Articles

Early Traction

Indonesia inaugurated its first bullion banks on 26 February 2025 when President Prabowo Subianto launched gold banking services at Pegadaian and Bank Syariah Indonesia (BSI).

A bullion bank takes gold on deposit, lends against it and provides trading, custody, and storage services in the metal.

Eighteen months on, the record supports a split assessment. Investment and corporate gold volumes have grown quickly, but refining infrastructure meant to feed the system has suffered a major disruption. Meanwhile the household gold that motivated the policy in the first place remains largely outside the formal financial system.

The Setup and Early Growth

The legal framework rests on the 2023 Financial Sector Development Law and OJK Regulation 17 of 2024, the last of which licenses institutions that meet a capital threshold near Rp14t to take gold deposits, lend against gold as well as trade and store it.

That threshold is high enough to confine the business, for now, to large and well-capitalised banks.

Pegadaian’s gold assets under management reached 132.3 tonnes by November 2025, against a five-year target of 220 tonnes. The institution brings more than a century of gold pawn lending to the mandate, and its early activity included gold-backed working capital financing of 150 kilograms alongside corporate deposits approaching three tonnes.

BSI’s gold business grew 78% in 2024 to Rp12.8t, and its app-based savings channel accumulated 830 kilograms by May 2025 through sharia-compliant products tied to hajj and umrah saving. That distribution logic reaches a base of more than 23 million BSI customers in the country with the world’s largest annual hajj quota.

Licensing remains confined to these two institutions as of mid-2026, a pace that reflects deliberate caution rather than a lack of interest. The regulator has published a bullion ecosystem roadmap for 2026 through 2031, issued rules for a gold-backed fund that trades like a stock, and planned a National Gold Council modelled on counterparts in Turkey and Singapore.

Government projections value the ecosystem’s eventual contribution at nearly US$15b in additional gross domestic product, a figure that signals ambition more than it forecasts a settled outcome.

The Downstreaming Connection

Bullion banking extends the resource downstreaming agenda that Jakarta first applied to nickel. Downstreaming is the strategy of processing raw materials at home rather than exporting them unrefined, capturing more of the value chain inside the domestic economy.

Jakarta has applied that strategy for years to nickel, helping turn the country from a nickel-ore exporter into a centre for refining and battery-input production. Though it earned criticism from foreign investors, the strategy also yielded plaudits and spurred similar steps by other resource-rich countries seeking to indigenise processing and retain more of the mining value chain at home.

The gold mandate follows the same logic. Indonesia ranks among the world’s top gold producers, yet it historically imported fine gold because it lacked the capacity to refine its own output to the purity international markets demand.

Freeport Indonesia’s Manyar precious metals refinery, inaugurated in March 2025 with capacity of up to 50 tonnes of gold per year, was designed to close that gap, with state miner Antam contracted to absorb 30 tonnes of refined output over five years in a deal valued at US$12.5b.

Antam’s own gold sales reached a record 43.8 tonnes in 2024, up 68% year on year, with a 45-tonne target for 2025, volumes it has long met in part through imported fine gold. However, the September 2025 mud rush at the Grasberg mine cut Freeport’s production sharply and idled the smelter complex, which is targeted to resume operations around September 2026.

The disruption matters because the policy’s economic payoff depends on replacing imports. Gold refined at home and fed to domestic bullion banks means less gold bought from abroad, which eases pressure on the current account, the broad tally of a country’s trade and income with the rest of the world.

An idled refining chain defers that benefit into 2027 and lengthens the period in which the banks must source metal the domestic system was built to supply.

Households, Volatility and the Indian Precedent

The government estimates that Indonesian households hold roughly 1,800 tonnes of idle gold, held mostly as jewellery and small bars kept outside the banking system.

Mobilising that stock has proven slow.

Early household deposits measured 1.1 tonnes from 31,000 customers by April 2025, and much of Pegadaian’s subsequent growth reflects investment and corporate accounts rather than family holdings.

Retail demand for the metal itself remains strong, with Indonesian bar and coin demand rising 47% year on year in the first quarter of 2026.

The obstacles to deposit mobilisation are familiar from other markets: emotional attachment to jewellery, documentation requirements that deter informal holders and deposit returns that compete poorly with the price gains households already capture simply by holding the metal.

Price volatility presents a separate and untested risk. Gold traded above US$5,500 per ounce in late January 2026 and fell below US$4,000 by late June. A swing of that size has not yet been stress-tested against gold-backed loans or the unallocated accounts the rules permit.

That distinction matters for a depositor. An allocated account assigns the customer specific, identifiable bars that remain their property. An unallocated account is only a claim on the bank for a quantity of gold, which leaves the depositor more exposed if the institution comes under stress.

India’s Gold Monetisation Scheme defines the cautionary benchmark. It mobilised 38 tonnes from an estimated 25,000-tonne household stock before its discontinuation in 2025.

Indonesia’s sharia distribution channel, absent from the Indian design, remains the strongest reason to expect a different outcome, because it reaches savers through the hajj and umrah products they already use. Bank Indonesia’s own gold reserves stood at 87.04 tonnes in the first quarter of 2026, which positions the central bank as a potential future buyer of domestically refined metal.

Outlook

Four indicators will determine the assessment through 2027: the undisclosed split between allocated and unallocated deposits, the pace of new bullion licenses beyond Pegadaian and BSI, the Manyar restart and its effect on the gold import bill, and the household share of deposit growth.

The current account provides the cleanest measure of overall success. A policy justified as import substitution should register in the trade data before it registers in financial inclusion statistics.

The regional stakes extend beyond Jakarta. A credible domestic system for trading, settling and storing gold would let Indonesia capture activity that currently routes through Singapore, which is building out its own bullion infrastructure on a parallel timetable.

The planned National Gold Council signals that ambition directly. Whether other emerging markets copy the model depends on a narrower question: whether a formal, regulated system can outcompete informal channels on price, trust and liquidity.

The first 18 months indicate that state-linked institutions can build gold balance sheets at speed. Converting family holdings into financial deposits remains the harder task.

The views expressed are those of the authors and do not necessarily reflect those of STRAT.O.SPHERE CONSULTING PTE LTD.