Impact of foreign capital entry in the Indonesian banking sector

Miki Hamada

No 406, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: After the Asian financial crisis of 1997/98, the Indonesian banking sector experienced significant changes. Ownership structure of banking sector is substantially-changed. Currently, ownership of major commercial banks is dominated by foreign capital through acquisition. This paper examines whether foreign ownership changes a bank’s lending behavior and performance. Foreign banks tend to lend mainly to large firms; this paper examines whether the credit to small and medium-sized enterprises (SMEs) is affected by foreign capital entry into the Indonesian banking sector. Empirical results show that banks owned by foreign capital tend to decrease SME credit.

Keywords: Indonesia; Banks; Finance; Small and medium-scale enterprises; Banking; Foreign bank entry; SMEs (search for similar items in EconPapers)
JEL-codes: G21 G34 O53 (search for similar items in EconPapers)
Date: 2013-03-01
New Economics Papers: this item is included in nep-ban and nep-sea
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 406. 2013-03-01

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