Millions of unbanked Indonesians are going to enjoy easier access to the savings, loan and insurance services on the back of the government's renewed political will to tackle financial exclusion. (Antara Photo/Rivan Awal Lingga)

Indonesia on Track to Greater Financial Inclusion


MARCH 31, 2017

Jakarta. Millions of unbanked Indonesians are going to enjoy easier access to the savings, loan and insurance services on the back of the government's renewed political will to tackle financial exclusion, an executive at Bill and Melinda Gates Foundation said.

President Joko "Jokowi" Widodo's seeks to grant access to financial services to 75 percent of Indonesian adults by 2019, up from 36 percent in 2014.

Jokowi has introduced a national strategy to promote financial inclusion through education, public financing facilities, supportive regulations and consumer protection. The strategy brings together Bank Indonesia (BI) and the Financial Services Authority (OJK).

"There is a renewed political will, therefore, we are here to bring back all the information to the table so that we can reassess our strategy," the foundation's program officer for the Financial Services for the Poor, Elisa Sitbon, said on Thursday (23/03).

"We think if Indonesia is able to assemble right now all this [data] into a coherent vision that aligns all the ministries and all the concerned parties, then you can reach the target by 2019 and that's very exciting," she added.

During her visit to Jakarta last week, Sitbon talked to the Jakarta Globe about the foundation's upcoming projects in Indonesia.

Since the past five years, Bill and Melinda Gates Foundation has been working alongside BI, OJK and other local partners, including financial service consultant MicroSave, to find the best ways to provide financial access to the poor. It has so far given $6.5 million in grants for various studies and workshops.

According to Sitbon, the foundation is preparing a new financial inclusion program, which will be tailored to the latest developments in the country. It also sees a possibility to increase its funding.

"We don't have a strict timeline, but I imagine we will have a decision within a month or so," Sitbon said.

Indonesia has been an interesting case for the foundation, she added, as a country where mobile phones are common, while bank accounts are considered unpractical by many, as banks are not even available in remote areas.

According to the World Bank's Global Findex Database, in 2014 only 36 percent of adults in Indonesia's population of about 250 million had bank accounts. In the same period, the number of subscriptions to cellular networks reached 325.6 million.

The OJK's branchless financial service, locally known as Laku Pandai, has been trying to address this challenge by allowing individuals and shops to act as a bank agents, providing simple financial products to micro customers.

Despite the effort, smaller banks and non-bank financial services could not participate in the program as current regulations bar them from using small, unregistered shops as agents. Once the regulation is amended, Sitbon said, huge opportunities will be unlocked.

"You need to be able to reach farmers and fishermen in very small rural areas and that's not easy for banks, because it doesn't make sense in financial terms to go that far for such a small amount of money," she said.

According to data from the OJK, as of December there were 275,916 agents across the country, representing 18 commercial banks and two sharia-based lenders — an improvement from only 84,374 agents of nine commercial banks a year earlier.

"We think that Indonesia, like no other country in Asia, has the potential to reap the benefit of digital economy," Sitbon said.

Melinda Gates herself visited Jakarta last week and met with the president.

After the meeting, Gates said she has learned many things during her visit and is eager to adopt Indonesian programs for eradicating poverty in other countries, reported.