Rereading Economic Justice in Indonesia's Banking System
Amid Indonesia’s sustained economic growth of around 5%, a fundamental question often overlooked in public discourse is whether the economic system we have built is truly fair. This question becomes increasingly relevant when examining how the financial sector, particularly banking, operates.
Bank credit, reaching trillions of rupiah, continues to grow, but its distribution remains far from even. Most financing is still concentrated on large business groups, while small and medium enterprises (SMEs) remain on the fringes of access.
This phenomenon invites us to reread the concept of economic justice, which should not merely be a normative slogan but a principle forming the foundation of policy. In this context, the ideas of Sumitro Djojohadikusumo, one of Indonesia’s economic architects, are highly relevant to revisit.
Sumitro did not only discuss economic growth but also how the state must ensure that such growth creates balance rather than inequality. In many of his writings, he emphasised the importance of the state’s role in correcting market failures and preventing the concentration of economic power in a handful of groups. In today’s terms, this can be seen as an effort to prevent the birth of an economic oligarchy.
Sumitro’s economic thinking, often called “Sumitronomics”, never separated efficiency from justice. He understood that the market plays a key role in driving growth but also recognised that the market does not always produce fair distribution.
Therefore, he positioned the state as a key actor that must be present to maintain balance. The state must not merely be a spectator but actively direct resource allocation to avoid concentration in certain groups.
In the banking context, this means the financial system cannot be entirely left to market mechanisms. If left unchecked, banks will tend to channel credit to the most commercially profitable parties, namely large business groups with low risk.
This logic is rational from a business perspective. However, from the viewpoint of economic justice, it leaves a major problem: access to capital becomes uneven, and growth opportunities become lopsided.
One assumption often used in modern economics is that financial institutions are neutral. They merely perform intermediation, collecting funds from society and redistributing them as credit. However, in practice, banking is never truly neutral. Decisions on who gets credit and who does not have significant economic and social implications.
When banks prefer to channel credit to conglomerates over SMEs, they indirectly determine the direction of wealth distribution in the economy. They become part of a mechanism that strengthens already powerful groups while weakening those still struggling.
From the Sumitronomics perspective, this condition is a market failure that must be corrected. If not, the economic system will tend towards sharper wealth concentration.
One important idea in Sumitro’s thinking is that access to economic resources, including credit, not only determines production capacity but also shapes power structures. In this context, credit is not just a financing tool but also an instrument of power. Those with access to large credit can expand businesses, dominate markets, and even influence policy.
Conversely, those without access will be left behind, no matter how great their potential. This creates what modern economics calls inequality of opportunity, not just outcomes. If this continues, the economy will move towards an oligarchic structure, where economic power is concentrated in a few groups with access to resources.
Indonesia often calls SMEs the backbone of the economy. Their contribution to GDP is large, and their role in absorbing labour is significant. However, when looking at credit distribution, this major contribution is not reflected proportionally. This creates a policy paradox. On one hand, the government promotes strengthening SMEs as a development strategy. On the other, the financial system has not fully supported that goal.
From the Sumitronomics perspective, this shows a lack of synchronisation between policy objectives and the instruments used. If SMEs are truly to be strengthened, their access to capital must be a priority. Without it, SME empowerment efforts will always be hampered by resource limitations.
In the last decade, financial inclusion has become an important agenda in Indonesia’s economic policy. However, as often happens, inclusion is more interpreted as expanding access, such as bank account ownership or the use of digital financial services.
Yet, from an economic justice perspective, inclusion is not enough to just be about access. Inclusion must also concern the quality of access. Do people get access to productive financing? Do they have equal opportunities to develop businesses?
If inclusion only results in increased consumer credit while productive credit remains concentrated in certain groups, then that inclusion is superficial. Sumitro would likely see this as a failure to understand the essence of development.