26 January 2023 - Technical Assistance II

The study on Export Finance conducted by the Ministry of National Development Planning in collaboration with ARISE+ Indonesia revealed that the proportion of export financing to total export in Indonesia was relatively stagnant below 10% for the past several years, prompting actions for future improvement. The initial findings and recommendations of the Export Finance Study were presented and discussed in a workshop hosted by Bappenas, with support from ARISE+ Indonesia, in Jakarta on Tuesday (24/01).

The workshop brought together the key stakeholders in export financing from the government and private sector, including Indonesia Exim Bank (LPEI), Bank Indonesia, Ministry of Trade, private banks, export insurance companies, and other stakeholders to obtain views and feedback to ensure the study reflected Indonesia's context and export finance environment.

The Director of Trade, Investment, and International Economic Cooperation, P.N. Laksmi Kusumawati, said that the study aimed to help sharpen the export direction and strategies by identifying the Binding Constraints of Indonesia's exports since 66% of exporters have experienced limited access to finance. The Export Finance study supplemented the Grand Design on Export Acceleration study as the background for developing the National Medium-term Development Planning and other planning documents.

"This Export Finance Study is expected to provide recommendations to the government that ensure easy finance access for business actors," Ms Laksmi said.

ARISE+ Indonesia Technical Assistance II Team Leader, Alessandro Martinatto, said, "We are pleased to support Bappenas in conducting this study that will enable the business sector, in particular SMEs, to increase export, thus improving Indonesia's competitiveness. I believe this will also benefit and strengthen trade cooperation between the EU and Indonesia."

The study identified relevant issues on export finance, including its access and types by exporters' company size, the existing condition of export finance in all regions of Indonesia, current export finance programs in the banking sector, analysed the banking sector's behaviour on export finance and the existing government policies on export finance, and conducted benchmarking analyses of export finance in other countries.

According to the study, the lack of business credibility, especially from micro, small and medium enterprises, poses a challenge in accessing export financing. Indonesian banks' appetite to grow export financing was also relatively low due to high export credit risk, limited pool of exporters, and low penetration of export credit insurance.

ARISE+ Indonesia's researcher team from Svara Institute, Made Suardhini, proposed recommendations to address challenges in enhancing export finance in Indonesia, including developing tools/policies to assist financing institutions in mitigating risks, developing access to finance for the MSME segment, and reducing costs related to export facilities.

Rini Satriani, the Division Head at Indonesia Exim Bank, commented, "Thank you, ARISE+ Indonesia. This is like a new hope for us having a Grand Design on export acceleration as our guide to improve export financing."

Bagus Yuliantok, the Head of the National Interest Account Division at Indonesia Exim Bank, added, "We hope the synergy within the export ecosystem could be strengthened through this workshop to support our SMEs and increase export."

Yulianti, the Trade Analyst at the Directorate of Export Import Facilitation, Ministry of Trade, complimented the study and recommended additional review to develop a sharia scheme for export financing.

"Indonesia Exim Bank and Indonesia Sharia Bank have just launched a pilot project to support export financing for SMEs in the sharia-practised province of Aceh, which we assisted in the facilitation with the SMEs. However, the scheme has yet to be developed. The study will benefit not only SMEs in Aceh but also across Indonesia, especially with the blossoming sharia finance sector."

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