Non-banking Funds Not Yet Executed
Friday, 12 January, 2007 | 14:13 WIB

TEMPO Interactive, Jakarta: The World Bank stated so far the government has not seriously executed financial resources from non-banking financial institution's (LKNB) assets. These resources reach Rp375 trillion. Half of this is managed for pension and insurance funds.

“That amount is equal to 14 percent of the gross domestic product (GDP),” said the World Bank's Lead Financial Economist, P.S. Srinivas, during the Membuka Potensi Sumber Daya Keuangan Dalam Negeri Indonesia book launching at the World Bank office, Jakarta, yesterday (11/1).

“That is a significant amount and needs to be managed better,” he said further.

Srinivas said that a country needs banking and LKNB so that its financial system is solid. LKNB, he said, can move and allocate long-term domestic resources to finance development. Now Indonesia needs additional investment in infrastructure amounting to US$5 billion. “The government's loan strategy is by adding that portion of domestic long-term loans,” he said.

According to him, LKNB in Indonesia funds is still small scale compared to banks with Rp1,500 trillion assets. In Malaysia, LKNB's assets reach 138 percent of GDP; Thailand, 32 percent and Singapore, 170 percent.

The World Bank projects that LKNB in Indonesia has the opportunity to grow rapidly. The reasons are, first, the number of citizens who have insurance policies is small, above 10 percent. Second, citizens who have pension savings are only 15 million. Third, there are around 100,000 accounts of domestic retail investors at the stock exchange. Fourth, mutual funds investors are only 255,000.

“Other factors are leasing companies and venture capital haven’t had important roles in financing businesspeople and small- and medium-scaled businesses,” said Srinivas.

According to him, every year the pension and insurance funds in Indonesia grow 20 percent. However, this LKNB's assets needs to be improved. Now insurance companies invest one-third of their funds (Rp23 trillion) in short-term time-deposit and mutual funds. As for pension funds, the amount is 40 percent (Rp42 trillion).

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