Jakarta. The National Council for Financial Inclusion, or DNKI, is reviewing a regulation that prevents social-assistance payments and the disbursement of government-subsidized bank loans to small-medium enterprises through financial technology applications, in an effort to give more Indonesians access to financial services.
Indonesia is still lagging behind its Southeast Asian neighbors in terms of financial inclusion. A 2014 World Bank survey showed that only 36 percent of Indonesians had bank accounts, compared with 78 percent in Thailand and 81 percent in Malaysia.
"We are now encouraging state-owned banks to collaborate with fintech [players] to reach every single part of Indonesia," DNKI secretary Eny Widiyanti told the Jakarta Globe on Tuesday (31/07).
The DNKI was established under the auspices of the Coordinating Ministry of Economic Affairs to foster economic growth, accelerate poverty reduction and reduce economic gaps between regions. One of its goals is to raise financial inclusion in the country to 75 percent in 2019 and 90 percent in 2023.
Eny said despite banks claiming to have more than 700,000 agents across the archipelago, it would be not enough to serve all Indonesians dispersed over more than 17,000 islands – especially not in remote areas.
Indonesia must ensure that more than 54 million adults obtain bank accounts at formal financial institutions to achieve next year's 75 percent financial inclusion target, the Global Findex 2017 survey showed. However, it also showed that 30 percent of all accounts were inactive, which doubled since 2014.
TCash, a mobile financial service application provided by Telkomsel, Indonesia's largest mobile operator, was used to disburse social-assistance payments in 2015, but this was stopped after the government issued a regulation that only state-owned banks were allowed to distribute such funds.
Meanwhile, state-owned banks such as Bank Negara Indonesia (BNI), Bank Rakyat Indonesia (BRI) and Bank Tabungan Negara (BTN), have cooperated with Go-Pay, a payment system provided by ride-hailing firm Go-Jek, to disburse credit to drivers and Go-Food partners.
Budi Gandasoebrata, chief compliance officer at Go-Pay, said the company is currently discussing the matter with both state-owned and private banks.
Fintech Lending Surge
According to the Financial Services Authority (OJK), fintech lending companies have disbursed Rp 7.64 trillion ($516 million) in loans as of June, following the release of a regulation in 2016 on borrowing services through fintech firms.
"We're very optimistic that fintech's opportunity to channel loans particularly to micro, small and medium enterprises will be bigger in the future as loans to this segment now only make up 7 percent of total credit in Indonesia," OJK deputy commissioner Sukarela Batunanggar said.
Micro, small and medium enterprises find it hard to obtain loans as banks generally associate them with high risk, he said. According to Bank Indonesia, loan growth has dropped to below 10 percent over the past two years, compared with more than 20 percent previously.
According to the International Finance Corporation, the World Bank's financing arm, the private sector and micro, small and medium enterprises need funding of $166 billion, or about 19 percent of the country's gross domestic product.
There are currently 63 fintech firms registered at the OJK, which oversees more than 200,000 lenders and 1.85 million borrowers.
OJK deputy chairman Nurhaida said the regulator will release regulation on digital financial innovation and establish a fintech center this month "to facilitate and ensure that fintechs become more transparent."