Economist: Placement Of IDR 200 Trillion Funds In Banking Needs To Be Distributed To Productive Financing

JAKARTA - Director of Insight at the Indonesian Chamber of Commerce and Industry, Fakhrul Fulvian, assessed that the placement of funds of Rp200 trillion by the Ministry of Finance to the banking sector will only have a significant impact on the economy, if directed at the right cost-making and risk-taking mechanism.

According to him, state money should play a role as a 'mantle of courage' for financial institutions to channel funds to the real sector, not just thicken liquidity in the banking system without a productive direction.

"We don't lack money, what we lack is the courage to distribute it in a healthy way. If this fund only stops at deposits or reverse returns, the effect is minimal," said Fakhrul, in Jakarta, quoted by Antara, Wednesday, October 8.

He considered, so that the impact of placing these funds was optimal, collaboration with non-bank financial institutions was needed which were ready to take measured risks. Therefore, the fiscal stimulus approach needs to be expanded to become a risk sharing collaboration (risk-sharing ecosystem) between the government, banks, guarantor institutions, and the venture capital industry.

So far, the financing ecosystem in Indonesia is still dominated by banking institutions that tend to be careful, while equity-based financing institutions such as venture capital have not been systematically empowered.

The venture capital can be a layer of courage in our financial system. The bank maintains liquidity, the government bears some risks, and venture capital distributes funds to the innovative sector. That is why the venture capital industry needs to be seen not as a small sector, but as a missing middle between fiscal policy and the business world," he said.

Fakhrul assessed that the role of venture capital will be very important for sectors with high growth potential but not yet fully bankable, such as modern agriculture, green industry, logistics, and regional processing.

If a small portion of the Rp200 trillion fund is directed to a collaborative scheme with venture capital, then the multiplier effect will be much greater than conventional lending.

In addition, Fakhrul highlighted the need for regulatory reform, so that the venture capital industry can become an official development channel.

He suggested that the Financial Services Authority (OJK) open a tiered leasing model, which allows the formation of micro venture funds with a minimum capital of IDR 5 billion-IDR 10 billion so that venture capital can develop in various regions in Indonesia.

Our regulations still treat venture capital like an ordinary financial institution. Even though venture capital is actually a machine of courage. If the license is made graded and flexible, the ecosystem will grow from below," he also said.

Fakhrul also assessed that the growth of a healthy venture capital industry could withdraw Indonesia's funds which are currently widely stored abroad.

"If the risk ecosystem is clear, the diaspora funds and domestic investors will dare to return home," he said.

As a comparison, Fakhrul gave an example of several countries that succeeded in utilizing venture capital instruments as an extension of fiscal policy.

Singapore, for example, formed Heliconia Capital under Temasek Holdings to finance the expansion of a national medium company. South Korea owns Growth Ladder Fund, a government fund that is rotated through private venture capital to fund startups and technology SMEs. While France runs the Bpifrance model, which channeles public funds through a co-investment mechanism with the private sector and regional development banks.

All developed countries combine state funds with market courage. That's what we haven't done yet," said Fakhrul.

"Indonesia can create our own version, this Rp200 trillion fund can be the first step in building a venture-based development architecture. Here, the role of entrepreneurs in general and Kadin in particular will emerge, to jointly create a strong financing and business environment," he said again.

Closing his view, Fakhrul emphasized that effective fiscal policy is not only a matter of accelerating absorption of funds, but also about the ability to channel courage into the economic system.

When this is achieved, entrepreneurs will return to their minds on the prospects and the courage to start will emerge. Fiscal policy is not enough just to move funds. He must form the distribution of courage to turn the economy around. Venture capital is a measureable instrument of courage, and this is where state money can really work," he also said.