Indonesia may consider slashing public stakes in banks and imposing lending quotas, as policymakers prepare reform proposals for incoming President Joko Widodo, the Bloomberg news agency reported.
Financial regulators and economic officials from the current administration will meet next week to forge a set of plans to address persistently high domestic borrowing costs and insufficient lending going to manufacturers, according to Edi Prio Pambudi, an assistant deputy minister at the Coordinating Ministry for Economic Affairs.
Quotas and privatizing state-owned banks are among the scenarios under discussion, he added.
"Banking in Indonesia is still dominated by public banking not private banking," Edi said.
"The cost of financing is very expensive" and the country needs to reallocate the investment focus from primary commodities into manufacturing, he said.
The country needs to ensure the flow of money will go into more productive sectors, as currently domestic banks prefer to allocate funds to agriculture and low-productive industries, he said.
State-owned banks are under pressure to show profit to the government, and high interest rates at local lenders mean companies seek financing outside Indonesia, leading to rising external debt, he said.
Bank Mandiri, Indonesia’s biggest lender by assets, is 60% owned by the government. Others that are state-owned include Bank Rakyat Indonesia, the second-biggest bank, Bank Negara Indonesia and Bank Tabungan Negara.