Firstly, in Indonesia it is a more complicated process to issue bonds than it is to obtain a loan from a bank.

Secondly, for the company there is no major difference in terms of costs when comparing the issuance of a corporate bond to a bank loan. With a relatively insignificant difference in costs, the company will therefore opt for the easier way, that is a bank loan.

Thirdly, not all companies can issue bonds. Only those companies that have obtained an investment grade rating are able to sell bonds. However, in Indonesia there is a limited amount of these companies.

Fourth, in Indonesia, many companies lack the knowledge of processing and issuing bonds, or even lack the understanding of accessing the capital market. Lack of education from regulators is cited as a contributing factor to this matter.

Fifth, not all companies are willing to fulfill the obligation to disclose company information to the public as a requirement to raise public investor funds.

All in all, it makes Indonesian companies prefer to opt for bank loans when seeking funding for business expansion rather than selling corporate bonds. However, Kumar added that he is unsure whether the number of corporate bond sales in Indonesia is actually lower than other countries. What is certain, though, is that in terms of value Indonesian corporate bonds are lower compared to regional peers. The main difference is that Indonesian corporate bonds have a much smaller face value, while foreign companies abroad tend to set high face values.

According to Kumar it will require extra effort to encourage domestic companies preferring bonds over bank loans as an alternative source of financing. Key is to educate companies about the capital market. In addition, the government should also decide to allow foreign companies to issue corporate bonds in Indonesia. To achieve this it will require a deepening of financial markets, higher liquidity, and a higher degree of participation of domestic investors in the capital market.