BI Explains the Difference Between JIBOR and INDONIA

JAKARTA - Bank Indonesia (BI) officially stopped the Jakarta Interbank Offered Rate (JIBOR) starting January 1, 2026 and as a replacement, national financial market participants are directed to use the Indonesia Overnight Index Average (INDONIA) as a reference rate.

Meanwhile, INDONIA is an interest rate index that reflects rupiah borrowing-lending transactions without collateral between banks with overnight tenor that actually occur in the domestic money market.

BI Director of Financial Market Development Arief Rachman revealed that the fundamental difference between JIBOR and INDONIA lies in the source of the interest-forming data.

He added that the main difference between JIBOR and INDONIA lies in its calculation basis, namely JIBOR is sourced from interest rate quotations submitted by contributor banks and calculated using a simple average.

On the other hand, INDONIA is compiled based on actual transactions (deal done), not just an offer, so that the interest rate used is the result of a real agreement in the market, so that it is not easily manipulated.

"The difference between JIBOR and INDONIA. The difference is the offer price, another is the transaction price that occurs, Another is just a simple average, this is a weighted average." he said in a media briefing, Wednesday, January 7.

Referring to actual transactions, Arief assessed that INDONIA is better able to describe the liquidity conditions and dynamics of the money market more accurately.

"Therefore, it is more to reserve conditions in the market. If we go back to the future, besides that, references must be reliable and can be a reference and transparent. So, those who are more qualified as interest rates that can be a reference," he said.

Previously, JIBOR was available in various tenors, ranging from overnight, one week, one month, three months, to 12 months. However, since January 2, 2019, BI has stopped publishing JIBOR overnight tenors and encouraged the transition of financial contracts to INDONIA as a new reference for that tenor.

Meanwhile, he said for tenors other than overnight, BI is now using compounded INDONIA, which is an interest rate calculated from the merger of INDONIA over a certain period.

"By using, for various tenors, by using INDONIA Index data. So, for overnight it's called INDONIA, for non-overnight it's now called compounded INDONIA," he said.