Indonesian financial institutions to pump billions into tourism development

Funds will go a long way in helping to support small business owners, such as this food vendor in Lombok

Indonesian financial institutions are stepping up their support for tourism development in the country – to the tune of billions of US dollars – with the sector expected to boost foreign exchange earnings and in turn lower the current account deficit.

The Indonesian Financial Services Authority (OJK) recently announced its funding programme for small- and medium-scale (SMS) industries in the 10 New Bali destinations.

Funds will go a long way in helping to support small business owners, such as this food vendor in Lombok

The funding will not only come from banks, but also through the capital market and microcredit programmes.

OJK has set a programme based on the type of lending for 2019-2024, and a budget of 228 trillion rupiah (US$15.3 billion). For the period of 2018 and 2019, OJK has budgeted to finance 6,000 homestay rooms with an estimate of 45 million rupiah per unit and 20 trillion rupiah for other SMS tourism businesses.

Wimboh Santoso, chairman of the board of trustees of OJK, said in a statement that the move could accelerate the process of national tourism development.

“Lending (on such developments) is currently scattered and not well coordinated,” he said, adding that the lack of integration of the tourism industry was the major reason why credit lending in the sector remained low.

“The integration of transportation, infrastructure and other facilities will (increase the eligibility) to get credits because as soon as they are integrated people will see the risk is small,” he added.

Bank Indonesia (BI), the central bank, last week hosted a co-ordination meeting on tourism with the central and regional governments in Yogyakarta, yielding nine strategies to help reach the tourism targets.

Perry Warjiyo, governor of BI said: “The government has set a long-term target of international arrivals to reach 25 million with US$28 billion in earnings by 2025.” The target next year is 20 million arrivals and US$17.6 billion in earnings.

Among the strategies outlined is enhancing payment accesses for people in tourist destinations. In this case, OJK will issue a regulation on microcredit programme for tourism businesses as well as the lending procedures, Perry said.

The other strategy is to intensify BI’s digital payment system services in all tourist destinations, and Bali will champion the pilot project during the IMF-Wold Bank Meeting next month.

An outcome from the meeting was the decision to strengthen the synergy of tourism promotions between the central and regional governments with BI. This synergy kicked off with the Indonesia Investment Day in Singapore on August 31, which saw the attendance of 300 investors.

Lauding the funding support for tourism, Horamsyah Thaib, head of the Working Group for the Acceleration of the Development of the 10 Tourism Priority Destinations, said: “The SMS tourism industry needs lending from the banking and other financial institutions to enable them to develop businesses.”

Ng Sebastian, owner of INCITO Vacations, South Sulawesi, said: “We do not know the details of BI’s programme to intensify the digital payment… but I would like to see a system which is economical for both the suppliers in the destination and easy to (use) by the tourists in the source markets.”

He explained that for corporations, receiving payments by international bank transfers, credit cards or payment gateways were not a problem.

“However, nowadays there are more individuals (travellers) overseas buying products from microbusinesses in Indonesia. The transaction fees are sometimes more expensive than the price of the product itself,” he said, adding that BI’s existing National Payment Gateway could only ease domestic transactions.

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