Indonesia’s central bank is ending the old JIBOR rate and will fully switch to the Indonia overnight index on January 1.
What’s changing?
JIBOR (Jakarta Interbank Offered Rate) has been used to set prices for deposits, loans and swaps. It will be retired and replaced by Indonia, an index that reflects actual overnight transactions in the money market.
Why move to Indonia?
- It’s based on real market trades, making it more transparent.
- It matches the way interest rates move, helping the central bank’s policy work better.
- It aligns Indonesia with a global shift toward transaction‑based benchmarks.
How will this affect borrowers?
Bank Indonesia wants lenders to pass on recent rate cuts to households and businesses. With a market‑driven benchmark, the hope is that loan rates will fall more quickly. So far, the central bank has cut its policy rate by 125 basis points this year, but lending rates have only dropped 24 basis points.
What’s the bigger picture?
Indonesia expects daily money‑market activity to reach 81 trillion rupiah by 2030, up from 54 trillion in October. A reliable benchmark like Indonia will help transmit lower rates across the economy. Other Southeast Asian countries have made similar moves, such as Thailand and Malaysia, which have introduced their own overnight rates.
Is the transition smooth?
Most banks have already started using Indonia since 2018, and only a few contracts still need a fallback clause. Market participants say the process is proceeding well.
Remember, this is perspective, not a prediction. Do your own research before making any financial decisions.