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FINANCIAL INCLUSION AND
MSME PROGRAMS
IN INDONESIA
Pungky P. Wibowo
Director
Department of MSME and Financial Access Development
Bank Indonesia
APEC 37th Meeting
SMEs Working Group
2013
OUTLINE
Access to Finance Condition in
Indonesia
Financial Inclusion and MSME
Program
Collaboration and Strategic
Partnership
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FACTS OF INDONESIA
World Bank (2011) :
There is only 20% of Indonesian adults have owns account
balance in formal financial institution
Central Asia &
Eastern Europe
High income OECD & nonOECD
Middle East &
North Africa
92%
Indonesia
Malaysia
Philippines
Thailand
Vietnam
India
China
Russia
Brazil
50%
East Asia & Pacific
42%
Sub-Saharan
Africa
19.6%
66.7%
26.5%
77.7%
21.4%
35.2%
63.8%
48.2%
55.9%
12%
42%
South Asia
22%
INDONESIA
20%
Latin America & Caribbean
40%
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Indonesia has a huge economic
potential and large market for
financial services
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More than 13,000 islands
Population: + 234 million 1)
GDP Growth 2012: 6.23% yoy 2)
GDP per capita Dec 2012: USD
3.051 2)
Banking industry covers ± 75.8% of
assets in financial sector
Source: 1) BPS, 2010; 2) BPS, 2012
Sourcer: Worldbank, Global Financial Inclusion Index , 2011
Market Share of Indonesia Financial System by Total Assets
0.10%
0.10%
2.80%
6.10%
3.30%
0.50%
Commerical Bank
Rural Banks
10.10%
Insurance Company
1.20%
Pension Funds
75.80%
Multifinance Companies
Venture Capital
Securities Company
Mutual Fund
Pawn Broker (Dec'11)
Source: Bank Indonesia and Bapepam-LK, 2012
NUMBER OF
FINANCIAL INSTITUTION
120
Commercial Banks
1.653
Rural Banks
1397
Insurance Companies
269
Pension Funds
200
Multifinance Companies
89
Venture Capital
754
Securities Companies
Credit Guarantee
6
Company
1
Pawn Broker
INDONESIAN POVERTY CHARACTERISTIC
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There is a huge gap in poverty level disparity between provinces in Indonesia
(Jakarta = 4%, Papua = 31%, Indonesia = 12 %)
27.04
30.66
35.00
Poor people (%)
25.00
3.70
3.95
5.01
5.37
5.71
6.19
6.38
6.83
7.64
7.96
8.00
8.05
8.06
8.28
9.82
9.89
10.41
11.66
13.01
13.06
13.08
13.48
14.94
14.98
15.65
15.88
17.22
17.51
18.02
18.58
20.41
20.76
30.00
BIG GAP
20.00
15.00
10.00
5.00
0.00
Source : BPS, 2012
LEVEL OF ACCESS TO FINANCIAL SERVICES
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• More than 50 per cent of Indonesia household have no access to bank financial
services
• Less than 20 per cent of Indonesia poor household have access to bank financial
Source : Improving Access to Financial Services in Indonesia, World Bank, 2010
services
THE ROLE OF MSME IN INDONESIAN ECONOMY
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MSME are the back bone of Indonesia’s economy but they get only a small
portion of banks’ financing
 MSME play a crucial role in Indonesia’s
economy:
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
MSME are dominating the business units with
share up to 99,9% of total business units.
MSME absorbs around 97,2% of total labor
force.
MSME contributes around 59.1% to the GDP.
Contribution to GDP
Job Creations
MSME,
97.2%
Large Scale,
40.9%
MSME, 59.1%
Large
Scale,
2.8%
 The trend of MSME Credit

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Source: MSME Statistics 2012, Ministry Cooperatives and MSME
The Medium Scale Enterprise loan dominates the
MSME Credit (49,73%)
The growth of MSME Credit around 15,39% (yoy)
and around 10,83% (yod)
Source: Bank Indonesia, June 2013
CONSTRAINT OF POOR HOUSEHOLD AND MSME
Innovation is needed to address the constraint of financial inclusiveness…
SUPPLY SIDE
Asymmetric information
Transaction cost vs Profit Gained
Service and Product are not fully fit to the need of people
High Technology for effective the distibution channel
Regulation and Policy for effective access to finance
DEMAND SIDE
Limited financial capability, education, experience and
psychological factors
Limited skills and capability in doing business
Formal identity problem
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OUTLINE
Access to Finance Condition in
Indonesia
Financial Inclusion and MSME
Program
Collaboration and Strategic
Partnership
8
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FINANCIAL INCLUSION FRAMEWORK
Main Goal
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To reach economic welfare through poverty reduction, distribution income, and financial system
stability in Indonesia by creating financial system that can be accessed by whole people in this country
Equitable
Income
Distribution
Financial
System
Stability
Poverty
reduction
Productive and high purchasing power society
Easy access to financial system
Target Groups
Migrant Employee Group and People in Remote Areas
Very Poor
Working Poor/
Productive
Near Poor
Non - Poor
Strategy
6 Pillars of Financial Inclusion
Financial
Education
Public
Financial
Facility
Mapping on
Financial
Information
Supporting
Regulation/
Policy
Intermediary/
Distribution
Facility
Customer
Protection
BALANCING POLICY FOR
FINANCIAL INCLUSIVE & PRUDENT OPERATION
Inclusive
1. Simplicity;
2. Customized;
3. Flexible
Prudent
Indonesia Policy
1.
2.
3.
4.
Equal Treatment;
Procedural;
Standards;
Compliance based;
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FINANCIAL INCLUSION AND MSME PROGRAMS
FINANCIAL INCLUSION AND MSME
Strategy
Program
• Education
(poor
household &
MSME)
• National
Campaign
• Research and
Diagnostic
• Gov’t Credit
Programs
• G2P channel
•Financial
Identity Number
(FIN)
•MSME
information
system
• Multilicensing
• Provision of
Credit /
Financing by
Commercial
Bank and
Technical
Assistance for
MSME
development
• Branchless
banking
• TabunganKu
• Branchless
banking
• “Start-Up”
Credit
• Land
Certification
• MSME Rating
• Credit Bureau
• Micro Insurance
• Banking
Mediation
• Product
Transperancy
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Financial Education
Branchless Banking
G2P transaction
eg. Disbursement
of social program
Bank Led/Telco Led
Hand Phone number
Price
Information
As account number of no frill
account “TabunganKu”
TabunganKu/
basic saving account
Financial Inclusion
Information System
database
Survey
Financial
Literacy
Research &
Diagnostic
Financial
Identity
Number
Customer
profil data
Credit Rating
Micro
credit
Progress of Financial Inclusion Program: What have we done so far?
2009
Financial
Education
TabunganKu/
Basic saving
account
2010
2011
2012
2013
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2014
Blueprint of Financial Education
National Campaign “Let’s Go to the Bank”
TabunganKu
Indonesia Saving Movement (Gerakan Indonesia Menabung)
Intensive campaign of GIM
Let’s Go to The Bank
Financial Literacy
Survey
Financial
Identity
Number
Branchless
Banking
Baseline and Comprehensive Survey
FIN Information System Development
Research on Branchless
Banking Development
Guiding Principle for Branchless Banking Pilot Project
Pilot Project
Start-up credit
System
Information of
Financial
Inclusive (SIFI)
Development of financing scheme and financing generic model
Tailoring Strategy for SIFI
PROGRESS OF FINANCIAL INCLUSION PROGRAM
No.
1.
2.
Program &
Target
Progress
Financial Education
a. Student
(elementary, junior
high/equal, senior
high/equal, university)
• to enhance financial education
• to input financial education to
national curriculum
Integrate financial education into
National Curriculum for Senior High
School in 2013
b. Migrant worker
• To enhance financial education
Assessment to integrate financial
education into basic curriculum of
worker training.
c. Certain society group
including migrant worker
• To enhance financial education.
Preparation of material and financial
education plan.
Financial Identity Number (FIN)
General society, especially
unbanked people.
3.
Goal
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Provide the database of unbanked
people , that can be accessed by
financial institution to bridge the an
asymmetric information.
FIN Database development :
• Baseline survey : 400.000 data
• Comprehensive survey : 600 data
To broaden the financial services
access for society through “no frill
account” product
TabunganKu
June 2013: 3,93 millions accounts in
the amount of Rp4,31 trillions
TabunganKu / Basic Account
General society & student
Champaign : Indonesia Saving Movement
General society & Student
As an effort to increase society
awareness to saving
Bank Indonesia, sent an appeal letter
to all banking sectors to support the
Saving day (Hari Rajin Menabung)
PROGRESS OF FINANCIAL INCLUSION PROGRAM
No.
4.
Program &
Target
Enhance financial service access
using technology instead of physical
bank.
Branchless Banking Pilot project
• Participant :
5 banks and 3 telecommunication
companies
• Conducted in 8 provinces in
Indonesia.
Development of supporting
regulations for Branchless Banking.
Credit for beginner (Start-up credit)
Beginner entrepreneur
6.
Progress
Branchless Banking
Remote area society &
Unbanked people
5.
Goal
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Developing financing scheme for
beginner entrepreneur
Development of Financing Scheme
System Information of Financial Inclusive (SIFI)
General Society
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Tailoring financial inclusive policy
and regulation.
As a base for decision making
Database study material.
Tailoring Strategy of SIFI
OUTLINE
Access to Finance Condition in
Indonesia
Financial Inclusion and MSME
Program
Collaboration and Strategic
Partnership
16
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COLLABORATION AND STRATEGIC PARTNERSHIP
IN NATIONAL AND REGIONAL ECONOMIC DEVELOPMENT
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• Endorsement & constitution supports
• Policy
• Regulation
Bank
Indonesia /
OJK
Banking
Association
• Capacity Building
• Infrastructure
Synergy
DPR / DPD
Related
Ministry
National Economic
Regional Economic
• Championship
Sector
• Sectoral
fostering and
development
Education
institution
Capacity Building
Regional
Office of
Regional
Bank
Government
Indonesia
BPD / BPR
• Mapping leading
• Regional Banks and
sector & regional
Rural Banks
creative industry
development
• Main player and regional host
• Business model
• Finance
• Pioneer of Decreasing Micro Interest
development.
Infrastructure:
Rate
PPKD
WAY FORWARD
In order to improve access to finance services, particularly for the unbanked
people, Indonesia recognising:
• The importance of combating financial illiteracy that can increase financial
capability and assist the effectiveness of financial inclusion through
financial education;
• The importance of innovative delivery channel (namely branchless banking
and Financial Identity Number (FIN)) in order to increase access and to
broaden the outreach financial services for unbanked people;
• The importance of a strong collaboration and coordianation among the
parties involved to achieve synergy and avoiding redundancy for efficiency
and effectiveness because financial inclusion is an ongoing process.
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Thank You