Indonesia is one of the largest countries in Asia with the population of 230 million. However, among members of the Association of South-East Asian Nations (ASEAN), the country has lower per capita income and had the lowest real GDP growth rate. It's not surprising that its financial sector is one of the costliest in the world with more than 50% of GDP was spent to bail out the banking sector in the aftermath of the Asian crisis in 1997-98. The weak financial sector is attributed to the collapse of economy and average income of Indonesian yet to return to the pre-crisis levels. For 30 years, Indonesia was under the control of one president and was highly fragmented socially. Against the government inefficiency, almost all segments of the public sector corrupted highly and lost its credibility. Now under the new government, the country is getting the international attention indeed got much applauds for its brave policies.
On the banking sector front, though the country closed many banks, it still has 131 banks, which the central bank believes too many. Of which 41 are under the ownership control of foreign investors. The top ten banks control 80% of the sector assets. Four state-control banks continue to dominate the sector with around 40% of assets. When compared with other Asian countries it lags behind in terms of retail banking development. The sector is surrounded by inefficient infrastructure, lack of client credit history and the dominance of cash-based payments. During the crisis, majority of the banks taken over by the government, which have now either been closed, or sold back to private sector. |
