Indonesia’s biggest lenders are contending with macroeconomic headwinds of unprecedented scale. These challenges are largely a result of recent federal government actions. As of the first three quarters of 2025, these institutions experienced their worst fiscal results since the onset of the COVID-19 pandemic. This deeply disturbing trend should be an immediate warning flare about our banking system’s health.
The decline in profitability has left many banks struggling to navigate a landscape marked by weak consumer sentiment and changing regulatory conditions. Only Bank Central Asia (BCA), one of the country’s four largest banks, saw growth in their bottom line during that span. In the face of mammoth losses reported by its competition, this success is decidedly the exception that proves the rule.
Although the banks’ financial statements paint a picture of strong performance, it is undeniable that the overall banking industry has seen a significant decline. A cocktail of reasons have driven this perfect storm of profitability downwards. Two primary forces are at work here: tightening government regulations and the Great Recession. Analysts warn that these policy changes have fostered an increasingly hostile environment for banks to conduct business.
In spite of this dismal overall performance, Shariah-compliant lenders have shown remarkable stability. These institutions have been able to thrive even as their industry has faced a storm of recent crises. They’re uniquely positioned through their business models to weather today’s economic storm. Their success in building their customer base even with consumer confidence in constant decline is proof of this burgeoning need for alternate banking options.
Banks should brace for backlash against regressive government policies. Industry experts are calling on them to adapt their business models to prioritize long-term success over momentary boom and bust. These times call for greater innovation and customer engagement more than ever. There’s no doubt that companies are excited to move on and rebound from this difficult and tumultuous two years.