Indonesia's Guarantee Industry Faces Capital Constraints

Regulatory Challenges and Capital Requirements

The Indonesian guarantee industry is currently facing significant operational challenges, primarily stemming from capital constraints and new regulatory requirements. Achmad Ivan S. Soeparno, Chairman of Asippindo (Indonesian Guarantee Companies Association), highlighted that obtaining additional capital remains a major hurdle for guarantee companies, particularly for regional credit guarantee companies (Jamkrida).

The recent OJK regulation (POJK No. 10/2025) has set a minimum capital requirement of Rp250 billion for guarantee companies, including Jamkrida. This new requirement has put additional pressure on these companies to secure substantial funding. The process of obtaining this capital from local governments is described as 'extraordinary' due to the rigorous scrutiny involved. Local governments often question the benefits they would derive from investing in these guarantee companies, comparing potential returns to those from fixed deposits.

Subrogation Rights and Reinsurance Capacity Issues

Another significant challenge faced by the industry is related to subrogation rights. Subrogation is the right of guarantee companies to take over creditor claims after paying out guarantee claims. Currently, this process is not functioning effectively, creating a temporary financial burden on these companies. Achmad Ivan emphasized that while guarantee companies pay out claims, the subsequent recovery through subrogation is not happening as it should, affecting their capital recycling.

The industry is also constrained by limited reinsurance capacity. Currently, there is only one reinsurance company in Indonesia, Sinar Mas, with a capital of Rp500 billion. This limits the reinsurance capacity to approximately Rp20 trillion (40 times its capital), which is insufficient given that the total guarantee portfolio is nearly Rp300 trillion annually. This limitation hampers the ability of guarantee companies to optimally manage their risk.

Industry Response and Future Outlook

Despite these challenges, industry stakeholders are aware of these issues, and regulatory bodies like OJK are taking steps to address them. The OJK has released the Roadmap for the Development and Strengthening of the Indonesian Guarantee Industry 2024–2028, indicating a structured approach to resolving these challenges. For 2025-2026, the focus is on improving governance and risk management practices within guarantee companies.

As of November 2025, the guarantee industry's assets stood at Rp47.63 trillion, growing 2.03% year-on-year. However, guarantee service income declined by 7.96% to Rp7.38 trillion, and guarantee claims decreased by 16.95% to Rp6.61 trillion. These statistics highlight the ongoing challenges and adjustments within the industry.