The commitment of global financial institutions to reduce exposure to the coal industry has strengthened in recent years. Banks in Indonesia have also begun to follow this trend.
The World Resources Institute noted that in 2025, around 70% of the world’s 100 largest commercial banks had adopted policies to exit coal financing.
Most started by halting financing for new mining projects and coal-fired power plants, then gradually tightened financing for companies still reliant on thermal coal.
Nevertheless, reducing exposure to the coal industry is no easy task. Amid high funding demands in this sector, many banks continue to extend credit to companies involved in the coal business through corporate loans, bond issuances and general financing facilities.
Data from Bank Indonesia shows that loan disbursement in rupiah and foreign currency by commercial banks and rural banks (Bank Perkreditan Rakyat, BPR) to the mining and quarrying sector reached 269.47 trillion rupiah (RM62.6bil). This was the highest value ever recorded.
However, at least the shift is beginning to emerge in Indonesia. Amid a slowdown in the coal industry, several banks have started to adjust their financing policies by considering sustainability or ESG aspects.
One such bank is PT Bank KB Indonesia Tbk (KB Bank), which has begun by halting direct financing for coal-mining exploitation activities.
KB Bank wholesale banking director Widodo Suryadi said the policy was a directive from the KB Financial Group (KBFG). According to him, the group has directed financing toward more sustainable sectors, including renewable energy.
“We are not allowed to extend direct credit to coal mines engaged in exploitation. Financing for the supply chain is still possible, but financing for mining activities is a no,” he said.
This policy marks one of the changes implemented since KB Bank joined KBFG. Previously, credit disbursement was conducted broadly without specific sector restrictions.
Nevertheless, KB Bank remains open to financing opportunities across various economic sectors while considering business resilience amid current market conditions.
On the other hand, KB Bank also strives for consistency despite the challenges of channeling funds into green financing. Widodo acknowledged that not all green projects currently meet banking requirements, mainly because many prospective debtors are startups that do not yet possess adequate cash flow.
“As a bank, we still look at the ability to generate cash flow. If the cash flow is still negative, that certainly becomes a consideration in credit approval,” he said.
However, he said the bank is interested in environmental infrastructure projects by more established companies, such as the development of wastewater treatment facilities and waste processing facilities.
At present, KB Bank’s green financing is still dominated by syndicated loans for power generation projects. In addition, KB Bank is studying financing opportunities for the solar panel sector and other sustainability projects.
According to Widodo, ESG will be the company’s business focus moving forward because the trend cannot be avoided.
“Like it or not, ESG is becoming inevitable. Whether we like it or not, everyone will move in that direction,” he said.
To support this implementation, KB Bank has integrated ESG aspects into its internal credit approval process. Every financing proposal must undergo an assessment based on a set of ESG criteria prior to approval.
Business transformation
The shift in financing policy is not merely a response to global ESG trends. For KB Bank, limiting direct financing for coal exploitation activities is part of a broader business transformation since joining KBFG.
This transformation serves as the guiding principle for KB Bank’s business strategy. The objective is not only to strengthen its business foundation, but also to pursue sustainable and inclusive growth.
In its 2025 sustainability report, KB Bank president director Kunardy Darma Lie said the bank’s transformation efforts focus not only on improving corporate performance and customer experience, but also on creating broader value for society and making tangible contributions to environmental sustainability.
A major transformation initiative called “deep change” was carried out last year and became the foundation for strengthening corporate governance, enhancing transparency and managing the business in a more sustainable manner. This phase served as an important foundation for KB Bank in building an organisation that is more resilient and adaptive to dynamics of the banking industry.
The results of the transformation began to show in the first quarter of 2026. Management assessed that the company’s fundamentals had improved, supported by credit growth, margin expansion, asset quality improvements and a healthier funding structure.
KB Bank posted a profit of 10.5bil rupiah (RM2.4mil) at the end of March this year, down 97% from 352bil rupiah (RM81.8mil) in the same period a year earlier. However, several indicators encourage optimism.
Lending rose 2.6% year-on-year to 43.19 trillion rupiah (RM10bil). An increase in performing loans by 4.76% to 34.02 trillion rupiah (RM7.9bil) was said to reflect an improvement in portfolio quality.
Net interest income increased significantly by 97.28% year-on-year to 363bil rupiah (RM84.3mil), in line with an improvement in net interest margin, which rose to 2.09% from 1.09% in the same period the previous year. This is said to reflect more optimal asset and liability management as well as greater cost-of-funds efficiency.
Concurrently, total third-party funds at the end of last March were recorded at 41.52 trillion rupiah (RM9.6bil). KB Bank logged a 5.74% growth in low-cost funds, or current account/savings account, to 13.09 trillion rupiah (RM3bil).
For the first time since joining KBFG in 2020, KB Bank also recorded a positive pre-provision operating profit of 9bil rupiah (RM2.1mil) at the end of the first quarter of 2026, which management described as a key milestone for the bank.
Kunardy said there is still room for improvement, particularly in credit quality, overall business fundamentals and strengthening the capital structure to support long-term growth. “Our focus going forward is to maintain this momentum through quality growth, disciplined risk management and stronger synergies with KB Financial Group,” he said.
Bank strategy
Having seen the results of the transformation, KB Bank is confident that the company’s performance at the end of the first half of the year will also yield positive results. Kunardy said business trends through the end of June 2026 remained on a positive trajectory, although the company had yet to release its mid-year financial statements.
“We see this progress continuing, although the transformation journey is still a long one,” Kunardy said.
However, the company does not want to pursue credit growth alone. It also wants to improve borrower quality so that the non-performing loan ratio continues to improve through prudent remediation measures.
It is only natural that asset quality remains a concern for management. After all, KB Bank’s non-performing loan (NPL) ratio remains high. From the Q1 financial statements, the gross NPL in Q1 2026 was at 9.83%, while the net NPL stood at 6.21%.
As a result, the company has also begun shifting its business focus by increasing the contribution of fee-based income through strengthening transaction banking services in the wholesale segment.
Through this unit, KB Bank will enhance transaction services while expanding cross-selling opportunities to corporate clients. Enhanced services include operational account management, cash services, custody and foreign exchange transactions.
In addition, KB Bank will reinforce ecosystem-based financing. Credit disbursement will continue to focus on sectors including manufacturing, consumer goods, natural resources, pharmaceuticals, hospitals, logistics and cold chain storage.
The bank will also continue to target South Korean business groups, which have traditionally supported 30% of the company’s wholesale credit exposure.
In the retail segment, KB Bank will expand its Priority Banking Centre network. The first centre opened in Semarang and will be expanded to Jakarta and several other major cities.
However, Kunardy stressed that the company does not want to force credit growth at the expense of prudential principles. Given macroeconomic conditions, KB Bank projects a credit growth of 8% to 11% this year.
