In an effort to cut down it’s reliance on foreign funding, Indonesia is looking to an alternative new growing source of funding from within, digitally and tech savvy millennials.
The latest two-year bond, dubbed by the media as “James Bond” due to the 007 series number, was one of the 10 Indonesia plans to launch this year as authorities look to tap young Indonesians’ growing appetite for fixed income. In 2018, the authorities only managed to sell five, but has stated that more than half the buyers of this latest offering were millennials.
For years, the Indonesian government has been looking to mobilise domestic savings in order to reduce the reliance on volatile foreign investment to fund the deficit. Nearly 40 per cent of government bonds are currently owned by foreigners.
Another one of the major driving push for millennials’ funds is the explosive growth of Indonesia’s online marketplaces, which have opened new financial investments to young people, away from more traditional asset classes, such as property, which was a method favoured by their parents.
Despite being Southeast Asia’s largest economy and the fourth most populous nation in the world with 260 million people, financial markets remain rather weak comparatively, with only approximately 49 per cent of adults with bank accounts and a small retail investor community.
In 2018, a government pilot project created to boost online retail bond investment attracted more than 45,000 new investors, most of them aged between 25 to 38, said Loto Srinaita Ginting, the finance ministry’s director of debt securities.
“The features and marketing strategy of retail bonds fit perfectly with the millennials,” said Ms Ginting, explaining how the ministry used social media to promote the bonds and encourage financial literacy.
However, not all young people are ready to embrace online market places. Those that stated their preference for traditional and conventional investment channels such as banks cite concerns over privacy and safety.