Bank Indonesia Encourages Corporations To Collect Alternative Financing Through Asset Securitization

JAKARTA - Bank Indonesia (BI) encourages a number of corporations and business entities to immediately jump into the development of the asset securitization market in order to find alternative sources of financing.

BI Senior Deputy Governor Destry Damayanti said that the condition of the asset securitization market in Indonesia is still not as developed as in other countries, both in terms of supply and demand.

"In fact, several companies that have conducted asset securitization in the form of Asset-Backed Securities Collective Investment Contracts (KIK-EBA) and Asset-Backed Securities in the form of Participation Certificates (EBA-SP) have been well received by the market", he said in a virtual seminar entitled 'Asset Securitization: Opportunities and Challenge', Wednesday, March 24th.

Destry added that for a corporation that acts as the originator (the initial owner of the securitized asset), assets that have been illiquid can become liquid so that the company's fund needs can be met without increasing the debt ratio and also not having to sell their assets.

"Meanwhile, investors get benefits with lower risks because they have underlying assets", he said.

On the same occasion, Member of the Board of Commissioners of the Financial Services Authority (OJK), Hoesen conveyed several challenges related to asset securitization in the domestic financial market.

"This financing scheme is less popular than other instruments because corporations requiring funds and potential investors still consider this method to be complex and unfamiliar", he said.

Meanwhile, the Head of the Fiscal Policy Agency at the Ministry of Finance Febrio Kacaribu said that the government has made several efforts to encourage the asset securitization market.

"We continue to conduct outreach to corporations and the public. Most recently, the government formed a Sovereign Wealth Fund, as well as the issuance of a legal framework through the Financial Sector Development and Strengthening Bill (P2SK)", he explained.

For information, the issuance of KIK-EBA and EBA-SP in Indonesia is still limited to state-owned companies and banking institutions.

Meanwhile, the underlying assets were mostly housing loans, with a few in the form of future cash flows, commercial loans, and financial assets. In its development, the KIK-EBA management fund was recorded at IDR 4.87 trillion and the EBA-SP management fund was IDR 4.41 trillion until mid-March 2021.

Asset securitization itself is an initiative of Bank Indonesia in developing sources of economic financing and risk management as set out in the 2025 Money Market Development blueprint.

This step is also part of the synergy between the authorities that have been formulated in the National Strategy for Financial Market Development and Deepening (SN-PPPK).