√ Types of Financial Institutions in Indonesia and Their Explanations
Types of Financial Institutions in Indonesia and Their Explanations - The financial institution that we know is a business entity engaged in finance by providing services storage, distribution and lending of funds to its customers, insurance, various types and forms of savings, and programs for future.
For more details please read Definition of Financial Institutions According to Experts which was discussed earlier.
Types of Financial Institutions in Indonesia and Their Explanations
On this occasion, aroundknowledge.com will again continue the discussion regarding financial institutions, especially financial institutions in Indonesia, namely the types and their explanations.
Types of Types of Financial Institutions
In Indonesia, financial institutions are divided into two, namely types Bank financial institutions And non-bank financial institutions.
1. Bank Financial Institutions
Bank financial institutions are financial institutions that provide financial services and attract funds from the public directly. Bank financial institutions or simply called Banks besides having the function of collecting and channeling funds.
Banks also function to provide services to the public in the form of offering banking services such as delivery services money, safekeeping of valuables and so on as well as providing a sense of security and comfort to the people who use it his services.
Types of Bank Financial Institutions
Institutions of this type consist of Central Banks, Commercial Banks and Rural Banks. Based on the Basic Banking Act No. 23 of 1998 there are two types of banks in Indonesia, namely Commercial Banks and Rural Banks.
- Central Bank
The Central Bank in Indonesia is held or implemented by Bank Indonesia. The main objective of Bank Indonesia as the central bank is to achieve and maintain stability in the value of the rupiah. In order to achieve this goal, the Central Bank has the duty to establish and implement monetary policy, regulate and maintain the smooth functioning of the foreign exchange system and regulate and supervise banks.
- commercial banks
Commercial Banks are Banks that can provide services in payment traffic, while Rural Credit Banks is a Bank that only accepts deposits in the form of time deposits or other equivalent forms That.
- Rural Credit Banks (BPR)
BPR is a bank financial institution that accepts deposits only in the form of time deposits, savings or other equivalent forms and distributes the funds as a BPR business.
This BPR is a bank that specifically serves small communities in an area, sub-district or village. Rural Banks originated from Village Banks, Village Barns, Market Banks, Employee Banks and other banks which were later merged to become Rural Banks.
2. Non-Bank Financial Institutions (LKBB)
Non-Bank Financial Institutions (LKBB) according to Law no. 10 of 1998 is a business entity that carries out activities in finance sector, which raises funds by issuing securities and channeling them to pay for investments company.
This institution was founded in 1973 based on the Decree of the Minister of Finance No. Kep. 38/MK/I/1972 which issued that these institutions can carry out the following efforts:
- raise funds by issuing temporary letters
- provide medium-term credit
- make temporary investment
- acting as an intermediary between Indonesian companies and government legal entities
- act as intermediaries in obtaining participants or campaigns
- as intermediaries to obtain experts and provide advice according to expertise
- engage in other business in the financial sector.
Types of Non-Bank Financial Institutions
The following are several non-bank financial institutions in Indonesia.
- Development financing institution.
A financing institution is an institution whose business is to provide financing in the form of providing funds or capital goods by not directly withdrawing funds from the public.
- Insurance company
An insurance company is an institution or company that provides a replacement guarantee for risks faced by a person either in the form of death, damage or loss of property and others etc. An insurance company is an institution that collects funds by withdrawing insurance premiums and promises to provide a number of compensation in the event of an event or disaster that befalls the party participating in the program insurance.
The funds raised by insurance companies are generally invested in securities or lent to other parties. This type of insurance can be in the form of psychiatric insurance, education, fire, vehicle, health and so on. With insurance it is hoped that it can help reduce the burden on society when it comes to the backbone the family is affected by a disaster or when a valuable object suffers irreparable damage intentional.
- Saving and loan cooperative
Namely a cooperative whose business accepts deposits and provides loans to its members who need funds with low (mild) interest. The purpose of this savings and loan cooperative is to educate its members to be more economical by setting aside part of their income for savings.
The benefits of savings and loan cooperatives include: members can get loans easily and not complicated, interest rates Loans are quite low, members are protected from moneylenders, can get Business Results (SHU) and loans are not used guarantee.
- Pawnshop
Pawnshops are a state-owned financial institution that provides short-term loans or credit by guaranteeing certain items. The amount of the loan depends on the value of the collateralized item.
The purpose of this pawnshop is to help the wider community, especially the middle class underprivileged or less able to get a loan quickly with an easy, simple and easy procedure fast.
- Pension Fund Institution
A pension fund is a fund provided by the government or a company to its employees or employees who have reached a certain age limit (retired) as a reserve for old age. This institution specifically manages pension funds whose sources of funds are obtained from foundations or companies as old age insurance for the members concerned.
This pension fund institution aims to improve the welfare of the community (especially civil servants and the military, private employees and retirees) and reserves for old age.
That's a brief explanation about Types of Financial Institutions in Indonesia and Their Explanations, hopefully can add new insights for the readers. Thank you very much 🙂
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