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In Indonesia, microfinance is predominantly provided by commercial and state-supported enterprises, including: (1) commercial banks (BUs), particularly the unit desa program of Bank Rakyat Indonesia (BRI), a primarily state-owned bank, (2) government-owned savings and credit cooperatives (USPs), (3) rural banks known as people’s credit banks (BPRs), and (4) local government-operated rural fund and credit institutions (LDKPs). Bank Indonesia (BI), the central bank of Indonesia, regulates all commercial and rural banks, while cooperatives are supervised by the Ministry of Cooperatives and Small-Medium Enterprises, and rural fund and credit institutions are supervised by provincial governments (though technically required to obtain bank status). As legal frameworks focus mainly on banks and cooperatives, the legal status of and applicability of regulation for other formal and semi-formal institutions providing microfinance services can often be unclear.



Microfinance & Banking

Consumer Protection

Indonesia’s National Consumer Protection Agency (NCPA) was mandated by the Law No. 8 Concerning Consumer Protection, but did not commence operations until 2004. The NCPA falls under the Directorate of Consumer Protection, and statistics on its website reflect that about 50% of consumer complaints are about banking and financing services, out of only 56 reported cases. The NCPA functions include: helping the government to formulate consumer protection policy; encouraging the development of consumer protection NGOs; disseminating consumer protection information; and accepting consumer complaints.

The Consumer Dispute Settlement Board, with offices throughout Indonesia, was established to provide a forum for out-of-court settlement of consumer disputes and has quasi-judicial powers of investigation and enforcement, including the ability to impose administrative sanctions. The Board also has the ability to control the inclusion of standard clauses in consumer contracts. Consumer protection NGOs and the Directorate of Consumer Protection also offer dispute settlement services.

There are over 200 consumer protection NGOs in Indonesia, and they work to improve consumer awareness of their rights and obligations, as well as accepting consumer complaints and assisting in their resolution, bringing class action suits in the courts, and helping the government and communities in implementing consumer protection.

Indonesia has established policies to implement financial sector reform in recent years so as to minimize the risk of a recurrence of the economic crisis of 1998. Bank Indonesia, the independent central bank of Indonesia, has the primary authority to license, supervise and regulate banks, including those banks conducting business based on sharia principles. All banks are required to be members of the Indonesia Deposit Insurance Corporation (IDIC), established in 2004. The Minister of Finance has the authority to issue or revoke licenses of finance companies. The National Sharia Council has the power and function of issuing fatwas concerning products, services and business of banks conducting business based on sharia principles.

Banks must keep secret all information on depositors and their deposits; however, information on customers other than savings customers and depositors is not considered subject to bank secrecy requirements. In addition, there are certain exceptions made to permit disclosure: to tax authorities; for use in criminal and civil proceedings; in legal proceedings between a bank and its customers; for information exchanges between banks; upon written request by a customer or their agent; and upon the request of a depositor’s heirs. Information disclosed between banks may only be disclosed to a director or specially designated officer of a bank.

The Business Competition Supervisory Commission has broad powers to investigate any complaints of non-compliance with the Law No. 5 Concerning Ban on Monopolistic Practices and Unfair Business Competition of 1999, assess losses resulting from such actions, and impose administrative sanctions on businesses such as injunctions, compensation, and fines. It also reviews any mergers, acquisitions, or consolidations that may have an anti-competitive effect. The Commission’s decisions are subject to a judicial appeal process.

The Credit Information Bureau (BIK) at Bank Indonesia officially opened in June 2006 and administers the Debtor Information System (DIS) by gathering positive and negative reports concerning both individual and business entity creditors. Membership in the BIK is mandatory for commercial banks, large rural banks, and non-bank credit card providers, and voluntary for smaller rural banks, non-bank financial institutions, and cooperatives. Individual Debtor Information (IDI) history can be accessed upon request by financial institutions, BIK members, and the public, both as individuals and business entities. A complaint procedure has been established for those who claim that their credit history data is inaccurate. Credit referencing with the DIS no longer applies to microcredit loans.

Branchless Banking