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Indonesia: Financial Market Development and Inclusion Program Subprogram 1

Sovereign (Public) Project | 48207-001 Status: Closed

The Asian Development Bank is working with Indonesia to develop its financial sector and to expand access to financial services for poor households. The project is assisting in the development of the integrated financial sector regulator, called OJK, to become fully operational and effective.

Project Details

Project Officer
Mohd Sani Mohd Ismail Southeast Asia Department Request for information
Country
  • Indonesia
Modality
  • Loan
Sector
  • Finance
 
Project Name Financial Market Development and Inclusion Program Subprogram 1
Project Number 48207-001
Country Indonesia
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3274-INO: Financial Market Development and Inclusion Program Subprogram 1
Ordinary capital resources US$ 400.00 million
Strategic Agendas Inclusive economic growth
Regional integration
Drivers of Change Governance and capacity development
Knowledge solutions
Sector / Subsector

Finance / Finance sector development

Gender Equity and Mainstreaming No gender elements
Description FMDIP supports the government's key reform priorities in the financial sector and represents the start of a medium to long-term partnership between the Asian Development Bank (ADB), the government, and the country's newly formed independent unified financial sector regulator, the Financial Services Authority (OJK). The government's priority areas include the OJK implementing its supervisory mandate over the bank and nonbank sector and promoting financial system stability; deepening the capital market and the nonbank financial sector to provide efficient means for the private sector to raise capital, including infrastructure financing; and promoting access to financial services by poor households to address rising income inequality in Indonesia.
Project Rationale and Linkage to Country/Regional Strategy The program has three outputs critical to develop the financial sector and promote financial inclusion: (i) regulatory structure for financial stability strengthened, (ii) financial market deepened, and (iii) access to financial services enhanced. FMDIP consist of three subprograms which will see ADB partnering with the government and OJK up to 2019. The focus of each subprogram is based on the government's priorities subprogram 1 focuses on OJK's supervisory mandate and increasing its capacities to function effectively as an integrated financial services regulator as a prerequisite for financial stability and financial market development, while subprograms 2 and 3 will increasingly focus on financial inclusion reforms. OJK has developed the National Strategy on Financial Literacy, which will be updated in 2016, and the government is finalizing the National Strategy on Financial Inclusion. ADB is also supporting OJK to complete a sector assessment on micro-finance. These strategies will be implemented during subprogram 2 (2015 2017). The program's three outputs are expected to have positive, economy-wide effects including by reducing cost of borrowed capital and generating wealth for those excluded from the financial sector (para 30). A capacity development national TA to support OJK and the government is being processed in parallel with the program. This support is supplemented by ADB's regional TA on ASEAN capital market integration, which integrates regional collaboration and considerations into national financial sector development.
Impact Increased annual growth rate of financial sector (National Medium-Term Development Plan, 2015 -2019)
Project Outcome
Description of Outcome Development and inclusiveness of the financial sector increased
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

1. Regulatory structure for financial stability strengthened

2. Financial market deepened

3. Access to financial services enhanced

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location Nation-wide
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design The impact of FMDIP is aligned with the government's national medium-term development plan and will contribute to increased growth rate of the size of the financial sector. The outcome of FMDIP will be increased development and inclusiveness of the financial sector, measured by increase in the size of financial assets to GDP by 12 percentage points, increased access to financial services for the poorest 40% of the population from 21.9% to 25.0%, and a reduction in 5-year credit default swap spreads by 20 basis points.
During Project Implementation Subprogram 1 covers January 2013 June 2015, subprogram 2 covers July 2015 June 2017, and subprogram 3 covers July 2017 June 2019. The Fiscal Policy Agency in the Ministry of Finance (MOF) is the executing agency while OJK is the implementing agency. The executing and implementing agencies are responsible for implementation of FMDIP. The Center for Financial Sector Policies, which has been set up within MOF will monitor the implementation of the policy actions under the Policy Matrix. It will coordinate with the International Department within OJK in undertaking this task.
Responsible ADB Officer Mohd Sani Mohd Ismail
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SERD
Executing Agencies
Ministry of Finance
[email protected]
Frans Seda Building
Jln. Dr. Wahidin Raya No. 1
Jakarta 10710, Indonesia
Timetable
Concept Clearance 24 Jun 2014
Fact Finding 23 Mar 2015 to 02 Apr 2015
MRM 03 Jun 2015
Approval 01 Sep 2015
Last Review Mission -
Last PDS Update 25 Sep 2015

Loan 3274-INO

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
01 Sep 2015 30 Sep 2015 27 Oct 2015 30 Jun 2016 - 03 Feb 2016
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 400.00 Cumulative Contract Awards
ADB 400.00 01 Sep 2015 400.00 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 01 Sep 2015 400.00 0.00 100%

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