Definition of Non-Bank Financial Institutions

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What is a Non-Bank Financial Institution (LKBB)? Based on the Decree of the Minister of Finance of the Republic of Indonesia No. KEP-38 / MK / IV / 1972, the definition of Non-Bank Financial Institutions is all institutions / agencies that carry out financial activities both directly and indirectly raise funds from the community by issuing securities and channeling these funds to finance investments in various companies .

Non-Bank Financial Institutions (LKBB) have an important role in the economy of a country, including Indonesia. With the existence of the NBFI, domestic consumption moves forward and drives the pace of the economy.

The several LKBB business activities in Indonesia are as follows:

Collect funds from the public by issuing securities.
Providing credit facilities to private and government companies, both short, medium and long term.
Acting as an intermediary for companies in Indonesia, and becoming a government legal entity in the provision of domestic and foreign credit.
Include capital of companies and the sale of shares in the capital market.
Become an intermediary for companies in obtaining experts in the financial field.
Carrying out other business activities in the financial sector with the approval of the finance minister of the Republic of Indonesia.

Functions and Objectives of Non-Bank Financial Institutions
Actually, there are quite a number of functions of Non-Bank Financial Institutions in Indonesia. In general, the functions and objectives of the LKKB are as follows:

Collecting funds from the public by issuing securities, then redistributing the funds to finance capital for companies in need.
Providing capital assistance in the form of credit to the public so that they are not caught up in high interest loans applied by moneylenders.
Assist the government in developing efforts in various fields, especially in the economic and financial fields.
Helps stimulate the inclusion of private capital as well as expand financing sources for business activities.
Helps drive industrial and economic development through the capital market.

Types of Non-Bank Financial Institutions
If mentioned all, there will be a lot of non-bank financial institutions in Indonesia. However, in general there are 7 LKBBs that we often encounter, including:

1. Savings and Loan Cooperatives
Savings and Loans Cooperative is a Non-Bank Financial Institution that collects funds from each member and then redistributes it to members and non-members. The source of income for cooperatives comes from members and also loans from other financial institutions.

The main purpose of savings and loan cooperatives is to help improve the welfare of its members and the community at large. Some examples of this cooperative are the Village Unit Cooperative (KUD), the Multipurpose Cooperative (KSU), the Market Cooperative.

2. Pawnshops
Pegadaian Public Company is one of the State-Owned Enterprises (BUMN) that conducts credit distribution activities to the community. The legal basis used is the law of pawn so that people avoid interest that is too high.

Pawnshop is quite popularly used by the lower middle class because the process tends to be easier. The several service products from Perum Pegadaian include:

Conventional pawn
Islamic mortgage
Gold pawn
Precious metals assessment and certification services
Safekeeping services for valuables

3. Leasing company
Leasing or Multifinance Company is a LKBB that provides financing services with a lease contract system that is combined with installment purchases to companies and individuals.

The several leasing companies that are quite popular in Indonesia include:

PT. BCA Finance
PT. BFI Finance
PT. Summit Oto Finance
PT. Indomobil Finance Indonesia
PT. Astra Credit Companies (ACC)
PT. Adira Dinamika Multi Finance, Tbk
PT. Federal International Finance (FIF)


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