National market capitalization ratio of 48 percent indicated that the scope of the domestic financial sector’s contribution to the economy was rather small as compared to ASEAN countries, Finance Minister Sri Mulyani Indrawati stated.
“Neighboring countries that are more developed, such as Malaysia, Thailand, or Singapore, can have a capital market capitalization ratio of up to 100 percent,” Indrawati remarked during the event titled “LIKE IT: Sustain Habit in Investing, Invest in Sustainable Instruments,” accessed here on Friday.
Thus, the minister believes that Indonesia had the opportunity to pursue improvement of the capital market as a financial sector that could become a good and productive intermediary.
Moreover, she observed that there were other challenges in the national financial sector, such as its tendency to lean towards short-term fund accumulation.
This condition was certainly highly challenging when developmental or economic needs often require long-term sources of funds, for instance, for infrastructure development.
“Infrastructure development usually requires very large funds and the ability to restore it also requires a long period of time. Let us say 20 years. It could even be 30 years,” she pointed out.
Hence, Indrawati was confident that the national financial sector’s capability to garner long-term funds was crucial, especially now that Indonesia’s financial sector was still dominated by the banking sector.
Some 80 percent of the financial sector assets were in the banking sector, and the majority were in the form of deposits that are short-term in nature, or under five years. On the other hand, sectors that accumulate long-term funds, such as the insurance industry and pension funds, only contributed as much as 14 percent.
This became one task for the Financial System Stability Committee (KSSK) to test its ability to form a financial sector capable of collecting and utilizing funds in the long term in a strong and credible manner.
“Of course, this is not an easy task to do. Moreover, the community still needs to be improved, not only its literacy but also its trust and confidence in the financial system, financial instruments, and financial institutions,” Minister Indrawati concluded.
Source: Antara News