The resolution of Non-Performing Loans (NPLs) is critical for financial stability and economic

resilience, particularly in emerging markets like Indonesia. This research examines Indonesia’s

NPL resolution framework and identifies opportunities for enhancement by drawing lessons

from South Korea’s model, led by the Korea Asset Management Corporation (KAMCO). The

study highlights that South Korea’s success underscores the importance of KAMCO’s pivotal

role, with robust regulatory frameworks, innovative financial instruments, the development of

a secondary NPL market, and private sector participation in creating an efficient, market-driven

system. These elements enable efficient asset recovery and effective systemic risk management.

By comparison, Indonesia’s framework, while achieving notable progress at the institutional

level, requires further development to incorporate innovative, market-driven solutions and a

broader systemic orientation. Through comparative and gap analyses, the study identifies

critical areas for improvement in Indonesia’s framework, including regulatory flexibility,

operational efficiency, market infrastructure, and crisis preparedness.

To bridge these gaps, the study proposes a strategic roadmap emphasizing regulatory reforms

for market-driven solutions, operational improvements through standardization and

digitalization, development of a secondary market with active private sector participation, and

the creation of a centralized public entity for systemic risk management. Capacity building and

international collaboration are also identified as critical to ensuring alignment with global best

practices. By adopting a holistic, innovative, and market-oriented framework, Indonesia can

strengthen its financial resilience, attract diversified investment, and position itself as a leader

in regional distressed asset management. The findings offer practical recommendations to

advance Indonesia’s financial stability and long-term economic growth.

Keywords: Non-Performing Loans (NPLs), Financial Stability, KAMCO, Systemic Risk

Management, Secondary Market, Private Sector, Distressed Asset Management.