OJK Urges Increased Credit for Mining Downstreaming, Emphasizing Economic Growth and Job Creation

Downstream Mining Indonesia Receives Up to US$ 33 Billion
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The Financial Services Authority (OJK) is actively promoting the increased disbursement of credit for the downstreaming of mining commodities by banks this year. In the first quarter of 2023, the credit for downstreaming has experienced a remarkable growth rate.

Dian Ediana Rae, the Executive Director of Banking Supervision at OJK, highlighted that the disbursement of mining credit, including projects related to downstreaming, reached a substantial amount of Rp237 trillion by March 2023, showing a significant year-on-year increase of 43.41 percent.

“This growth rate surpasses the national average for credit growth, which is a notable achievement,” stated Rae during the OJK Commissioner Board Meeting held on Tuesday (6/6/2023).

Despite the rapid growth, Rae emphasized that the credit risk associated with the mining sector remains under control, as indicated by a gross non-performing loan (NPL) ratio of 2.31 percent, which is lower than the credit risk prevalent in the banking industry.

Rae further expressed OJK’s continued commitment to driving banks in enhancing the provision of commodity downstreaming credit throughout the year.

“We are steadfast in our determination to make commodity downstreaming credit a target that receives constant support, thereby enhancing the overall economic value,” emphasized Rae.

Acknowledging the importance of facilitating the downstreaming processes, OJK has initiated discussions with banks to encourage their involvement. In the context of downstreaming nickel mining for electric vehicle batteries, OJK has issued specific incentives to banks to incentivize their participation.

One of the incentives implemented is a reduction in the risk-weighted assets (RWA) of bank loans from 75 percent to 50 percent for the production and consumption of electric vehicles, thereby aiming to stimulate further investment and lending in this area.

President Joko Widodo has previously emphasized the significance of downstreaming programs in positioning Indonesia as an advanced nation.

“Incorporating downstreaming processes across all commodities, including CPO, Minerba, and marine resources, is pivotal for our national development,” stated President Widodo at the annual financial industry meeting (PTIJK) earlier this year.

President Widodo further stressed that downstreaming plays a vital role in driving the growth of national gross domestic product (GDP). He projected that downstreaming activities in the mining, oil and gas, and maritime sectors could potentially generate an economic impact of approximately US$715 million, while concurrently creating around 9.6 million new job opportunities.

However, President Widodo also recognized the need to address the issue of insufficient financing from national banks for downstreaming projects, urging OJK to provide support and guidance to banks concerning the critical importance of financing initiatives in the downstreaming sector.

“In light of these considerations, I request OJK’s steadfast support in raising awareness and disseminating information on the crucial significance of downstreaming,” President Widodo emphasized.