Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Second Financial Sector Reform Development Policy Financing (P173232) Indonesia Second Financial Sector Reform Development Policy Financing (P173232) EAST ASIA AND PACIFIC | Indonesia | Finance, Competitiveness and Innovation Global Practice | IBRD/IDA | Development Policy Lending | FY 2021 | Seq No: 1 | ARCHIVED on 29-Jun-2022 | ISR52005 | Implementing Agencies: Fiscal Policy Agency, Ministry of Finance, Republic of Indonesia Key Dates Key Project Dates Bank Approval Date: 10-Jun-2021 Effectiveness Date: 09-Dec-2021 Original Closing Date: 30-Jun-2022 Revised Closing Date: 30-Jun-2022 pdoTable Project Development Objectives Program Development Objective (from Program Document) The program development objective of this programmatic operation is to support financial sector reforms that will assist the Government of Indonesia (GoI) in achieving a deep, efficient and resilient financial sector. The proposed operation is the second in a series of three programmatic operations. This programmatic DPL series is structured around the following three pillars and set of objectives: • Pillar A: Increasing the Depth of the Financial Sector. Pillar objectives: to expand the size of the financial sector by increasing outreach (including to youth and women), broadening financial market products and mobilizing long-term savings. • Pillar B: Improving the Efficiency of the Financial Sector. Pillar objectives: to lower the costs for individuals and enterprises by strengthening the insolvency and creditor rights framework, protecting consumers and personal data and strengthening payment systems. • Pillar C: Strengthening the Resilience of the Financial Sector. Pillar objectives: to strengthen the capacity of the sector to withstand financial and non-financial shocks by strengthening the resolution framework, implementing sustainable finance practices, establishing disaster risk finance mechanisms and advancing the effectiveness of financial sector oversight. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO -- Satisfactory Overall Implementation Progress (IP) -- Satisfactory Overall Risk Rating -- Moderate Implementation Status and Key Decisions The Project Development Objective (PDO) of the DPL series is to support the Government of Indonesia (GoI) in its effort towards the development of a deep, efficient, and resilient financial system. This PDO reflects the common vision of the World Bank team and the national counterparts for the development of the Indonesian financial sector. The DPL series consists of three operations and one supplementary operation. The first operation was approved by the World Bank’s Board in March 2020 and the supplementary operation was approved in May 2020 as part of the COVID-19 emergency response. The second operation was approved in June 2021 and the third operation is scheduled for early 2023. Overall the project has made significant progress towards achieving its PDO and is therefore rated as Satisfactory. The first DPL in the series made significant progress towards advancing the set of 9 reform areas agreed upon. This progress paved the way for continued engagement with various counterparts under the second DPL, whose reforms proved to be extremely relevant to address some of the challenges identified under the first DPL that gained new urgency in the face of the COVID-19 pandemic and its impacts on the economy and the financial sector. 6/29/2022 Page 1 of 5 Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Second Financial Sector Reform Development Policy Financing (P173232) Reforms such as: reforms to develop new long-term instruments to broaden Indonesia’s investor base and deepen its capital markets are critical in rendering Indonesia’s asset market less vulnerable to foreign portfolio outflows; reforms to increase the number of payment channels are crucial for the implementation of large-scale social assistance payments to protect livelihoods during the crisis; reforms to strengthen the bank resolution framework for troubled banks and establish a clear funding mechanism, a key element of a recovery strategy. The results framework is already providing indications of some of these reforms: for instance, on consumer protection, the number of financial service providers that have undergone financial consumer protection examinations per year has increased from 10 in 2019 to 44 in 2022 (against a target of 30 in 2023); on insolvency, the number of insolvency cases opened by the court, proving greater access by firms has increased from 307 in 2018 to 853 in 2021 (against a target of 430 in 2023); the number of days for LPS to pay out insured depositors in closed commercial banks has decreased from 90 days in 2018 to 28 in 2021 (on track to achieve the 2023 target of 7). The Financial Sector Omnibus Law, currently under preparation, is expected to provide additional traction to the structural reforms needed for making the Indonesian financial sector deeper, more efficient and more resilient. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance Moderate -- Moderate Macroeconomic Substantial -- Substantial Sector Strategies and Policies Moderate -- Moderate Technical Design of Project or Program Substantial -- Substantial Institutional Capacity for Implementation and Substantial -- Substantial Sustainability Fiduciary Moderate -- Moderate Environment and Social Low -- Low Stakeholders Moderate -- Moderate Other -- -- -- Overall Moderate -- Moderate Results Results Indicators Increasing the depth of the financial sector IN01159142 ►Adults with transactional accounts (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 49.00 -- 52.00 88.00 Date 29-Dec-2017 -- 31-Dec-2021 29-Dec-2023 IN01159143 ►Sex-disaggregated financial inclusion data regularly collected and made publicly available (Yes/No, Custom) 6/29/2022 Page 2 of 5 Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Second Financial Sector Reform Development Policy Financing (P173232) Baseline Actual (Previous) Actual (Current) End Target Value No -- No Yes Date 31-Dec-2021 -- 31-May-2022 29-Dec-2023 IN01159144 ►Outstanding IDR-denominated private debt securities (IDR trillion) (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 412.00 -- 504.10 711.00 Date 31-Dec-2018 -- 31-May-2022 29-Dec-2023 IN01159145 ►Portion of short-term investments (cash, bank deposits) in pension fund portfolios (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 19.30 -- 18.00 16.00 Date 29-Dec-2017 -- 31-Dec-2021 29-Dec-2023 Improving the efficiency of the financial sector IN01159166 ►Number of insolvency cases opened by the court, evidencing greater access by firms (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 307.00 -- 853.00 430.00 Date 31-Dec-2018 -- 31-Dec-2021 29-Dec-2023 The number of insolvency cases as of December 31, 2021 was 853, of which 620 were restructuring Comments: cases (PKPU) and 233 were bankruptcy 9 (liquidation) cases. IN01159167 ►Number of Financial Services Providers (FSPs) undergoing financial consumer protection examinations (offsite or onsite) per year (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 10.00 -- 44.00 30.00 Date 31-Dec-2019 -- 31-Mar-2022 29-Dec-2023 IN01159168 ►Adults making and receiving digital payments (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 34.60 -- 37.00 58.00 Date 29-Dec-2017 -- 31-Dec-2021 29-Dec-2023 6/29/2022 Page 3 of 5 Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Second Financial Sector Reform Development Policy Financing (P173232) Strengthening the resilience of the financial sector IN01159169 ►Number of days for LPS to pay out insured depositors in closed commercial banks (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 90.00 -- 28.00 7.00 Date 31-Dec-2018 -- 31-Dec-2021 29-Dec-2023 Based on average payout days of 8 rural banks closed during CY2021. Comments: IN01159170 ►Number of bank resolution plans finalized by LPS (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 10.00 All systemic banks Date 31-Dec-2019 -- 31-Dec-2021 29-Dec-2023 Resolution plans are currently being prepared for a total of 17 banks cumulatively (estimated 16 systemic Comments: and 1 non-systemic), which are due by end Nov 2022. IN01159171 ►Commercial banks complying with sustainable finance practices (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 0.00 75.00 Date 31-Dec-2019 -- 31-Dec-2021 29-Dec-2023 The number could not be updated at the time of the ISM Comments: IN01159172 ►Utilization of the pooling fund for disaster response financing (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Fund established by Pooling fund is Presidential operational and ready Pooling Fund not Value -- Regulation in August to be used in disaster established 2021 but not yet response, including operational climate-related events Date 31-Dec-2019 -- 31-May-2022 29-Dec-2023 IN01159173 ►Number of financial conglomerates receiving more intense integrated supervision (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 49.00 -- 16.00 16.00 Date 31-Dec-2020 -- 31-May-2022 29-Dec-2023 6/29/2022 Page 4 of 5 Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Second Financial Sector Reform Development Policy Financing (P173232) The initial target was 14 FCs. However as there are 2 new FC within the scope of the FC definition Comments: outlined in the relevant OJK regulation, the new target should be increased to 16 FCs. Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P173232 IBRD-92490 Effective USD 400.00 400.00 0.00 400.00 0.00 100% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P173232 IBRD-92490 Effective 10-Jun-2021 06-Dec-2021 09-Dec-2021 30-Jun-2022 30-Jun-2022 Tranches Restructuring History There has been no restructuring to date. Related Project(s) P170940-Indonesia First Financial Sector Reform Development Policy Financing ,P173233-Indonesia Third Financial Sector Reform Development Policy Financing 6/29/2022 Page 5 of 5