At an online discussion on 'Advancing Indonesia's Financial Literacy' here on Tuesday, Indrawati said that a financial sector that plays an efficient intermediary role can support the growth of a nation.
In addition, a financial sector that is a well-functioning intermediary can support the creation of various innovations, creations, and productivity, she noted.
This, she added, could help the nation's economy to become competitive and productive.
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Indrawati asserted that economic recovery cannot just rely on the government's stimulus, the financial sector must try to quickly recover its intermediary function, especially in credit-channeling.
This is because the disruption that the pandemic has caused in the financial sector has led to 70 percent of the financial sector becoming dominated by banks that do not channel its credit, she explained.
This could entail negative credit growth, which would make economic recovery difficult until the financial sector recovers credit growth, Indrawati pointed out.
The depth and stability of Indonesia's financial sector is among the lowest in ASEAN countries, such as Singapore, Malaysia, Thailand, and Philippines, and therefore, needs to be raised, she said.
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The capital market has started to revive through Initial Public Offerings (IPO), and it is expected that this would mark an upward trend, she added.
Still, the size and the contribution of Indonesia's capital market has not matched that of the banking sector, so its revival has not yet significantly supported the nation's economic recovery, Indrawati observed.
"This is something that we need to handle, and we still have homework to do to deepen the financial sector," she stressed.
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Translator: Astrid Habibah, Fadhli Ruhman
Editor: Fardah Assegaf
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