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 Name||Financial Market Development and Inclusion Program Subprogram 1|
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Governance and capacity development
|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)|
|Description of Outcome||Development and inclusiveness of the financial sector increased|
|Progress Toward Outcome|
|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)|
|Summary of Environmental and Social Aspects|
|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 Ismail, Mohd Sani|
|Responsible ADB Department||Southeast Asia Department|
|Responsible ADB Division||Public Management, Financial Sector and Trade Division, SERD|
Ministry of Finance Directorate General of Budget Financing and Risk Management
Frans Seda Building
Jln. Dr. Wahidin Raya No. 1
Jakarta 10710, Indonesia
|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|
|Approval||Signing Date||Effectivity Date||Closing|
|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%|
|Cofinancing||0.00||01 Sep 2015||400.00||0.00||100%|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
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|Title||Document Type||Document Date|
|Loan Agreement for Financial Market Development and Inclusion Program - Subprogram 1||Loan Agreement (Ordinary Resources)||Sep 2015|
|Program Pembangunan dan Inklusi Pasar Keuangan Subprogram I||Translated PDS||Sep 2015|
|Financial Market Development and Inclusion Program - Subprogram 1: Report and Recommendation of the President||Reports and Recommendations of the President||Aug 2015|
|Second Financial Market Development and Integration Program - Subprogram 1||Initial Poverty and Social Analysis||Jun 2014|
|Second Financial Market Development and Integration Program, Subprogram I: Concept Paper||Concept Papers||Jun 2014|
Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
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Evaluation Documents See also: Independent Evaluation
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ADB Continues Support for Indonesia's Bid for More Inclusive Financial SectorADB has approved a $400 million policy-based loan to continue supporting the Government of Indonesia’s reforms to develop a more inclusive financial sector.
ADB $400 Million Loan Helps Indonesia Create More Inclusive Finance SectorADB has approved a $400 million program loan to help Indonesia develop its financial sector, including expanding access to financial services for poor households.
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