Green Finance in Indonesian Banking: Regulation, Implementation, and Challenges

Abstract

This study aims to analyze the development of green finance in the Indonesian banking sector, focusing on regulatory frameworks, implementation practices, and emerging challenges. The research employs a literature review method by examining academic sources, regulations, and official reports published last five years. Findings indicate that Indonesia has established a relatively comprehensive sustainable finance regulatory framework, such as POJK No. 51/2017 and POJK No. 60/2017, though implementation remains limited. Several state-owned banks, including BNI, BRI, and Mandiri, have begun adopting green finance practices through the issuance of green bonds, financing environmentally friendly MSMEs, and selective financing policies based on ESG principles. Nevertheless, challenges such as limited technical guidelines, insufficient human resource capacity, and low demand for green products continue to hinder progress. This research emphasizes that stronger synergy among regulators, financial institutions, and society is essential to reinforce the green finance ecosystem and support the transition toward a low-carbon economy.