ASBANDA Urges Regional Development Banks to Elevate Their Role as Orchestrators of Local Economic Growth

The General Chairman of the Regional Development Banks Association (ASBANDA), Agus H. Widodo, is urging Regional Development Banks (BPD) to undertake a fundamental transformation of their roles. BPDs need to shift from merely managing local government funds to becoming orchestrators of regional fund flows and the primary drivers of regional economic growth through productive and measurable financing innovations. He emphasised that changes in the economic landscape and limitations on local government fiscal space demand that BPDs take on more strategic and proactive roles. “Going forward, BPDs cannot suffice with just managing local government funds. BPDs must transform into orchestrators of regional fund flows capable of actively and sustainably driving the economy,” stated Agus. He delivered these remarks at the National Seminar on Regional Development Banks across Indonesia in Solo, which was also attended by the Governor of Central Java, Ahmad Luthfi. Furthermore, Agus explained that BPDs possess structural advantages not held by other banks, ranging from closeness to local governments, understanding of local economic characteristics, to networks reaching the district level. With these advantages, BPDs can play a larger role in directly driving the regional economy. “BPDs must ensure that every rupiah circulating in the region adds economic value, boosts productivity, and strengthens the real sector,” he asserted. Agus stressed that local fiscal limitations should not hinder development. In such conditions, financing innovation is key to maintaining the continuity of government spending and regional economic growth. One strategic instrument being promoted is the optimisation of regional loan schemes. This scheme is not only focused on infrastructure financing but also on strengthening public services, improving the quality of health and education sectors, as well as developing UMKM and the local economy. “Regional loans must be viewed as a strategic instrument to create multiplier effects for the regional economy, not just a short-term funding source,” clarified Agus. In this context, ASBANDA has also submitted proposals to regulators for a more precise policy approach to financing the regional public sector. “This is not a request for relaxation, but an effort to provide a more appropriate framework so that public sector financing can be carried out optimally yet prudently,” he emphasised. To elevate BPDs, Agus stated that the transformation will focus on three main pillars. First, strengthening governance and risk management. Second, developing productive and impactful financing innovations. Third, deepening roles within the regional economic ecosystem. According to him, the future success of BPDs will not only be measured by financial performance but by their contributions to driving tangible regional economic growth. “The future of the regional economy is not only determined by the size of the regional budget, but by our ability to manage and direct fund flows to create sustainable growth,” he said. Meanwhile, Central Java Governor Ahmad Luthfi, in his keynote speech, affirmed that regional development requires collaboration across stakeholders. “Building a region cannot be done alone. We are not supermen, but a super team. Everyone must collaborate to drive regional economic growth,” he explained. He also emphasised the importance of BPDs’ role in supporting regional investment, maintaining economic stability, and strengthening the real sector, particularly UMKM. In his view, BPDs must be present as solutions to various regional economic challenges, from fiscal limitations to improving community welfare. The holding of this seminar is hoped to become a strategic momentum to accelerate the transformation of BPDs into more modern, adaptive, and impactful regional financial institutions. Going forward, BPDs are expected not only to serve as financial intermediation institutions but also as the engine of inclusive and sustainable regional development.