Most people often hear the term financial institution and will directly associate it with banks. In fact, financial institutions are actually not only limited to banks, you know, but there are also various other forms. One of them is non-Bank financial institutions (LKBB).
Non-bank financial institution (LKBB) is a business entity in the field of finance that may collect and distribute funds to the public but not in the form of savings, current accounts, or deposits.
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Funds can be raised by issuing securities, then channeling them to finance investment companies that need loans.
Banks and non-bank financial institutions (NBFI) play a vital role in economic activity in Indonesia. Because the strategic role of these two financial institutions is believed to be able to collect and channel public funds effectively and efficiently towards improving people’s living standards.
LKBB itself has a role to help the business world increase the productivity of goods and services. In addition, it facilitates the distribution of goods and encourages the opening of jobs.
Functions And Objectives Of Non-Bank Financial Institutions
Actually, there are quite a lot of functions of Non-Bank Financial Institutions in Indonesia, in general, the functions and objectives of LKBB are as follows:
Collecting funds from the public by issuing securities, then channeling the funds back to finance capital for companies in need.
Provide capital assistance in the form of credit to the public so as not to be trapped in debt with high interest applied by loan sharks.
Assist the government in development efforts in various fields, especially in economics and finance.
Help stimulate private equity participation and expand sources of financing for business activities.
Help drive industrial and economic development through capital markets.
Benefits Of Non-Bank Financial Institutions
The existence of Non-Bank Financial Institutions (LKBB ) has certainly provided benefits to the community. These benefits can be felt from the products it offers, as follows :
Pawnshops provide benefits for people who need funds
The company provides guaranteed benefitsthe risks that may occur in accordance with the services offered
Pension fund institutions provide welfare to company employees, especially those who have retired
Financial institutions provide loans to the public in terms of financing their consumption activities.
Cooperatives provide benefits to members in terms of togetherness and residual business results.
The Role Of Non-Bank Financial Institutions
Non-Bank financial institutions “LKBB ” have an important role in the economy of a country, including Indonesia. With the LKBB, domestic consumption moves forward and drives the economy.
As for some lkbb business activities in Indonesia are as follows:
Raise funds from the public by issuing securities.
Provide credit facilities to private and government companies, both short, medium and long term.
Play a role as an intermediary for companies in Indonesia and become a legal entity of the government Daka credit procurement in the country and abroad.
Include the capital of companies and the sale of shares in the capital market.
Become an intermediary for the company in obtaining experts in the field of Finance.
Carry out other business activities in the field of Finance with the approval of the minister of Finance of the Republic of Indonesia.
Types Of Non-Bank Financial Institutions
The presence of this institution is legal because it is in accordance with applicable regulations, namely the decree of the Minister of Finance No.38 / MK / IV / 1972. In Indonesia, there are several types of LKBB that will be easily found and popular, What are they?
- Insurance Companies
An insurance company is a service company in risk management for losses, loss of benefits, and legal liability to third parties due to uncertainty events. Where, this insurance company collects funds through the withdrawal of premiums or a certain amount and every month for a certain period of time (contract period) in accordance with the agreement of both parties listed in the insurance policy.
There are several insurance products that are quite popular to offer, including health insurance, life insurance, vehicle insurance, education insurance, and property insurance.
- Pension Fund Company
Pension fund company is a company that manages pension funds at the employer company or the company itself. Later in retirement, the money managed will be returned every month, so it can be concluded that this pension fund company provides long-term savings services.
This pension fund company can be implemented by banks and insurance, where there are 2 types of pension funds distributed, namely the employer pension fund (DPPK) and the financial institution pension fund (DPLK).
- Pawnshop
The pawnshop public company is one of the state-owned enterprises “SOEs ” that carry out lending activities to the public. The legal basis used is the pawn law so that people avoid interest that is too high.
Pawnshops are quite popular used by the lower middle class because usually the process tends to be easier. As for some of the products of pawnshop services include:
Savings And Loan Cooperative
A savings and loan cooperative is a non-bank financial institution in the form of a cooperative and collects funds from its members, then distributes them back to members and non-members.
- Leasing
Leasing or multifinance company is a leasing company or non-bank financial institution that offers credit or cash payments for certain goods. The system used is a lease contract combined with the purchase in installments either to individuals or companies. - Capital Market
The capital market is a meeting place and conduct transactions between fund-seekers (issuers) and fund owners/investors (investors). In the capital market traded are types of securities such as stocks and bonds. If measured from the time the capital traded is long-term capital. - Money Market
The money market is the theme of obtaining funds and investing funds, almost the same as the capital market. The difference is that capital is offered in the short-term money market and in the long-term capital market. In the money market, many transactions are carried out with electronic media so that both parties / customers do not need to come directly. - Leasing Company
Leasing company is a business that emphasizes the financing of capital goods desired by its customers. For example, someone wants to buy a motorcycle on credit, then this need for payment can be closed by the leasing company. - Factoring companies
A factoring company is a company whose business takes over the credit payments of a company. Taking credit is done by taking other companies ‘ non-performing loans and can also manage the credit sales of companies in need. - Venture Capital Firms
Venture capital companies are companies whose main business is to contain high risk. Its business is to provide financing in the form of credit and unsecured which is generally not served by other financial institutions,
So far, the credit system with guarantees is considered very difficult, hindering and burdensome for customers to obtain capital.
- Plastic card companies
A plastic card company is a company that issues plastic cards / credit cards. Then what does it do ? Its function is used to as a substitute for cash to use the bank.