Non-bank financial institutions are one of the driving wheels of the Indonesian economy apart from banks. Its presence helps a lot of people to facilitate economic activities.
Because its function is very crucial and helps us a lot in daily life, there is nothing wrong if we know more about this institution.
The following is the information you need to know about non-bank financial institutions that the BFI Finance Team has compiled from various trusted sources.
Definition of Non-Bank Financial Institution
Non-bank financial institutions are institutions that have official licenses to collect public funds. The collected funds are then managed to be channeled into securities and/or to support economic activities related to investment.
Based on the Decree of the Minister of Finance No. 38/MK/IV/1972, non-bank financial institutions or more commonly referred to as non-bank financial institutions (LKBB) are institutions whose establishment is intended to help improve people's welfare.
The form of encouragement given by LKBB can be in the form of collecting funds from the community and channeling funds to finance various needs in economic activity. LKBB itself first appeared in Indonesia in 1972.
Not only collecting funds and managing them but this institution is also committed to implementing two important principles. The first principle is to report all forms of suspicious transactions to avoid money laundering, terrorism, and other criminal acts.
Second, always committed to finding out the customer's background as clearly as possible. For example, complete identity, credit history, and habits in transactions.
Types of Non-Bank Financial Institutions
There are many types of non-bank financial institutions such as finance companies and so on. The full explanation is as follows.
1. Pawnshop
A pawnshop is a type of non-bank financial institution that functions as a credit channel to the public. Pawnshop is one of the State-Owned Enterprises (BUMN) as a solution for people who need loans by mortgaging their assets or goods.
Some of the most common types of pawnshop products include:
- Gold Pawn
- Conventional Pawn
- Sharia Pawn
- Precious Metals Appraisal Service Provider and Its Certification
- Valuables Safekeeping Service Provider
2. Savings and Loan Cooperative
The next non-bank financial institution is a savings and loan cooperative which has a legal basis in accordance with Law no. 17th 2012. This institution has a task similar to that of a bank, which is to collect funds from cooperative members and then distribute them to members and non-members.
The most obvious difference between savings and loan cooperatives and banks is the amount of interest paid. Savings and loan cooperatives usually charge a higher interest rate.
Nevertheless, savings and loan cooperatives are considered quite profitable for their members because at the end of the period the profits will be shared from the difference in business earned for one year after deducting operating expenses.
3. Capital Market
The capital market is a non-bank financial institution that functions as a place for buying and selling securities with maturities of more than one year (long-term).
The capital market is an ideal place for fund seekers (issuers) to get investors (investors). Later these investors can invest their capital by buying company shares or bonds through securities.
4. Money Market
As with the capital market, the money market is also an ideal place to look for investors or investors. Assets traded in the money market include Money Market Securities (SBPU), Time Deposits, and Bank Indonesia Certificates (SBI).
The difference between the money market and the capital market is the period of time the letters are traded. Money markets tend to sell securities in short terms such as one year or less.
5. Venture Capital Company
Reporting to the Financial Services Authority (OJK), a venture capital company can be defined as a company that finances a business or company within a predetermined period of time.
The form of activity can be in the form of an agreement in the distribution of results, shares, and so on.
6. Insurance Company
Non-bank financial institutions that have a role as a protector in the event of a risky event are insurance companies. This type of company has many types, including health insurance, education insurance, vehicle insurance, life insurance, travel insurance, to property and home ownership insurance.
The way this company works is by raising funds through premiums paid by customers on a regular basis and lasting for a certain period of time. The agreement is made between the customer and the company in accordance with the insurance policy.
7. Leasing Company
Other non-bank financial institutions, namely leasing companies or more familiarly called leasing or multi-finance. This type of company acts as a contract-based financing service, it can also be combined with purchases on credit. Targeting individuals and companies with financing accompanied by collateral.
8. Factoring Company
The following non-bank financial institutions have a role in taking over the credit of a company that is experiencing problems and managing credit sales for companies in need.
9. Financial Technology (Fintech)
Fintech is a technology-based non-bank financial institution. This modern institution carries out its financial activities through crowdfunding, micro-financing, online lending, peer to peer lending services (P2P).
10. Pension Fund Company
Finally, the pension fund company. This non-bank financial institution acts as an old-age guarantor service. The way it works is by collecting funds obtained from deductions from employee salaries every month as long as the employee is still said to be actively working.
There are two types of pension funds handled by banks and insurance, namely the Employer Pension Fund (DPPK) and the Financial Institution Pension Fund (DPLK). Meanwhile, institutions that manage pension funds include BPJS Employment, Taspen, Asabri, and so on.
Functions of Non-Bank Financial Institutions
In addition to collecting funds from the public like conventional banks, non-bank financial institutions also have other functions that are no less important.
1. Raising Community Funds
In accordance with the Decree of the Minister of Finance No. 38/MK/IV/1972 previously mentioned, non-bank financial institutions have an important function, namely to collect public funds.
The funds collected from these customers will later be issued in the form of securities that can be used to finance the investment of a company or individual.
2. Providing Credit Facilities
The second function of non-bank financial institutions is to provide credit facilities that can be used to purchase goods. For example, motorized vehicles or electronics.
Before an existing credit application can be approved, prospective borrowers are required to follow the applicable terms and conditions. Such as attaching personal data to check credit history.
3. As an intermediary for the company
The presence of non-bank financial institutions helps companies to get capital and investors.
This is very helpful for domestic companies to get capital injections from foreign or domestic investors.
4. Conducting Business in the Financial Sector
The existence of this institution also plays a role in helping the welfare of the community and the continuity of activities in the Indonesian financial sector.
For example, finance or multipurpose companies, credit guarantee companies, to social security providers. However, these institutions still need official approval from the minister of finance.
Image Source: Pexels/Pavel Danilyuk
Advantages of Applying for a Loan at a Non-Bank Company
Here are a series of benefits that you can get from applying for a loan at a non-bank financial institution.
1. Easy Terms
2. The Loan Disbursement Process is Processed Quickly and Safely
3. Easy to apply, can be done online or offline
4. Generally, Loan History Checks First
5. Loans Can Be Unsecured (KTA)
Well, for those of you who need a fast loan with a series of advantages for business capital, children's education costs, to lifestyle, you can apply for a loan at BFI Finance. What are the advantages of applying for a loan at BFI Finance? The following are a series of benefits that you can get by applying for a loan at BFI Finance.
Loan Information Car BPKB Guarantee
Disbursement of funds up to 85% of the value of the vehicle and a tenor of up to 3 years.
Loan Information BPKB Motor Guarantee
Loan funds with a fast process and a maximum tenor of up to 18 months.
Loan Information Home Certificate Guarantee
Low interest starts from 0.9% with a long tenor of up to 48 months.
Sobat BFI, thus information about non-bank financial institutions. The presence of these institutions certainly greatly facilitates the wider community in helping daily economic activities. Before deciding to choose the institution, make sure you choose an official institution that has guaranteed legality.
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