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Getting to Know Financing Institutions for Infrastructure Development in Indonesia

Financing institutions for infrastructure development in Indonesia still sound foreign. Not many people know what the institution is, its functions, types, and so on. Well, through this article you can know more about what a financial institution is and get a lot of interesting information about the institution, all of which will be discussed thoroughly in this article. So make sure you scroll this article to the end!

The presence of infrastructure financing institutions is quite important. This institution can channel funds to infrastructure projects. To get to know financial institutions in more detail, let's look at some interesting information below:

Definition of Financing Institution

What is meant by a financing institution is an institution or business entity used to carry out financing activities. Both provide funds and capital in the form of goods. 

Types of Financing Institutions

After you know the meaning of a financial institution, it is better if you know the types of financial institutions. The types of financing institutions themselves vary, by knowing the type you can know where to look for sources of funds for your needs. The following are the types of financial institutions you need to know:

  • Venture Capital Company

This company is also known as a Venture Capital Company. Venture capital companies have a focus on the equity participation of a company within a certain time by an agreement without collateral. The risk of failure does not lie with the debtor but lies with the venture capital company. This company's activities include equity participation, profit, and profit-sharing, and finally the purchase of convertible bonds.

  • Infrastructure Financing Company

This financial institution was formed to provide funds for infrastructure projects. There are several activities of infrastructure financing companies such as subordinated loans. In addition, there are also direct loans for infrastructure financing and infrastructure refinancing.

Infrastructure financing companies also carry out credit enhancement or support credit. For example, guaranteeing infrastructure financing, consulting services, and various other activities.

  • Financing Company

Finally, there are finance companies. This company was formed to be able to do leasing, factoring, and consumer financing to credit card businesses. What is meant by leasing is a business activity used in the form of capital goods. This activity is used as the object of a transaction that becomes the property of the financial institution for the duration of the leasing agreement.

What is meant by consumer financing is financing activities and providing various kinds of goods that are tailored to the needs of consumers. The goods in question can be electronics, motor vehicles, houses, and so on. The payment system is installments or installments whose tenors can be adjusted according to the abilities and desires of consumers.

Factoring is often referred to as factoring. One of the financing activities is the purchase of the company's trade receivables in the short term. It also includes the management of the debt. Factoring this one can be done using collateral or not.

The last is the credit card business, namely the purchase of goods using a card. Later the user must pay the bill before it is due. The provision of this one credit card also follows BI regulations.

Purpose of the Financing Institution

Many misguided and interpreted the presence of this financial institution to be used to replace and compete with financial institutions such as banks. Even though the purpose of a financial institution is not like that. The purpose of the existence of a financial institution is to increase economic welfare and job opportunities. In addition, financial institutions are a diverse source of funds apart from financial institutions.

Difference between Financing and Financial Institutions

To be able to distinguish between financial institutions and financial institutions, please see some of the differences below!

  • Activities

The first difference between a financial institution and a financial institution is its activities. Judging from their activities, financial institutions carry out activities or activities that do not collect funds from the public. It is very different from banking institutions whose funds come from the public. Funds are collected from the community.

  • Providings

Financial institutions and financial institutions provide different things. Financial institutions not only provide funds but also provide capital goods. For example, a leasing company that provides capital goods. In particular, financial institutions such as banks only provide financial capital.

  • Guarantees

The fundamental difference between a financial institution and a banking institution is the guarantee. Financial institutions do not require any guarantees at all, while banking or financial institutions must be accompanied by guarantees. The greater the guarantee that you make as collateral, the greater the loan that will be obtained. Most banking institutions cannot provide loans if there is no collateral.

  • Interest rate

What about the interest rate? It can be said that financial institutions and banking institutions have different interest rates. The interest rates given by financial institutions are higher than those of banking institutions. However, financial institutions are claimed to be able to provide higher financing loans than banking institutions. This is one of the reasons why financial institutions impose high interest rates.

  • Giral Money

The next difference is demand deposits. Financial institutions cannot create demand deposits, in contrast to banking institutions that can demand demand deposits. Then what is demand deposit? Demand deposit is a means of payment such as valuable money issued by commercial banks. Demand deposit is also a bill that can be used as a means of payment that can be used at any time, not limited to time.

  • Permissions

The last difference is permissions. Specifically for financing institutions, the regulation, guidance, supervision and licensing are carried out by the finance ministry. For banking institutions, regulation, guidance and supervision, and licensing are carried out by Bank Indonesia, namely Law Number 10 of 1998. Furthermore, the licenses of financial or banking institutions are transferred to financial services supervisory institutions in accordance with Law Number 23 of 1999.

Examples of Financing Institutions

So that you can understand the activities of financial institutions in more detail and further see some examples of financial institutions and their types as below!

  • Factoring. Which includes the type of factoring financing institutions are Aditama Finance, PT IFS Capital and finally SG Finance.

  • Credit card issuing company. Companies that are included in the credit card issuing companies are Bank Mandiri, Bank BCA or CIMB Niaga.

  • Venture capital company. The venture capital companies include Fenox Venture Capital, CyberAgent Venture and finally 500 startups.

  • Leasing company. Included in the types of leasing companies are Oto Summit, BCA Finance, Amanah Finance and finally Adira Finance.

  • Infrastructure financing company. The only best infrastructure company and become the government's right hand is PT SMI or Sarana Multi Infrastruktur. This financing company is a legal entity which is a Persero and is a BUMN.

All of the above financing institutions are potential financing alternatives. These institutions are able to support faster economic growth in Indonesia, and even have a crucial role for the survival and welfare of the community.

The Role of SMI (Sarana Multi Infrastruktur) as a Development Financing Institution in Indonesia

As a trusted infrastructure development financing institution in Indonesia, PT SMI has an important role for infrastructure development in Indonesia. There are several roles of PT SMI as a financing institution for infrastructure development in Indonesia, as follows:

  • Deepening Financial Instrument

PT SMI has a role in the issuance of the first corporate green bond in Indonesia in June 2018 with a Medium Green rating. The issuance of green bonds is used to finance green financing.

  • Promoting Private Sector Participation

The next role of PT SMI is to promote infrastructure investment through the provision of consulting services, capacity building and finally the development of PPP projects.

  • Municipal Financing

The role of PT SMI in this one is the financing provided to the Regional Government or Regional Government which is used to accelerate regional development.

  • SDG Indonesia One

The next role of PT SMI is to have an integrated funding platform that is used to fund or finance projects with an SDG orientation. Projects are like derisking, finance and investment, and project development.

  • Supporting PEN Program

The next role of PT SMI is to support the PEN program. PT SMI supports the implementation of government investment to save SOEs through the PEN program. In addition, PT SMI also distributes PEN loans to regions and regions affected by the Covid-19 pandemic.

  • Innovative and Creative Financing Model

PT SMI is able to create products that can fill the market gap. In addition, PT SMI became a catalyst in financing the infrastructure.

  • Other Roles

In addition to the roles mentioned above, PT SMI also has several other roles, such as equity investment, namely entering into equity participation from equity financing. PT SMI also has a role in producing quality economic research products to support the consideration of providing financing.

Examples of Infrastructure Ever Funded by PT SMI (Sarana Multi Infrastruktur)

As an infrastructure financing institution in Indonesia, PT SMI has financed many infrastructure projects with fantastic value. There are approximately 54 projects that have been financed by PT SMI.

In the 54 projects that were financed by PT SMI, there were 35 toll road repair projects spread across the islands of Sumatra, Java, Kalimantan and Sulawesi. The rest are projects for the construction of steam and solar power plants, electricity programs, natural gas networks, irrigation of fiber optic networks. There are also LRT projects, widening of national border roads and construction of embankments.

Not only that, PT SMI also provides support for regional infrastructure development. This infrastructure financing company provides facilities through local governments or regional governments in infrastructure development in Central Indonesia, Eastern Indonesia and the rest in Western Indonesia.

PT SMI is always in line with the government's efforts to provide connectivity between regions or regions. PT SMI also supports efforts to equalize the development of essential infrastructure projects such as roads, markets, hospitals, access to information, telecommunications and transportation.

Various Financing Products

What's interesting is that PT SMI (Sarana Multi Infrastruktur) offers a variety of products that are tailored to your needs. PT SMI offers financing and investment, consulting services and finally project development. Specifically for financing and investment, PT SMI provides public sector financing services, commercial sector financing, sharia financing, equity investment and many others.

How, are you interested in applying for financing at the trusted infrastructure development financing institution PT SMI? If so, get to know more about the products offered by this financial institution via this link!

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