Client : ARISE+ INDONESIA

Export financing is integral to Indonesian export acceleration. But, the proportion of export financing to total exports in Indonesia has been relatively stagnant at below 10% for the past several years, emphasizing the need for initiatives aimed at future improvement. Thus, this study aims to identify issues related to export financing, map existing government policies on export finance, conduct benchmarking against other countries regarding export financing and formulate recommendations for the government to support export acceleration in the country. To collect the data and analyses, this study employs qualitative methods by conducting a desk study, focus group discussion (FGD), and in-depth interviews with 15 stakeholders in November-December 2022, including government institutions, exporters, banks, and insurance providers.

According to Bank Indonesia, export financing refers to all financing provided for exporters and suppliers to support the production, collection, and preparation of goods related to export transactions. Meanwhile, the Ministry of Trade categorizes export financing into pre-shipment financing and post-shipment financing.

In-depth interviews with banks revealed that they generally consider export credit to only cover working capital loans. This is different from the definition of Lembaga Pembiayaan Ekspor Indonesia (LPEI) – the export financing institution established by the Indonesian government – that also includes investment and other export-related loans under export credit. Consequently, there is no significant difference between LPEI (alone) export credit and the total export credit of Indonesia’s State-Owned banks (consisting of 5 banks). In August 2022, LPEI’s total export credit reached Rp83 trillion as opposed to Rp94 trillion for State-Owned banks.

In the area ofTrade Credit Insurance, Indonesia has two main TCI providers, namely Asuransi Asei (a subsidiary of a State-Owned company) and LPEI. An in-depth interview with the Indonesian Financial Service Authority (OJK) confirmed the low penetration of the export credit insurance market, which may be caused by low expertise in said market. In-depth interviews with local banks also affirmed that only a few of them use these services. One of the SOE banks, for instance, prefers to absorb the buyers’ risk by involving third parties to conduct trade checking on foreign buyers.

Benchmarking against other countries highlighted the relevance of ECA(Export Credit Agency)and TCI (Trade Credit Insurance) agency to support a country’s exports. China has China Exim Bank as ECA and Sinosure as TCI, both owned by the government. Meanwhile, Japan has JBIC as ECA and NEXI as TCI. There are several government initiatives or incentives disbursed through these institutions. In Indonesia, both functions are served by LPEI.