Dian Ediana Rae, Chief Executive of Banking Supervision of the Financial Services Authority (OJK), said that the domestic banking sector remains attractive to foreign investors.
“Although some foreign banks are reducing their business focus in Indonesia, foreign investors are still interested in investing in the domestic banking sector,” Dian said in Jakarta, on Thursday.
Dian stated that the positive economic growth and the large demographic in Indonesia are attracting investor interest in long-term growth. The economy in the third quarter of 2023 grew by 4.94 percent year on year, supported by strong household consumption and increased investment amid a decrease in government consumption and export performance.
Government policy support, including efforts to simplify regulations and provide tax incentives and ease foreign worker permits, is sending positive signals.
In addition, innovation and digitalization in the banking sector are key factors driving the interest of foreign investors in local banks. Dian mentioned that strategic partnerships with local banks can strengthen the position of foreign banks in the continuously growing market, showing that foreign investment in the Indonesian banking sector remains relevant.
Foreign banks that combine adaptability, innovation, and strategic partnerships have a good chance of success in a dynamic business environment.
Overall, foreign banks in Indonesia have shown solid post-pandemic recovery with a strong foundation. “The aggregate total assets, third-party funds, and foreign bank loans have experienced positive growth over the past decade, despite a decrease in third-party funds during the pandemic year of 2020,” she said.
Dian stated that the liquidity and capital adequacy of foreign banks are good, with a loan to deposit ratio (LDR) exceeding 100 percent, influenced by funding sources including capital and funds from foreign sources. Profitability shows a trend of improvement, especially supported by treasury income. The proposition of foreign banks as institutions with a global network remains an added value, especially for institutional and corporate customer segments. Thus, foreign banks remain relevant players in supporting the Indonesian economy.
