THE INDISPENSABLE ROLE OF INDONESIAN BANKS IN INTERNATIONAL TRADE TRANSACTIONS

Abstract

The crucial role of banking in facilitating, financing, and securing complex and risky international trade transactions is fundamental, particularly for Indonesia's export-oriented economy and key emerging market dynamics. This paper aims to comprehensively analyze core banking mechanisms supporting trade, the multi-layered governing legal frameworks (international and Indonesian national), and contemporary challenges faced by Indonesian banks. Employing normative legal research with a qualitative approach, it extensively analyzes primary legal statutes (Indonesian Banking Law, Commercial Code, BI and OJK regulations, UCP 600, URC 522, ISBP) and scholarly literature. Findings indicate banks significantly mitigate credit, operational, and payment risks, facilitate diverse secure payment mechanisms, and provide essential trade finance, yet operations are increasingly constrained by stringent AML/CFT compliance, digitalization demands, and sophisticated risk management needs. It concludes that banking is a vital pillar of Indonesia's international trade ecosystem, its effectiveness hinging on continuous adaptation to regulatory and technological changes, and internal capacity building. Recommendations include strengthening the legal framework for trade digitalization, enhancing supervisory capacity for trade-based financial crime, and incentivizing banking innovations supporting export diversification and SME participation.