Digital Banks’ Financial Ratios Reveal The Impact of Financial Inclusions Business Model on the Banking Sector in Indonesia

Financial inclusion became the common goal globally during the post-economic crisis of 2008, and in Indonesia, this has been promoted as a “National Strategy” to encourage economic growth. This has been supported by the entire Government’s Institutions, including Bank Indonesia, through issuing a Macroprudential Inclusive Financing Ratio (RPIM). This ratio requires banks to allocate at least 20 percent of their total lending to MSME and low-income people starting December 2022 and 30 percent by 2024 through 1) Direct financing, 2) Financing through Non-Bank Financial Institutions and qualified business entities such as financing companies and Peer to Peer (P2P) lending, and 3) Financing through Investment Securities. These factors drive the increasing growth of digital banks whose business model collaborates with financing companies and P2P to provide unsecured loans to unbanked customers. This business model differs from existing traditional banks with well-diversified products and segments from Wholesale banking and Consumer Banking businesses where the loans are mainly secured, and the inherent credit risk is lower than unsecured loans for unbanked customers. Those factors are reflected in the financial ratios. The current problem is some negative perceptions of the uniqueness of digital banks’ financial ratios, particularly compared to traditional banks. This study aims to analyze and measure the financial ratios of three digital banks, three traditional banks, and two financing companies. Any misleading perception might trigger negative public sentiments toward digital banks. Hence, alignment among regulators and relevant stakeholders is critical. Some suggestions are proposed to cater to this problem.