Bullion Bank and Gold Mining Sector Downstream Strategy
In recent years, the downstream development of natural resources has become one of Indonesia’s primary economic development strategies. The government seeks to ensure that natural wealth is no longer merely exported as raw materials, but is processed domestically to generate greater value for the national economy.
To date, downstream development has been predominantly discussed in the context of commodities such as nickel, bauxite and copper. However, there is one strategic commodity that is equally important: gold.
As one of the world’s countries with substantial gold reserves, Indonesia has the opportunity to develop a more integrated gold industry, from the mining sector through to the financial sector. Within this context, the concept of a bullion bank has emerged—a financial institution that provides various gold-based services such as gold deposits, gold-backed financing and gold trading.
In February 2025, the Indonesian government officially launched bullion bank services operated by financial institutions such as Pegadaian and Bank Syariah Indonesia after obtaining a licence from the Financial Services Authority (OJK). The presence of bullion banks is expected to strengthen the domestic gold ecosystem, reduce dependence on gold imports and promote downstream development of the domestic gold mining industry.
The presence of bullion banks is not merely related to financial sector innovation, but can also form part of the strategy for downstream development of the mining sector. Moreover, if designed appropriately, bullion banks can also be an instrument that aligns with principles of Islamic economics, particularly in promoting the equitable management of natural resources and providing benefit to the wider public.
Indonesia ranks amongst countries with substantial gold potential in the world. Data from various international institutions shows that Indonesia’s gold reserves reach approximately 2,600 tonnes, positioning it as one of the countries with the largest gold resources globally.
Additionally, Indonesia operates several world-class gold mines, including those operated by PT Freeport Indonesia in Papua as well as various gold mines owned by PT Aneka Tambang (Antam).
However, this substantial potential is not always aligned with the value-added that the national economy enjoys. In many cases, gold is still positioned as merely a mining commodity. After extraction, gold is often exported or traded in a form that does not provide maximum value-added benefit to the domestic economy.
This situation reflects a paradox often experienced by resource-rich nations: abundant natural wealth, yet economic benefits not fully realised by society. Therefore, downstream development becomes an important agenda to ensure that the value chain of the mining industry does not stop at the stage of natural resource exploitation alone.
In the context of gold, downstream development does not simply mean refining the metal into industrial products, but also integrating it into the national economic and financial system. In the modern economic ecosystem, value-added is created not only in the production sector, but also in the financial sector. This also applies to the gold commodity. In addition to use in jewellery and manufacturing industries, gold also functions as an investment asset and global financial instrument.
This is where bullion banks play a strategic role. A bullion bank is fundamentally a financial institution that manages gold-based economic activities, from storage, trading, through to gold-backed financing. Through this institution, gold can become part of the financial intermediation system.
Thus, bullion banks can be understood as financial infrastructure for gold downstream development. Whereas smelters function to process minerals into metals, bullion banks function to integrate metals into a broader economic system. Through bullion banks, gold that has previously been stored passively can be utilised for various productive economic activities. This simultaneously extends the value chain of the domestic gold industry.
The economic potential of Indonesia’s gold industry is actually substantial. Research indicates that the total value of the domestic gold business chain is estimated at approximately Rp482 trillion per annum. This business chain encompasses the mining sector, refinement, jewellery industry, gold trading through to gold-based investment.
If this ecosystem can be managed in a more integrated manner, the contribution of the gold industry to the national economy can increase significantly. Some analyses even estimate that the development of the bullion bank ecosystem in Indonesia could increase gross domestic product (GDP) by approximately Rp245 trillion and create more than 1.8 million new jobs in the long term.
These figures demonstrate that gold is not merely a mining commodity, but also a source of widespread economic activity. However, this potential can only be realised if the value chain of the gold industry can be strengthened from upstream through to downstream.
From the perspective of Islamic economics, gold holds a very important position. Since the early days of Islamic civilisation, gold has been used as a medium of exchange in the form of dinar, whilst silver has been used in the form of dirham. Both became standards of value that were relatively stable within the economic system.
However, Islam does not only view gold as a medium of exchange, but also as a trust—a natural resource that must be managed equitably and provide benefit to the wider public. This principle aligns with the concept of maqāṣid al-sharī’ah, which refers to the objectives of Islamic law that emphasise economic welfare and justice.
Within this context, the management of gold must not stop at mere economic activity.