With Many Advantages, BPD Urged to Elevate Its Status

Changes in the economic landscape and limitations in local government fiscal space demand that Regional Development Banks (BPD) take on a more strategic and proactive role. Moving forward, BPDs can no longer merely serve as managers of local government funds. “BPD must transform into orchestrators of regional fund flows capable of actively and sustainably driving the economy,” said ASBANDA Chairman Agus Haryoto Widodo at the National Seminar on Regional Development Banks across Indonesia, held in Solo and attended by Central Java Governor Ahmad Luthfi recently. BPDs, he continued, possess structural advantages not held by other banks, from closeness to local governments and understanding of local economic characteristics to networks reaching down to the district level. With these advantages, BPDs hold a unique position to play a larger role in directly driving regional economies. “BPD must ensure that every rupiah circulating in the region adds economic value, boosts productivity, and strengthens the real sector,” he stated. Agus said that local fiscal limitations should not hinder development. In such conditions, financing innovations become key to maintaining the continuity of government spending and regional economic growth. One strategic instrument being promoted is the optimisation of regional loan schemes, not only focused on infrastructure financing but also on strengthening public services, improving the quality of health and education sectors, and developing UMKM and the local economy. “Regional loans must be viewed as strategic instruments to create a multiplier effect for the regional economy, not merely short-term financing sources,” said Agus. In this context, ASBANDA has also submitted proposals to regulators for a more precise policy approach to public sector financing at the local level. “This is not a request for relaxation, but an effort to present a more appropriate framework so that public sector financing can be carried out optimally yet prudently,” he said. To elevate BPDs, Agus stated that the transformation will focus on three main pillars: strengthening governance and risk management, developing productive and impactful financing innovations, and deepening roles in the regional economic ecosystem. According to him, BPD’s future success will not only be measured by financial performance but by its contribution to driving tangible regional economic growth. “The future of the regional economy is not only determined by the size of the Regional Budget (APBD), but by our ability to manage and direct fund flows to create sustainable growth,” he said. Meanwhile, Central Java Governor Ahmad Luthfi stated that regional development requires cross-stakeholder collaboration. “Building a region cannot be done alone. We are not supermen, but a super team. Everyone must collaborate to drive regional economic growth,” he said. He also emphasised the importance of BPD’s role in supporting regional investments, maintaining economic stability, and strengthening the real sector, particularly UMKM. BPD, he said, must be present as a solution to various regional economic challenges, from fiscal limitations to improving community welfare. The seminar is expected to serve as a strategic momentum to accelerate BPD’s transformation into more modern, adaptive, and impactful regional financial institutions. Moving forward, BPDs are hoped not only to be financial intermediaries but also engines of inclusive and sustainable regional development.