                                                                                                                                                                                                   95
   (Turnover decreased by                                                                   • Automotive                                                                                          I     II     III    IV     I     II   III   IV     I     II   III   IV     I          7     8    9   10 11 12       1     2

   10-30%)                                                                                  • Shopping center

                                                                                                                                                                                                 2017

                                                                                                                                                                                                                            2018

                                                                                                                                                                                                                                                    2019

                                                                                                                                                                                                                                                                            2020

                                                                                                                                                                                                                                                                                       2019

                                                                                                                                                                                                                                                                                                                     2020
                                                                                            • Animal husbandry, fisheries
                                                                                            • Distribution/retailler of non-                                                                          Expenditure of IDR 1-2 Million                  Expenditure of IDR 2-5 Million              Expenditure of > IDR 5 Million

                                                                                              essential goods                                                                                                                                                                                            Source: Bank Indonesia

                                                                                            • Commodities (plantation,
                                                                                              mining)                                                                                            Foreign Investment
   LOW IMPACT                                                                               • Packaging
   (Turnover decreased by                                                                   • E-commerce                                                                                                                    Others
                                                                                                                                                                                                                                              20,1%                                           28,8%
                                                                                                                                                                                                                                                                                                             Singapore
                                                                                                                                                                                                                           US$ 1,3 M                                                                        US$ 2,0 M
    Global and Domestic Economic Review

                              60                                                                                                                                                                             prices                                per barel
                              40
                                                                                                                                                                                                                                                   Lifting petroleum
                              20
                               0                                                                                                                                                                                                                   677-737 thousand
                                                                                                                                                                                                                                                   barrels per day
                             -20
                             -40                                                                                                                                                                                                                   Lifting natural gas
                             -60
                                                                                                                                                                                                                                                   1,085-1,173 thousand
                                     Mar 18

                                                May 18

                                                           Jul 18

                                                                        Sep 18

                                                                                   Nov 18

                                                                                                Jan 19

                                                                                                           Mar 19

                                                                                                                      May 19

                                                                                                                                 Jul 19

                                                                                                                                             Sep 19

                                                                                                                                                        Nov 19

                                                                                                                                                                   Jan 20

                                                                                                                                                                              Mar20

                                                                                                                                                                                        May 20

                                                                                                                                                                                                                                                   barrels per day

                                                                                                                                                                                                                                                                                              Source: Ministry of Finance
                                                                                                                                        Source: Statistics Indonesia (BPS)

                                                                                                TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS                                                                                                                                 9
Response to
                                       The Impact of
                                       Covid-19

                                       Since the announcement of Covid-19 as a pandemic by                          In order to follow up Article 11 of Act 2/2020, the
                                       WHO on March 11, 2020, the Government has issued a                           Government implemented the National Economic
                                       series of policies to prevent the spread of the impact of                    Recovery Program (PEN) as a measure to protect,
                                       the Covid-19 pandemic. A number of stimuli have been                         maintain and improve the economic capacity of
                                       issued, including fiscal, monetary, and FSS stimuli.                         business actors from the real sector and the financial
                                       An effective policy mix is essential to prevent the                          sector in carrying out their business during the
                                       augmentation in casualties and the spread of dredging                        Covid-19 pandemic. The PEN program has four
                                       negative impacts, particularly on the economy.                               principles in its implementation, namely not causing
                                                                                                                    moral hazard, priority scale, risk sharing, and good
                                       As a basis for handling the humanitarian and                                 governance.
                                       economic crisis, the Government established a legal
                                       umbrella to take extraordinary steps in handling                             Furthermore, the Act 2/2020 also stipulates policies
                                       Covid-19, namely Act Number 2 of 2020 concerning                             in order to maintain financial system stability in the
                                       Stipulation of Government Regulations in Lieu of Act                         face of the threat of an economic or financial crisis
                                       Number 1 of 2020 concerning State Financial Policy                           amid the Covid-19 pandemic. Policies for maintaining
                                       and Financial System Stability for the Mitigation the                        financial system stability include providing a support
                                       Corona Virus Disease 2019 (Covid-19) Pandemic and/                           scheme in exercising the authority of the KSSK in
                                       or in the Context of Facing Threats Endangering the                          addressing problems of financial system stability.
                                       National Economy and/or Financial System Stability
                                       (Act 2/2020).

                                                                                                          OJK Policy:
                                                                                                          1. Market stabilization to
                                                                                                             maintain market sentiment
                                                                                                          2. Massive and effective policy
                                                                                                             communication

                                                                                                   Investor Outflow

                                                                                                                                                               (Bank, NBFI,
                                                                                                       Financial Sector
                                          Debtor Default                CKPN
                                                                                                       (Banking, Capital Market, NBFI)       Liquidity         Capital
                                                                                                                                                               Market)
> Response to The Impact of Covid-19

                                                     OJK Policy:                          Financial Services Sector Condition                        Government Policy:
                                                     1. Loan Restructurisation
                                                     2. Additional Working Capital
                                                                                             CAPITAL                 LIQUIDITY                       Placement of Government
                                                                                                                                                     Funds in Commercial Banks
                                                        Loan

                                                                                     Supporting the National Economic Recovery Program               Bank Indonesia Policy:
                                                     Government Policy:
                                                     Interest Subsidy, Credit                                                                        1. Liquidity Scheme
                                                                                      •    Interest Subsidy                                          2. Quantitative Easing
                                                     Guarantee                        •    MSMEs and Corporate Credit Guarantee
                                                                                      •    Placement of Government Funds in Banking Sector

10                                       2021-2025 The Indonesian Financial Services Sector Master Plan
Condition of
The Financial Services
Sector
OJK Coincidence Index
The national FSS still shows maintained stability                                                                                                                                                                                                        in a normal area. The OJK Coincidence Index also
and growth with improved efficiency and increased                                                                                                                                                                                                        accrued and touched the threshold at the beginning
financial inclusion over the last five years, amidst                                                                                                                                                                                                     of the Covid-19 pandemic entering Indonesia.
slowing global economic growth and stagnant
national economic growth. Financial system stability                                                                                                                                                                                                     The national FSS market condition is still very
is maintained as reflected in the OJK Coincidence                                                                                                                                                                                                        segmented. The Banking sector dominates the
Index indicator which is below the threshold.                                                                                                                                                                                                            financial market on the basis of short-term sources
Although the OJK Coincidence Index experienced                                                                                                                                                                                                           of funds. Meanwhile, although the Capital Market
slight upturn in the second semester of 2015 and                                                                                                                                                                                                         continues to grow, it is still not optimal for long-term
the first semester of 2018 due to optimized volatility                                                                                                                                                                                                   financing. NBFI is still relatively small although it
in the rupiah exchange rate, it is still maintained                                                                                                                                                                                                      keeps growing.

                                                                                                                                                                                   OJK Coincidence Index
100                                                                                                                                                                                                                                                      100

 80                                                                                                                                                                                                                                                        80

 60                                                                                                                                                                                                                                                        60

 40                                                                                                                                                                                                                                                        40

 20                                                                                                                                                                                                                                                        20

  0                                                                                                                                                                                                                                                         0
      Dec 14
               Feb 15
               Apr 15
                        Jun 15
                                 Aug 15
                                          Oct 15
                                          Dec 15
                                                   Feb 16
                                                            Apr 16
                                                                     Jun 16
                                                                     Aug 16
                                                                              Oct 16
                                                                                       Dec 16
                                                                                                Feb 17
                                                                                                Apr 17
                                                                                                         Jun 17
                                                                                                                  Aug 17
                                                                                                                           Oct 17
                                                                                                                                    Dec 17
                                                                                                                                             Feb 18
                                                                                                                                                      Apr 18
                                                                                                                                                               Jun 18
                                                                                                                                                                        Aug 18
                                                                                                                                                                                 Oct 18
                                                                                                                                                                                          Dec 18
                                                                                                                                                                                                   Feb 19
                                                                                                                                                                                                            Apr 19
                                                                                                                                                                                                                     Jun 19
                                                                                                                                                                                                                              Aug 19
                                                                                                                                                                                                                                       Oct 19
                                                                                                                                                                                                                                                Dec 19

                                                                                                                                                                                                                                                                05/12/14

                                                                                                                                                                                                                                                                           05/03/15

                                                                                                                                                                                                                                                                                      05/06/15

                                                                                                                                                                                                                                                                                                 05/09/15

                                                                                                                                                                                                                                                                                                            05/12/15

                                                                                                                                                                                                                                                                                                                        05/03/16

                                                                                                                                                                                                                                                                                                                                   05/06/16

                                                                                                                                                                                                                                                                                                                                              05/09/16

                                                                                                                                                                                                                                                                                                                                                         05/12/16

                                                                                                                                                                                                                                                                                                                                                                     05/03/17

                                                                                                                                                                                                                                                                                                                                                                                05/06/17

                                                                                                                                                                                                                                                                                                                                                                                           05/09/17

                                                                                                                                                                                                                                                                                                                                                                                                      05/12/17

                                                                                                                                                                                                                                                                                                                                                                                                                 05/03/18

                                                                                                                                                                                                                                                                                                                                                                                                                            05/06/18

                                                                                                                                                                                                                                                                                                                                                                                                                                       05/09/18

                                                                                                                                                                                                                                                                                                                                                                                                                                                  05/12/18

                                                                                                                                                                                                                                                                                                                                                                                                                                                             05/03/19

                                                                                                                                                                                                                                                                                                                                                                                                                                                                        05/06/19

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   05/09/19

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              05/12/19
          Exchange Rate Market                                           Bond Market                                                                  Financial Services Institutions
                                                                                                                                                                                                                                                                                OJK Coincidence Index                                                                Threshold                                                           Monthly Average
          Capital Market                                                 Financial Services                                                           Threshold
                                                                         Institutions

                                                                                                    Indonesia’s Financial Services Sector Structure

                                                                                                                                                                                                                                                IDR804 T                                                                                                            IDR727 T

                                                                                                IDR527 T
                                                                                                                                                                                                                                        IDR2,558 T                                                                                                       IDR2,473 T
                                                                                                IDR527 T
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         > Condition of The Financial Services Sector

                                                                                            IDR1,923 T
                                                                                                                                                                                                                                  IDR8,713 T                                                                                                        IDR8,817 T

                                                                                                 2015                                                                                                                                             2019                                                                                                    Q2-2020

                                                                                                 Banking Assets                                                                                                                 NBFI Assets                                                                            Investment Manager’s Assets Under Management

                                                                                                  TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS                                                                                                                                                                                                                                                                                               11
Snapshot of The Development of Indonesia’s Financial
                                               Services Sector for 2015-2019 and Quarter 2 of 2020

                                                                    BANKING                                                                                                    NBFI

                                                                                                                                                                                                         Insurance, Pension Fund, Financing
                                                                                                                                     CAPITAL

                                                                                                                                                                                                             Companies, dan other NBFI
                                                                                  24.02%

                                                                                                                                                                                                NBFI ASSET
                                                                                                                                     MARKET                                 54.57%
                                                    TPF

                                                                      2015              2019                                                                   2015                 2019
                                                                  IDR4,836.76 T     IDR5,998.65 T                                                          IDR1,654.74 T        IDR2,557.78 T

                                                                           Q2-2020                                                                                  Q2-2020
                                                                         IDR6,260.46 T                                                   37.15%                   IDR2,472.86 T
                                                                                                         JCI

                                                                                                                              2015              2019
                                                                                                                           IDR4,593.01       IDR6,299.54

                                                                                                                                      Q2-2020
                                                                                                                                     IDR4,905.4

                                                                                                                                                                                                INSURANCE
                                                                                  38.89%                                                                                    65.15%
                                                    CREDIT

                                                                                                                                                                                                  ASSETS
                                                                      2015              2019                                                                  2015                  2019
                                                                  IDR4,092.10 T     IDR5,683.76 T                                                          IDR830.23 T          IDR1,371.20 T

                                                                           Q2-2020                                                                                  Q2-2020
                                                                         IDR5,617.71 T                                                   99.37%                   IDR1,325.78 T
                                                                                                    FUND NAV
                                                                                                     MUTUAL

                                                                                                                              2015              2019
                                                                                                                           IDR271.97 T       IDR542.24 T

                                                                                                                                                                                                     INSURANCE RBC
                                                                                                                                    Q2-2020                         2015
                                                                                                                                                                PAJ: 535.00%
                                                                                                                                                                                    2019
                                                                                                                                                                                PAJ: 789.37%
                                                                                                                                  IDR482.58 T
                                                                                  2.01%                                                                                    254.37%
                                                    CAR

                                                                                                                                                               PAU: 283.00%     PAU: 345.35%
                                                                      2015               2019
                                                                     21.39%             23.40%                                                                             62.35%
                                                                              Q2-2020
                                                                                                    CORPORATE BONDS

                                                                                                                                                                      Q2-2020
                                                                                                                                         78.16%
                                                                                                      OUTSTANDING

                                                                               22.50%                                                                          PAU: 688.00%     PAU: 319.35%

                                                                                                                              2015              2019
                                                                                                                           IDR249.88 T       IDR445.20 T

                                                                                                                                    Q2-2020                                                       ACCOUNTS RECEIVABLE
                                                                                                                                  IDR429.71 T
                                                                                  1.69%                                                                                     24.49%                     FINANCING
                                                    LDR

                                                                                                                                                              2015                 2019
                                                                      2015               2019
                                                                                                                                                           IDR363.27 T          IDR452.22 T
                                                                     91.95%             93.64%

                                                                              Q2-2020                                                                                 Q2-2020
                                                                                                                                                                    IDR413.20 T
                                                                               88.64%                                                    185.71%
                                                                                                    NEW ISSUERS
                                                                                                     NUMBER OF

                                                                                                                              2015                2019
                                                                                                                               21                  60
                                                                                                                                     Q2-2020
                                                                                                                                                                                                     GEARING RATIO

                                                                                                                                       25
                                                                                  38.74%                                                                              0.90 times
                                                    ASSET

                                                                                                                                                               2015                 2019
                                                                      2015              2019                                                                3.59 times           2.61 times
                                                                  IDR5,919.39 T     IDR8,212.58 T
                                                                                                                                                                      Q2-2020
                                                                           Q2-2020
                                                                                                          ISSUANCE VALUE

                                                                                                                                                                     2.48 times
                                                                         IDR8,313.96 T                                                   42.81%
                                                                                                                              2015              2019
> Condition of The Financial Services Sector

                                                                                                                           IDR116.83 T       IDR166.85 T
                                                                                                                                      Q2-2020
                                                                                                                                                                                                PENSION FUND
                                                    NPL (GROSS)

                                                                                  0.04%                                              IDR42.92 T
                                                                                                                                                                            41.17%
                                                                                                                                                                                                   ASSET

                                                                     2015               2019                                                                  2015                 2019
                                                                     2.49%              2.53%                                                              IDR206.59 T          IDR291.65 T

                                                                              Q2-2020                                                                                 Q2-2020
                                                                               3.15%                                                                                IDR288.70 T

12                                              2021-2025 The Indonesian Financial Services Sector Master Plan
Subsequent Events of
Financial Services Sector Conditions

 Banking Sector

 The resilience of the FSS, particularly Banking, is still in sound and controlled condition, demonstrated by
 adequate capital and liquidity as well as a maintained risk profile.

 CAR                                                                                                                                      NPL
                                                                                                                             23.74%
 23.50%                                                                                                                                                     NPL Gross                       NPL Net                        3.22%                 3.15%
                                                                                                                                          3.5%
 23.00%
                                                                                                                                          3.0%
 22.50%                                                                                                                                   2.5%
 22.00%                                                                                                                                   2.0%

 21.50%                                                                                                                                   1.5%
                                                                                                                                          1.0%
 21.00%                              21.63%                                                                                                                                                   1.17%
                                                                                                                                          0.5%                                                                                                   1.03%
 20.50%                                                                                                                                   0.0%
              Jan 20

                            Feb 20

                                        Mar 20

                                                     Apr 20

                                                                 May 20

                                                                             Jun 20

                                                                                         Jul 20

                                                                                                     Aug 20

                                                                                                                   Sep 20

                                                                                                                                 Oct 20

                                                                                                                                                 Jan 20

                                                                                                                                                              Feb 20

                                                                                                                                                                         Mar 20

                                                                                                                                                                                   Apr 20

                                                                                                                                                                                               May 20

                                                                                                                                                                                                        Jun 20

                                                                                                                                                                                                                  Jul 20

                                                                                                                                                                                                                             Aug 20

                                                                                                                                                                                                                                        Sep 20

                                                                                                                                                                                                                                                    Oct 20
 The capital adequacy ratio is still maintained at a                                                                                      Banking credit risk was maintained at a manageable
 fairly high level at 23.74% (October 2020), although                                                                                     level as of October 2020 at 3.15% (gross NPL) and
 in March 2020 it had dropped to 21.63%.                                                                                                  1.03% (nett NPL) and indicating an improvement
                                                                                                                                          position from July 2020 for gross NPL (3.22%) and
                                                                                                                                          May 2020 for net NPL (1.17%).

 TPF Growth (yoy)                                                                                                                         Liquidity
                       Giro                      Savings                     Deposit                          Total TPF                                                      AL/NCD (LHS)                  LA/TPF threshold=10%

 25%                                                                                                                                                                          AL/DPK (RHS)                 LA/NCD threshold=50%
                                                                                                                                          200%                                                                                                               40%
                                                                                                                            21.16%        180%                                                                                                               35%
 20%
                                                                                                                                          160%                                                                                                               30%
 15%                                                                                                                        12.12%        140%                                                                                                               25%

                                                                                                                            11.41%        120%                                                                                                               20%
 10%
                                                                                                                                          100%                                                                                                               15%
                                                                                                                            7.84%
  5%                                                                                                                                       80%                                                                                                               10%
                                                                                                                                           60%                                                                                                               5%
  0%                                                                                                                                       40%                                                                                                               0%
                                                                                                                                                   Jan 20

                                                                                                                                                                Feb 20

                                                                                                                                                                          Mar 20

                                                                                                                                                                                   Apr 20

                                                                                                                                                                                               May 20

                                                                                                                                                                                                        Jun 20

                                                                                                                                                                                                                 Jul 20

                                                                                                                                                                                                                           Aug 20

                                                                                                                                                                                                                                      Sep 20

                                                                                                                                                                                                                                                 Oct 20
          Jan 20

                        Feb 20

                                     Mar 20

                                                  Apr 20

                                                              May 20

                                                                          Jun 20

                                                                                      Jul 20

                                                                                                  Aug 20

                                                                                                                 Sep 20

                                                                                                                               Oct 20

 -5%

 Strengthening liquidity conditions due to high                                                                                           Bank liquidity was adequate with an increasing trend
 growth in bank deposits amid a credit slowdown.                                                                                          and ample. As of October 26, 2020, the LA/NCD and
 DPK growth since August has reached double digits,                                                                                       LA/TPF ratios were monitored at the 153.98% and
 continuing in October 2020 to grow 12.12% yoy,                                                                                           32.96% levels, well above the threshold.
 in line with the placement of Government funds in
 banks.
                                                                                                                                                                                                                                                                   > Condition of The Financial Services Sector

                                                              TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS                                                                                             13
Subsequent Events of
                                               Financial Services Sector Conditions

                                                Capital Market

                                                The condition of the Capital Market sector has gradually improved after passing through several lows,
                                                including:

                                                Jakarta Composite Index                                                                                                             NAV for Mutual Fund                                                                                                         Non-Resident Net Buy/Sell

                                                                                                                                                                                                                                                                                                                IDR Trillion
                                                                                                                                                                                                                                                                                                                                                        Net Buy/Sell SBN                             Net Buy/Sell Share
                                                                                                                                                                                   IDR Trillion
                                                                                                                                                                                                                                                                                                                 100
                                                                                                                                                                                    600
                                                                                                                                                            5,128.2                                                                                                                                                50
                                                                                                                                                                                    500                                                                                                                                                                                                                                                 21.80

                                                                                                                                                                                                                                                                                                                                                                                                                                                   BUY
                                                                                                                                                                                    400                                                                                                                             0
                                                                                                                                                                                                                                    465

                                                                                                                                                                                                                                                                                                                                                                                                                                                   SELL
                                                                                                                                                                                    300                                                                                                                                                                                                                                                 (3.71)
                                                                                                                                                                                                                                                                                                                 (50)
                                                                                                                                                                                                                                                                                                                                                                                                                             (15.59)
                                                                                                                                                                                    200
                                                                                                                                                                                                                                                                                                                                                                          (121.26)
                                                                                                                                                                                    100                                                                                                                         (100)
                                                                             3,937.6                                                                                                                                                                                                                                             (5.59)
                                                                                                                                                                                                                                                                                                                (150)
                                                                                                                                                                                           Jan 20

                                                                                                                                                                                                             Feb 20

                                                                                                                                                                                                                           Mar 20

                                                                                                                                                                                                                                        Apr 20

                                                                                                                                                                                                                                                    May 20

                                                                                                                                                                                                                                                               Jun 20

                                                                                                                                                                                                                                                                         Jul 20

                                                                                                                                                                                                                                                                                  Aug 20

                                                                                                                                                                                                                                                                                            Sep 20

                                                                                                                                                                                                                                                                                                       Oct 20
                                                Jan 20

                                                         Feb 20

                                                                           Mar 20

                                                                                        Apr 20

                                                                                                   May 20

                                                                                                             Jun 20

                                                                                                                         Jul 20

                                                                                                                                       Aug 20

                                                                                                                                                         Sep 20

                                                                                                                                                                       Oct 20

                                                                                                                                                                                                                                                                                                                                 Jan 20

                                                                                                                                                                                                                                                                                                                                               Feb 20

                                                                                                                                                                                                                                                                                                                                                            Mar 20

                                                                                                                                                                                                                                                                                                                                                                         Apr 20

                                                                                                                                                                                                                                                                                                                                                                                     May 20

                                                                                                                                                                                                                                                                                                                                                                                                Jun 20

                                                                                                                                                                                                                                                                                                                                                                                                          Jul 20

                                                                                                                                                                                                                                                                                                                                                                                                                    Aug 20

                                                                                                                                                                                                                                                                                                                                                                                                                               Sep 20

                                                                                                                                                                                                                                                                                                                                                                                                                                          Oct 20
                                                The stock market was well maintained and                                                                                            The increase in the JCI also boosted Mutual                                                                                 In line with the entry of non-resident investors to
                                                the JCI strengthened on October 30, 2020                                                                                            Fund performance. In the period of October                                                                                  other emerging markets, non-resident investors
                                                it closed at 5,128.2 levels, although it had                                                                                        2020, the Net Asset Value (NAV) was present                                                                                 began to take action on the SBN Market, which
                                                touched its lowest point on March 24, 2020                                                                                          at the level of IDR529 trillion, previously the                                                                             in October recorded a net buy of IDR21.8 Trillion
                                                (3,937.6).                                                                                                                          NAV of Mutual Funds had reached the lowest                                                                                  (March position was the largest net sell at
                                                                                                                                                                                    point of IDR465 Trillion.                                                                                                   IDR121.26 Trillion). The strengthening of the SBN
                                                                                                                                                                                                                                                                                                                market was supported by increased participation
                                                                                                                                                                                                                                                                                                                of the Banking sector in the SBN market.

                                                NBFI
                                                The change in the value of the NBFIs assets as a result of weakening yields of financial instruments and
                                                progressing toward the year end.

                                                                                        NPF                                                                                                             Insurance RBC                                                                                                            Gearing Ratio

                                                                                                                                                                       4,7%                                            Life Insurance                                    General Insurance

                                                                                                                                  5.6%                                                                                                                                                               489%

                                                                                                                                                                                                                                                                                                                                                        2.73x                                                                2.28x

                                                                                                                                                                                                                                                                                                     304%
                                                                                                                                                                                                                                                                                                                        Jan 20

                                                                                                                                                                                                                                                                                                                                      Feb 20

                                                                                                                                                                                                                                                                                                                                                   Mar 20

                                                                                                                                                                                                                                                                                                                                                                Apr 20

                                                                                                                                                                                                                                                                                                                                                                            May 20

                                                                                                                                                                                                                                                                                                                                                                                       Jun 20

                                                                                                                                                                                                                                                                                                                                                                                                 Jul 20

                                                                                                                                                                                                                                                                                                                                                                                                           Aug 20

                                                                                                                                                                                                                                                                                                                                                                                                                    Sep 20

                                                                                                                                                                                                                                                                                                                                                                                                                               Oct 20
                                                                                                                                                                                                    Jan 20

                                                                                                                                                                                                                  Feb 20

                                                                                                                                                                                                                               Mar 20

                                                                                                                                                                                                                                           Apr 20

                                                                                                                                                                                                                                                      May 20

                                                                                                                                                                                                                                                                Jun 20

                                                                                                                                                                                                                                                                         Jul 20

                                                                                                                                                                                                                                                                                  Aug 20

                                                                                                                                                                                                                                                                                           Sep 20

                                                                                                                                                                                                                                                                                                     Oct 20
                                                                  Jan 20

                                                                               Feb 20

                                                                                          Mar 20

                                                                                                   Apr 20

                                                                                                            May 20

                                                                                                                      Jun 20

                                                                                                                                  Jul 20

                                                                                                                                                Aug 20

                                                                                                                                                              Sep 20

                                                                                                                                                                          Oct 20
> Condition of The Financial Services Sector

                                                         The risk profile of finance                                                                                                       The insurance industry's capital is
                                                         companies is maintained at a                                                                                                      maintained stable at an adequate
                                                         manageable level with an NPF ratio                                                                                                level, Risk-Based Capital (RBC) of the                                                                                       Gearing Ratio is also in trend
                                                         of 4.7% for the position in October                                                                                               life and general insurance industry                                                                                          decreased at 2.28 times
                                                         2020 or has decreased from the                                                                                                    is 538.8% and 337.2%, respectively,                                                                                          (October 2020).
                                                         July position which reached the                                                                                                   well above the regulatory threshold
                                                         highest point of 5.6%.                                                                                                            of 120%.

14                                               2021-2025 The Indonesian Financial Services Sector Master Plan
Micro Finance Institution, Other Specialized
 Financial Services Institutions and
 Peer-to-Peer Lending Fintech Development
 Micro Finance                                                                                                                                                            Other Specialized Financial
 Institution                                                                                                                                                              Services Institutions
Since the enactment of Act                                                                                                                                                OJK also supervises a variety of other
Number 1 of 2013 concerning                                                                                                                                               specialized FSIs, which include guarantee
Micro Financial Institutions, the number                                                                                                                                  companies, pawnbrokers, Permodalan
of microfinance institutions that have obtained                                                                                                                           Nasional Madani (PNM), Indonesian Export
permits from OJK has been increasing every year.                                                                                                                          Financing Institution (Lembaga Pembiayaan Ekspor
The assets of microfinance institutions also continue                                                                                                                     Indonesia or LPEI/Eximbank), Sarana Multi Finance
to experience an increasing trend. As of October                                                                                                                          (SMF), and Danareksa. As of October 2020, there
2020, there were 223 MFIs with total assets of                                                                                                                            were 116 other specialized financial service
IDR1.13 Trillion.                                                                                                                                                         institutions with total assets reaching IDR252.74
                                                                                                                                                                          Trillion.

Number of Microfinance                                                                                                                                                    Number of Companies and Asset
Institution Entities and Total                                                                                                                                            Development of Other Specialized
Assets                                                                                                                                                                    Financial Services Institutions
 IDR Billion
                                                                                                                                                                          Rp Trillion

  1,200                                                                                                        223               223 250
                                                                                                 221                                                                          300                                                                        140
                                                                                 204                                                                                                                               117                  117     116
  1,000                                                                                                                                                                                                                       109
                                                                    183                                                                     200                                                                                                          120
                                                     180                                                                                                                      250

        800                                                                                                                                                                                                                                              100
                                     129                                                                                                    150                               150
        600                                                                                                                                                                                                                                              80
                                                                                                                                                                                                          44
                                                                                                                                            100                               100
        400                                                                                                                                                                                                                                              60
                                                                                                                                                                                        22       26
                                                                                                                                            50                                   50
        200                                                                                                                                                                                                                                              20
                            20
              0                                                                                                                             0                                     0                                                                      0
                    2015            2016             2017          2018          2019         Q2-2020         Q3-2020      Oct-2020                                                     2015    2016      2017     2018       2019     Sep-20   Oct-20

                                                          Assets                          Number of MFIs (rhs)                                                                                           Assets               Number of Companies

 Peer-to-Peer Lending Fintech
As of October 2020, there were 119 registered Peer-to-Peer Lending Fintech operators
and 36 licensed (a total of 155: 144 conventional and 11 sharia; 102 local and 53 foreign
investments). The total assets of Peer-to-Peer Lending Fintech operators reached
IDR3.42 Trillion.

 Asset Growth of Fintech Peer to Peer                                                                                                                           Growth in the Number of Fintech Peer to
 Lending                                                                                                                                                        Peer Lending Accounts of Lenders and
              4.000                                                                                                                         80                  Borrowers
              3,500                                                                                                                         70
                                                                                                                                                                                                                                                               > Condition of The Financial Services Sector

                                                                                                                                                                           50
              3,000                                                                                                                         60
                                                                                                                                                  IDR Billion
IDR Billion

              2,500                                                                                                                         50                             40

              2,000                                                                                                                         40
                                                                                                                                                                           30
              1,500                                                                                                                         30
                                                                                                                                                                Million

              1,000                                                                                                                         20                             20
                  500                                                                                                                       10
                                                                                                                                                                           10
                    -                                                                                                                       -
                        Dec-18

                                 Feb-19

                                           Apr-19

                                                      Jun-19

                                                               Aug-19

                                                                        Oct-19

                                                                                 Dec-19

                                                                                            Feb-20

                                                                                                     Apr-20

                                                                                                               Jun-20

                                                                                                                        Aug-20

                                                                                                                                   Oct-20

                                                                                                                                                                             -
                                                                                                                                                                                         2017          2018        2019             Sep-20      Oct-20

                                                    Conventional                             Sharia (rhs)                                                                         Accumulated Accounts of Lender          Accumulated Accounts of Borrowers

                                                                           TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS                                                                            15
Financial Conglomerates and Digital Financial
                                               Innovation Development
                                               Financial Conglomerates
                                               As of Quarter 2 of 2020, the total assets of the Financial Conglomerates (FCs) reached
                                               IDR7,486 T or 63.6% of the total assets of the FSS. This shows the significant influence
                                               of the Financial Conglomerates on the FSS in Indonesia. Of the total assets, the financial
                                               conglomerates were dominated by Banking as the lead entity at 95.70%.

                                               Trend of FCs Assets and Share                                                              Financial Conglomerate with
                                               towards FSS (SJK) Assets                                                                   >IDR100 Trillion Assets
                                                IDR Trillion                                                                                                                 IDR Trillion

                                                                                                                                                                 Group BRI                                                              1,404.9
                                                14,000                                                                              72%
                                                                                                                                                             Group Mandiri                                                             1,375.4
                                                                                  70.4%                                             70%
                                                12,000                                                                                                           Group BCA                                                   983.8
                                                10,000                                                                              68%                          Group BNI                                                886.5
                                                               66.2%     66.2%               66.7%                                         Group MUFG (d/h Group Danamon)                                     372.4
                                                 8,000                                                65.7%                         66%
                                                                                                                                                          Group CIMB Niaga                                 277.4
                                                 6,000                                                                62.6%         64%
                                                                                                              62.9%                                            Group Panin                            225.5
                                                 4,000                                                                              62%                Group Bangkok Bank                             193.8
                                                                                                                                                               Group OCBC                            189.5
                                                 2,000                                                                              60%
                                                                                                                                                            Group Maybank                            167.1
                                                      0                                                                             58%                        Group Astra                   120.7
                                                          Dec 2015 Dec 2016 Dec 2017 Jun 2018 Dec 2018 Jun 2019 Dec 2019 Jun 2020
                                                                                                                                                               Group Mega                    117.3
                                                                   FC Asset                FC Asset               FC Asset                                      Group UOB
                                                                                                                                                                                             111.7
                                                                                                                                                               Group HSBC
                                                                                                                                                                                             109.4

                                               The Development of Digital
                                               Financial Innovation
                                               As of Quarter 3 of 2020, OJK recorded a number of 89                                                                          DFI Cluster
                                               Digital Financial Innovation (DFI) companies which are
                                                                                                                                                                                                                                       35
                                               classified into 16 clusters.                                                                                   Aggregator
                                                                                                                                                                                                                                       36
                                                                                                                                                         Financing Agent                         5
                                                                                                                                                                                                      7
                                                                                                                                                           Credit Scoring                                          13
                                                                                                                                                                                                                   13
                                               Number of Registered DFI                                                                                 Financial Planner                             7
                                                                                                                                                                                                       7
                                               Operators at OJK                                                                                                                  1
                                                                                                                                                   Claim Service Handling
                                                                                                                                                                                     2
                                               100                                                       88           86       89
                                                                                                                                                        Project Financing                        5
                                                90                                                                                                                                               5
                                                80
                                                                                              71                                                                                 1
                                                                                                                                                        Blockchain-based
                                                70                                                                                                                               1
                                                60                                                                                                                               1                                      Q2-2020
                                                                                  45                                                                       Funding Agent

                                                                                                                                                                                                                                  86
                                                50
                                                                                                                                                                                 1
                                                40        31            31                                                                        Online Distress Solution
                                                                                                                                                                                 1                                      Total
                                                                                                                                                                                 1
                                                30
                                                                                                                                          Property Investment Management             2
                                                20
                                                                                                                                                                                     2
> Condition of The Financial Services Sector

                                                10                                                                                                                                                                      Q3-2020

                                                                                                                                                                                                                                  89
                                                                                                                                                     Verification Non-CDD                    4
                                                 0                                                                                                                                            5
                                                       Q1-2019         Q2-2019   Q3-2019    Q4-2019     Q1-2020   Q2-2020     Q3-2020                                                    3
                                                                                                                                                                                                                        Total
                                                                                                                                                         Tax & Accounting
                                                                                                                                                                                         3
                                                                                                                                                                   E-KYC                     4
                                                                                                                                                                                         3
                                                                                                                                                                 RegTech
                                                                                                                                                                                 1
                                                                                                                                                                                 1
                                                                                                                                                                InsurTech            2
                                                                                                                                                                             1
                                                                                                                                             Insurance Broker Marketplace        1
                                                                                                                                                                                 1
                                                                                                                                                                             -
                                                                                                                                                   Online Gold Depository
                                                                                                                                                                             -
                                                                                                                                                                             -
                                                                                                                                            Social Network & Robo Advisor
                                                                                                                                                                             -

16                                                   2021-2025 The Indonesian Financial Services Sector Master Plan
Level of Financial Literacy and Inclusion
The level of financial literacy and inclusion has continued                                                                                                                                                                 Improved Financial Literacy and Inclusion
to move positively over the past five years. Based on the                                                                                                                                                                                80,00%
                                                                                                                                                                                                                                         70,00%
results of the National Financial Literacy Survey conducted                                                                                                                                                                              60,00%
by OJK in 2019, the financial inclusion index reached                                                                                                                                                                                    50,00%
                                                                                                                                                                                                                                         40,00%
76.19% and the financial literacy index reached 38.03%.

                                                                                                                                                                                                                                                                 29,70%

                                                                                                                                                                                                                                                                                             38,03%

                                                                                                                                                                                                                                                                                                                                  67,80%

                                                                                                                                                                                                                                                                                                                                                                76,19%
                                                                                                                                                                                                                                         30,00%
                                                                                                                                                                                                                                                                                                                                                                                                                  2016
This augmentation was the result of the implementation                                                                                                                                                                                   20,00%
                                                                                                                                                                                                                                                                                                                                                                                                                  2019
                                                                                                                                                                                                                                         10,00%
of 3 National Strategic Initiative programs for Indonesian                                                                                                                                                                                0,00%
Financial Literacy (Revisit 2017).                                                                                                                                                                                                                                             Financial Literacy                                          Financial Inclusion

                                                                                               Aceh
                                                                                                                                                                                                                                                East Kalimantan

Distribution of                                                                                      6

                                                                                                                         North Sumatera                                                              North Kalimantan 23

Financial Literacy                                                                                               14
                                                                                                                                      Riau
                                                                                                                                            Riau Islands
                                                                                                                                                                                  West Kalimantan
                                                                                                                                                                                                                                                                  Central Sulawesi
                                                                                                                                                                                                                                                                                      North Sulawesi
                                                                                                                                                                                                                                                                                                                 North Maluku

and Inclusion in
                                                                                                                                                                                                                                                                                                                 15
                                                                                                                                      7          5                                                                                                                                               12
                                                                                                                           27                             South Sumatera                                                                          9                                   30
                                                                                                   West Sumatera                                                                                                                                                                            Gorontalo

Indonesia                                                                                                                                                                                              19                                                                                                                                                West Papua
                                                                                                                                                               Bangka Belitung
                                                                                                            Jambi                                    24                                                                                                            10                                                                          33
                                                                                                                                                                                                                             17                                                                                    Maluku
                                                                                                                                                           8                    22                                                       21                      25                       West Sulawesi                 20
                                                                                                                                                                                                                                                                                                                                                                                        32
          Inclusion 2016                                                                                                   Bengkulu 28                                                    Central Kalimantan                                                                     18
                                                                                                                                                                                                                                                                                                 Southeast Sulawesi
                                                                                                                                  Lampung                   31          DKI Jakarta                                         South Kalimantan                       29
          Inclusion 2019                                                                                                                                                 1                        East Java                                                        South Sulawesi
                                                                                                                                      Banten                   11                                          3                                                                                                                                                                    Papua
                                                                                                                                                                             16
          Literacy 2016                                                                                                                                        West Java
                                                                                                                                                                                              4
                                                                                                                                                                                                               2
                                                                                                                                                                                                                                                                          East Nusa Tenggara
                                                                                                                                                                                                                                         13            26              34
                                                                                                                                                                                                   DI Yogyakarta
          Literacy 2019                                                                                                                                                         Central Java
                                                                                                                                                                                                                                     Bali

                                                                                                                                                                                                                                          West Nusa Tenggara
                                 59.16%

                                          93.98%
                    94.76%

                                                       58.53%

                                                                92.91%

                                                                                      92.39%

                                                                                                            92.13%

                                                                                                                                   88.48%

                                                                                                                                                          87.96%

                                                                                                                                                                                     86.91%

                                                                                                                                                                                                                   86.39%

                                                                                                                                                                                                                                              86.09%

                                                                                                                                                                                                                                                                      85.56%

                                                                                                                                                                                                                                                                                             85.08%

                                                                                                                                                                                                                                                                                                               84.51%

                                                                                                                                                                                                                                                                                                                                      84.29%

                                                                                                                                                                                                                                                                                                                                                               83.99%
 76.19%

                                                                             48.95%

                                                                                                   47.38%

                                                                                                                                                                                                                                                                                                                                                                                         76.12%

                                                                                                                                                                                                                                                                                                                                                                                                                   75.85%
                                                                                                                         45.67%

                                                                                                                                                44.36%

                                                                                                                                                                       43.19%

                                                                                                                                                                                                  40.05%
          38.03%

                                                                                                                                                                                                                                39.63%

                                                                                                                                                                                                                                                        39.63%

                                                                                                                                                                                                                                                                                 39.27%

                                                                                                                                                                                                                                                                                                      38.85%

                                                                                                                                                                                                                                                                                                                         38.06%

                                                                                                                                                                                                                                                                                                                                               37.96%

                                                                                                                                                                                                                                                                                                                                                                         37.53%

                                                                                                                                                                                                                                                                                                                                                                                                   37.43%

                                                                                                                                                                                                                                                                                                                                                                                                                            37.01%
 67.8%

                    78.2%

                                          75.6%

                                                                76.0%

                                                                                      74.9%

                                                                                                            74.5%

                                                                                                                                   71.4%

                                                                                                                                                          73.2%

                                                                                                                                                                                     68.0%

                                                                                                                                                                                                                   69.5%

                                                                                                                                                                                                                                              73.1%

                                                                                                                                                                                                                                                                      67.3%

                                                                                                                                                                                                                                                                                             72.4%

                                                                                                                                                                                                                                                                                                               65.1%

                                                                                                                                                                                                                                                                                                                                      69.5%

                                                                                                                                                                                                                                                                                                                                                               68.4%

                                                                                                                                                                                                                                                                                                                                                                                         76.7%

                                                                                                                                                                                                                                                                                                                                                                                                                   64.0%
          29.7%

                                                                                                                                                                                                  31.3%

                                                                                                                                                                                                                                30.5%

                                                                                                                                                                                                                                                        22.5%

                                                                                                                                                                                                                                                                                 38.2%

                                                                                                                                                                                                                                                                                                      28.7%

                                                                                                                                                                                                                                                                                                                         37.5%

                                                                                                                                                                                                                                                                                                                                               31.3%

                                                                                                                                                                                                                                                                                                                                                                         27.3%

                                                                                                                                                                                                                                                                                                                                                                                                   33.0%

                                                                                                                                                                                                                                                                                                                                                                                                                            26.2%
                                 40.0%

                                                       38.5%

                                                                             35.6%

                                                                                                   33.5%

                                                                                                                         37.1%

                                                                                                                                                32.7%

                                                                                                                                                                       29.5%

National                     1                     2                     3                     4                     5                      6                      7                          8                             9                      10                      11                    12                 13                     14                       15                        16                        17
 76.19%

                    75.33%

                                          75.07%

                                                                74.80%

                                                                                      74.54%

                                                                                                                                                                                                                                              64.57%

                                                                                                                                                                                                                                                                                                               61.94%
                                                                                                            66.75%

                                                                                                                                   65.71%

                                                                                                                                                                                                                   64.83%
                                                                                                                                                          65.62%

                                                                                                                                                                                     65.09%

                                                                                                                                                                                                                                                                      62.99%

                                                                                                                                                                                                                                                                                             62.73%

                                                                                                                                                                                                                                                                                                                                      60.89%

                                                                                                                                                                                                                                                                                                                                                               60.89%

                                                                                                                                                                                                                                                                                                                                                                                         60.63%
          38.03%

                                                                                                                                                                                                                                                                                                                                                                                                                   59.84%
                                 36.75%

                                                       36.48%

                                                                             36.48%

                                                                                                   36.22%

                                                                                                                         35.70%

                                                                                                                                                35.43%

                                                                                                                                                                                                                                34.65%
                                                                                                                                                                       35.17%

                                                                                                                                                                                                  34.91%

                                                                                                                                                                                                                                                        34.55%

                                                                                                                                                                                                                                                                                 34.12%

                                                                                                                                                                                                                                                                                                      32.46%

                                                                                                                                                                                                                                                                                                                         31.23%

                                                                                                                                                                                                                                                                                                                                               26.9% 30.97%

                                                                                                                                                                                                                                                                                                                                                                         22.2% 29.13%

                                                                                                                                                                                                                                                                                                                                                                                                   19.3% 28.87%

                                                                                                                                                                                                                                                                                                                                                                                                                            28.0% 27.82%
 67.8%

                    65.5%

                                          66.9%

                                                                60.4%

                                                                                      59.3%

                                                                                                            66.9%

                                                                                                                                   66.2%

                                                                                                                                                          64.0%

                                                                                                                                                                                     61.5%

                                                                                                                                                                                                                   66.9%

                                                                                                                                                                                                                                              69.1%

                                                                                                                                                                                                                                                                      65.5%

                                                                                                                                                                                                                                                                                             63.3%

                                                                                                                                                                                                                                                                                                               69.8%

                                                                                                                                                                                                                                                                                                                                      62.5%

                                                                                                                                                                                                                                                                                                                                                               61.5%

                                                                                                                                                                                                                                                                                                                                                                                         62.2%

                                                                                                                                                                                                                                                                                                                                                                                                                   58.5%
          29.7%

                                                                                                                                                                                                  26.9%

                                                                                                                                                                                                                                21.5%

                                                                                                                                                                                                                                                        27.3%

                                                                                                                                                                                                                                                                                 27.6%

                                                                                                                                                                                                                                                                                                      28.4%

                                                                                                                                                                                                                                                                                                                         23.3%
                                 26.5%

                                                       30.5%

                                                                             26.2%

                                                                                                   23.3%

                                                                                                                         29.5%

                                                                                                                                                26.5%

                                                                                                                                                                       26.9%

National                18                     19                    20                    21                    22                     23                     24                         25                            26                         27                      28                    29                 30                     31                       32                        33                        34

By gender, the literacy index and financial inclusion                                                                                                                                                                 The sharia financial literacy index also upsurged from
improved equally for men and women.                                                                                                                                                                                   8.1% in 2016 to 8.93% in 2019, although it is still below
                                                                                                                                                                                                                      the rise in conventional financial literacy.

Level of Financial Literacy and Inclusion                                                                                                                                                                             Financial Literacy and Inclusion Based on
                                                                                                                                                                                                                      Gender
                                                                                                                                                                                                                      CONVENTIONAL                SHARIA
           LITERACY                       INCLUSION                                                                                                                                                                                             LUSI
                                                                                                                                                                                                                                                    ON                                                                                                        INCLUSION                           9.10%
                                                                                                    LITERACY INCLUSION
                                                                                                                                                                                                                                         IN
                                                                                                                                                                                                                                            C                                               29.5%                                                                                                   2019
                                                                                                                                                                                                                                                                                                                                                                                                                                           > Condition of The Financial Services Sector

                                 2019                                                                                2019
                                                                                                                                                                                                                                                                                                 2016
                                                                                                                                                                                                                                                                                                                                                                                                           11.1%
                                                                                                                                                                                                                                                                                                                                                                                                                  2016
                                                                                                                                                                                                                                                                                                      37.72%
   39.94% 77.24%                                                                       36.13% 75.15%                                                                                                                                                                                                      2019
                                                                                                                                                                                                                                                                                  Y
                                                                                                                                                                                                                                                                               AC

                   6.74%                  7.64%                                                             0.63%                  8.95%
                                                                                                                                                                                                                                                                          ER

                                                                                                                                                                                                                                                                          LI T                                                                            LITERACY

                   33.2% 69.6%                                                                           25.5% 66.2%                                                                                                                                                                 65.6%                                                                                                        8.1%
                                                                                                                                                                                                                     75.28%                                                                2016
                                                                                                                                                                                                                                                                                                                                                                  8.93%                              2016
                       2016                                                                                   2016                                                                                                              2019
                                                                                                                                                                                                                                                                                                                                                                         2019

                                                                                                                                                                                                                                LITERACY                     8.22%                                                                     LITERACY                         0.83%
                                                                                                                                                                                                                            INCLUSION                        9.68%                                                                    INCLUSION                          (2%)

                                                                                      TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS                                                                                                                                                                                                                                             17
Challenges Ahead

                     Short-Term Challenges

                                                                                N
                                                             PE
                                                                                        al
                                                                                     on
                                                                                  sia
                                                                              i Na
                                                                           om
                                                                         on
                                                                       Ek
                                                                   m
                                                                gra
                                                             Pro

                            1                                                                2        3                       4

                     Economic                            Mid and long-                           Financial market      Stimulus policy
                     uncertainties                       term financing                          condition still has   continuity to
                     due to Covid-19                     support for                             the potential to      reinforce
                     pandemic affecting                  National                                be exposed to         the National
                     the demand                          Economy                                 high volatility       Economy
                     recovery and public                 Recovery                                influenced by         Recovery and
                     purchasing power                    Program.                                the sentiment of      normalization
                     strength as well as                                                         market players.       phase.
                     goods and services
                     production and
                     distribution.
> Challenges Ahead

18                    2021-2025 The Indonesian Financial Services Sector Master Plan
Structural Challenges
  Global and Domestic Economic                                             Financial Literacy and Inclusion Gap
  Uncertainty
• Increases downside risk to the                                        • The raise in the financial
  national financial economic                                             inclusion index has
  system                                                                  not been followed by a
• Relatively low competitiveness                                          balanced increase in the
  with small capital and                                                  financial literacy index
  economies of scale compare to                                         • The need for equitable
  ASEAN                                                                   distribution of financial
• More complex FSS risks                                                  literacy and inclusion,
  and regulatory arbitrage                                                especially towards
  practices due to regulatory and                                         priority targets
  supervisory gaps                                                      • Rampant illegal
                                                                          investment

  Digital Economy Revolution
                                                                           The Need for Improved
                                                                           Effective FSS Supervision

                                                                           A supervisory approach that must be complemented
                                                                           by quick access to most recent data, analyze data
                                                                           precisely and accurately
    Disruption of FSS                Shortage of high
  business patterns and            quality talent in digital
   consumer behaviors                        era                           Limited capacity and
                                                                           expertise of OJK
                                                                           human resources to
                                                                           supervise, including
                                                                           the application of
                                                                           information technology-
                                                                           based supervision
                                     The importance of
  The role of regulation to
                                        appropriate
  encourage responsible
                                      research-based
         innovation
                                      approaches and
                                          policies

  The Need for Financing The National Economy

  Investment       Financing for            Limited        The efficiency      The development       The financial         Changing
                                                                                 of the sharia       market is still
    needs to       MSMEs is still        sustainable        level of the            financial     relatively shallow
                                                                                                                           needs of
    support           limited               finance        national FSS         industry is still     with limited        consumers
   economic                             instruments              is               not optimal     medium and long          who are
                                                                                                                                         > Challenges Ahead

     growth                                                   not yet            (8.87% of the      term financing       looking for a
                                        including its
  throughout                                                                           total         instruments        one stop shop
                                          incentives        competitive
  2020-2024                                                                    assets of the FSS                         for financial
                                                                               as of September                             products
                                                                                      2019)

                              TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS   19
2021-2025 Indonesian Financial
                  TO RECOVER NATIONAL ECONOMY AND REINFORCE FINANCIAL SERVICES SECTOR

                                     2020-2021 Short-Term Policy Direction
                                   Financial Services Sector Supports for National Economy
                                                      Recovery Program

                                                   1
                      To Accelerate Implementation of The
                 Government’s National Economic Recovery
                                              Program (PEN)
                    Through funding support for businesses
                   that are labor intensive and/or have high
                                                                                        Monitor and Evaluate
                           multiplier effect for the economy
                                                                                        The Stimulus Policy and
                                                                                        Normalization Transition of
                                                                                        The Prudential Relaxation
                                                                                      2
                                                                                        Policy
                                                                                        Continue the relaxation
                                                                                        implementation of loan/
                                                                                        financing restructuring policy
Current Crisis

                                                                                        in a selective manner to
  Response

                                                                                        prevent moral hazard
                                             3
                        Increase Consumer Demand,
                        MSMEs Development and Job
                        Creation
                        • Support Government-initiated
                          programs to reinforce demand
                          creation and employment
                          creation
                        • Accelerate economic driving
                                                                                                        4
                          wheels at the regional level to
                                                                                                  Accelerating The
                          improve economic activities
                                                                                                  Development of an
                                                                                                  Integrated Digital
                                                                                                  Economic and Financial
                                                                                                  Ecosystem
                                                                                                  Reinforce digitalization
                                                                                                  among MSMEs, Micro
                                                                                                  Waqf, and so on and
                                                                                                  put forward IT-based
                                                                                                  supervision
                                                       5
                                             Reformation of NBFI
                                             and Capital Market
                                             Acceleration to
                                             Maintain Financial
                                             Market Integrity

 20                  2021-2025 The Indonesian Financial Services Sector Master Plan
Services Sector Master Plan
RESILIENCE AND COMPETITIVENESS

                   2021-2025 Structural Framework
      Enhancing Financial Services Sector Resilience and Competitiveness

                        The 2021-2025 MPSJKI
          STRENGTHENING                         DEVELOPMENT OF                                  DIGITAL
          RESILIENCE AND                       FINANCIAL SERVICES                           TRANSFORMATION
         COMPETITIVENESS                       SECTOR ECOSYSTEM                              ACCELERATION

       Strengthening capital                Increasing the role of the                 Support FSS digital
       and accelerating                     FSS in supporting priority                 transformation innovation
                                            economic sectors, MSMEs,                   and acceleration
       consolidation of FSI
                                            job creation and regional
                                            development                                Developing regulatory
       Strengthening                                                                   framework which supports
       governance, risk

                                                                                                                                  Structural
                                            Establish FSS integration                  digital financial sector

                                                                                                                                  Response
       management and                       to add value of Sharia                     ecosystem
       market conduct                       Finance in the development
                                            of halal industry and sharia               Improving human capital
                                            economic ecosystem                         capacity in the financial
       Synchronize FSS                                                                 services sector in line with
       regulations and                      Expand the financial access                the development of the digital
       supervision by referring             and foster public financial                industry
       to the best practices                literacy
       and/or international                                                            Strengthening the role
                                            Strengthening consumer                     of research to support
       standards
                                            protection in the FSS                      FSS digital innovation and
                                                                                       transformation
       Strengthening                        Accelerating financial
       Integrated Supervision               market deepening                           Accelerate the implementation
       of Financial                                                                    of IT-based supervision
       Conglomerates and                    Supporting FSI business                    (Suptech) in OJK and use of
                                            expansion to carry out multi-              Regtech by FSS
       Cross Cutting Issues
                                            activities business
                                                                                       Perform Business Process
                                            Increase the role of financial             Reengineering to increase the
                                            services in the sustainable                quality of licensing, regulation
                                            finance to achieve the SDGs                and supervision

         COLLABORATION AND COOPERATION AMONG STAKEHOLDERS (ENABLER)

                       TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS       21
The Indonesian Financial
                                                                   Services Sector Master
                                                                   Plan 2021-2025
                                                                   The FSS should be developed with the goal to make                  To face these challenges, the national FSS must
                                                                   it highly competitive, able to play an optimal role                be developed so that it is highly resilient to various
                                                                   in the national economy, and able to face various                  shocks, competitive and adaptive to an ever-changing
                                                                   challenges amid the dynamics of the national and                   environment, efficient and contributes optimally
                                                                   global economy. As described above, the challenges                 towards economic development, and able to provide
                                                                   are divided into 2 (two) categories, namely short-                 consumer-oriented financial products and services.
                                                                   term and structural longer term challenges that
                                                                   may come from domestic or globally. In the Short-                  MPSJKI 2021-2025 is aimed to recover national
                                                                   Term, economic conditions and the FSS as a result                  economy as well as improving resilience and
                                                                   of the Covid-19 pandemic; speed of discovery and                   competitiveness of the financial services sector
                                                                   distribution of the Covid-19 vaccine; Government                   through innovation and digitization, as well as
                                                                   policy response for health management and                          preparing National FSS in facing regional and global
                                                                   implementation of the National Economic Recovery                   competition. The structure of the MPSJKI consists of:
                                                                   programs (PEN) and the impact of the Large-Scale
                                                                   Social Restrictions (Pembatasan sosial Berskala                    a. Short-term FSS Policy Direction (2020-2021) -
                                                                   Besar or PSBB) need to be considered. Meanwhile,                      Financial Services Sector Support for the National
                                                                   in the medium term from the domestic side, the FSS                    Economic Recovery Program (PEN).
                                                                   is still very segmented with a large number and
                                                                   relatively low capital capacity as well improvemenet               b. Structural Framework 2021-2025: Enhancing
                                                                   in governance and risk management. Cross-                             Resilience and Competitiveness of the Financial
                                                                   sectoral regulation and supervision still also needs                  Services Sector.
                                                                   to be harmonized. Globally, the FSS faces rapid                       1. Strengthening Resilience and Competitiveness.
                                                                   development of the digital economy along with the                     2. Financial Services Ecosystem Development.
                                                                   changes in consumer behaviors, relatively large                       3. Digital Transformation Acceleration.
                                                                   national development financing needs, and high
                                                                   volatility in global financial markets.
> The Indonesian Financial Services Sector Master Plan 2021-2025

22                                                                   2021-2025 The Indonesian Financial Services Sector Master Plan
Short-Term Financial Services Sector Policy Direction
(2020-2021) - Financial Services Sector Support for
the National Economic Recovery Program (PEN)
The pandemic which is still overshadowing the short-term outlook increases the urgency of formulating short-
term strategies to accelerate national economic recovery (PEN).

1. To accelerate implementation of the PEN                                                     Furthermore, OJK will continue to periodically
   One of the biggest challenges faced by many                                                 monitor the industry and try to find solutions to
   policymakers to respond to the impact of Covid-19                                           the problems that arise in the field that are often
   pendemic is in terms of the speed and accuracy of                                           reported through OJK Call Center Contact 157 and
   beneficiaries. This also occurs in the formulation                                          Regional Office/OJK Office (KR/KOJK). In addition,
   and implementation of stimulus policies at the                                              if necessary, OJK will also issue supporting
   FSS. Therefore, the support and cooperation of all                                          regulations for the implementation of the PEN
   parties, both from the policy makers and the policy                                         programs, i.e if there will be new policies/programs
   intermediaries, is very important.                                                          issued by the Government in the future.

   To accelerate implementation of Government                                            2. Monitoring and evaluation of the stimulus
   stimulus, OJK supports Government programs                                               policies and the transition to normalization of
   in PEN and optimizes the role of the FSS both in                                         the prudential relaxation policies
   keeping the economy rolling through financing
   support for labor-intensive businesses or those                                             During the implementation period of the stimulus
   with a larger multiplier effect on the economy.                                             policy, OJK actively monitors and evaluates the
   OJK has issued various stimulus policies                                                    implementation of these policies in order to
   during the Covid-19 pandemic in line with                                                   ensure the smooth running of the program and
   the Government's efforts to promote national                                                provide input and policy improvements. Looking
   economic recovery.                                                                          forward, monitoring will continue to be carried out
                                                                                               proactively and evaluation of stimulus policies will
                                                                                               also be carried out as one of the considerations for
                                                                                               further policy formulation and policy normalization.

                      THE NATIONAL ECONOMIC RECOVERY (PEN) PROGRAM WILL CONTINUE IN 2021
                                                    In order to maintain the momentum of economic recovery

                                   IDR25.40T                                            IDR48.80T                                                        IDR110.20T
                                                                                                                                                   1.    Cash Transfer Program (Program Keluarga
                               1. Procurement of Covid-19                          1. Interest Subsidy for People’s                                      Harapan) for 10 Million Beneficiary Families
                                                                                                                                                                                                           > The Indonesian Financial Services Sector Master Plan 2021-2025
                                                                                                                                   PROTECTION

                                  Vaccine                                             Business Loan (KUR)                                          2.    Food Stamps Programs (Kartu Sembako) for
                  HEALTH

                                                                                                                                     SOCIAL

                                                                                                                                                         19.8 Million Beneficiary Families
                               2. Immunization, Infrastructure,
                                                                        MSME

                                                                                   2. Financing Support for Cooperatives                           3.    Training Incentive Program (Kartu Pra-Kerja)
                                  Lab, R&D                                            and MSMEs                                                    4.    Village Direct Cash Assistance (Bantuan
                               3. BPJS Contribution Assistance                     3. Placement of Funds in Bank                                         Langsung Tunai) and Supporting Village
      IDR356.5T

                                  Reserve for Non-Wage Workers                     4. Loss Limit Guarantee                                               State-Owned Enterprises (BUMDes)
                                                                                                                                                   5.    Cash Social Transfer for 10 Million Beneficiary
                                  (PBPU) and Non-Workers (BP)                      5. PEN Financing Reserve                                              Families @IDR200 Thousand for 6 Months

                                   IDR14.90T                                            IDR20.40T                                                        IDR136,70T

                                                                                                                                                    1.    Tourism Support
                                                                                                                                    SEKTORAL KL/

                                1. Government Equity Participation
                  PEMBIAYAAN
                   KORPORASI

                                                                                                                                                    2.    Food Security
                                   (PMN) to Indonesia Eximbank (LPEI)
                                                                        INSENTIF

                                                                                    1. Tax Borne by The Government
                                                                         USAHA

                                                                                                                                       PEMDA

                                                                                                                                                    3.    ICT Development
                                2. Government Equity Participation                  2. Exemption of Income Tax Art. 22
                                                                                                                                                    4.    Loans to The Regions
                                   to SOEs in Assignments (HK, ITDC,                   on Import
                                                                                                                                                    5.    Labor Intensive Programs
                                   Pelindo III, KIW)                                3. Early VAT Refund
                                                                                                                                                    6.    Industrial Zones
                                3. Guarantee of Backstop Loss Limit                                                                                 7.    PEN Expenditure Reserves

                                                                                                                                                      Source: Ministry of Finance, August 2020.
                                                                                                        https://www.kemenkeu.go.id/publikasi/berita/6-arah-kelanjutan-pen-dalam-rapbn-2021/

                                     TO RECOVER THE NATIONAL ECONOMY AND ENHANCE THE FINANCIAL SERVICES SECTOR RESILIENCY AND COMPETITIVENESS                                                              23
OJK also proactively monitors and coordinates                    4. Accelerating the development of an
                                                                     not only at the central level, but also at the                      integrated digital economic and financial
                                                                     regional level through the regional offices or                      ecosystem
                                                                     OJK offices. This effort is made to accelerate the
                                                                     identification process as well as to overcome the                   Along with changes in consumer lifestyles and
                                                                     various constraints specific to certain regions. OJK                needs which prioritize non-physical/digital
                                                                     believes that a gradual and sustainable economic                    services, in addition by the new normal during
                                                                     recovery in the regions will in turn support a more                 the Covid-19 pandemic which has limited human
                                                                     solid and faster national economic recovery.                        physical activities, further emphasizes the urgency
                                                                                                                                         to accelerate the transformation and digital
                                                                     After the evaluation of policy implementation and                   economic and financial ecosystem.
                                                                     taking into account developments in the pandemic
                                                                     and the national economy, in the short-term, OJK                    Improving services through digital channels is
                                                                     will continue to implement relaxation to the credit/                one of the development focuses carried out by
                                                                     financing restructuring policy as a precautionary                   several industries that are ready to adapt to
                                                                     measure to support the decline in the quality of                    consumer needs. As a regulator, OJK supports
                                                                     restructuring debtors due to Covid-19 pandemic                      the acceleration of the transformation and
                                                                     conditions. Restructuring extensions are given                      development of the digital ecosystem in the FSS
                                                                     selectively based on the assessment of FSIs to                      through accommodative policies.
                                                                     avoid moral hazard.
                                                                                                                                         Several policies in the Banking sector that will
                                                                     Furthermore, to ensure the sustainability of the                    be taken in to account in the Short-Term are the
                                                                     stable and sound FSS business, the industry is                      Digital Banking Transformation Blueprint, the
                                                                     directed to continue to look into the adequacy                      implementation of digitalization for all Sharia
                                                                     of Allowance for Impairment Losses (Cadangan                        Banking business groups as well as provisions
                                                                     Kerugian Penurunan Nilai or CKPN) in anticipation                   related to Banking synergy under single ownership
                                                                     of deteriorating credit quality.                                    for the development of Islamic Banking and
                                                                                                                                         providing incentives in fulfilling the required
                                                                     The industry must consider this aspect in                           documents through optimizing the integrated role
                                                                     managing capital stock according to the risk                        of the governance committee.
                                                                     profile, including in determining the dividend/
                                                                     bonus to the shareholders.                                          In the Capital Market, to support digital
                                                                                                                                         transformation, OJK continues to encourage
                                                                   3. Increase consumer demand, MSMEs                                    the opening of wider access to MSMEs through
                                                                      development and job creation                                       equity/securities crowdfunding and opening
                                                                                                                                         access to finance by increasing the offering
                                                                     As previously discussed, pandemic management                        portion to the public through the e-IPO system.
                                                                     policies have a direct impact on the economic                       In addition, the implementation of the General
                                                                     downturn, especially from the demand side.                          Meeting of Shareholders electronically will also be
                                                                     Weak demand during a pandemic is an issue that                      continued. In the NBFI sector, OJK will encourage
                                                                     requires policy intervention. In this case, OJK                     the digitization of Micro Waqf Banks and prepare
                                                                     will always support programs initiated by the                       regulation framework in relations to digital
                                                                     Government in order to support demand creation,                     insurance and reinsurance brokerage services.
> The Indonesian Financial Services Sector Master Plan 2021-2025

                                                                     MSME development and job creation through
                                                                     coordination; business link and match; and moral                    To accelerate licensing requirements, OJK
                                                                     suasion with FSIs.                                                  continues to carry out Business Process
                                                                                                                                         Reengineering of the licensing processes that are
                                                                     In addition, OJK will accelerate the economic                       running at OJK, both in terms of simplification
                                                                     growth in the regions in order to support economic                  of business processes and improvements of the
                                                                     activity, including by facilitating the acceleration of             information technology.
                                                                     absorption of Government spending (State Budget/
                                                                     Regional Budget).                                                   a. In terms of simplification of business
                                                                                                                                            processes, analysis and mapping of types of
                                                                                                                                            licensing in all sectors (Banking, Capital Market
                                                                                                                                            and NBFIs) is carried out, which will then be
                                                                                                                                            simplified to achieve optimal SLA.

24                                                                   2021-2025 The Indonesian Financial Services Sector Master Plan
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