D

espite their dominance in the country'€™s retail sector, most traditional retailers are financially illiterate, with many not having a bank account, according to a survey conducted by the International Finance Corporation (IFC).

IFC research shows of the country'€™s traditional retailers, which generate about US$137 billion sales annually, 31 percent are financially literate and have had a bank account.

About 31 percent of respondents who did not have bank accounts said their transactions were conducted using cash, another 21 percent said there was no bank nearby their house, while another 20 percent said they did not like queuing in banks. The survey was conducted by the World Bank'€™s private sector financing arm.

The research suggests the country'€™s traditional retailers are immune to fast-growing e-money transactions, as only 1 percent of respondents are using e-payment services with suppliers, despite another 39 percent saying they are interested in digital transactions.

The study was conducted in Indonesia'€™s major cities, with 800 traditional retailers as respondents.

Ivan Mortimer-Schutts, IFC East Asia and Pacific regional advisor for payments and retail banking, said on Tuesday the survey showed a large gap between traditional and modern retailers '€” most of which had adopted an electronic payment system to conduct transactions with suppliers.

Mortimer-Schutts said traditional retailers did not have an integrated digital supply chain, ensuring effective and efficient trading and neatly organized information required to obtain loans from lenders.

'€œOften the real incentives come from large operations from distributors that they work with, encouraging them to receive and purchase invoices electronically. Small retailers don'€™t have access to the right services they need,'€ he said.

The survey suggested only 8 percent of respondents had access to loans, despite another 40 percent expressing their interest in securing credit from banks.

Mortimer-Schutts said there was a big opportunity to entice traditional retailers, as 87 respondents owned cell phones and half of the respondents owned personal computers or laptops.

The biggest challenge came from current e-payment services, where transactions were still limited to the same service providers, while traditional retailers were working with many distributors that could use different services.

'€œMost banking industries are moving toward enabling paying instruments issued by one provider to be compatible with other providers,'€ he said.

Anastassiya Marina, IFC Indonesia program manager of access to finance advisory services, said IFC would assist financial service providers and the government to formulate a common standard to introduce small and traditional retailers to digitally-based payments.

Marina said IFC would kick off discussions with banking and other local e-money providers early next year, and expected to have a pilot project in place by the end of next year.

She declined to provide details of providers agreeing to join the initiative, or how many retailers would be included, saying the figure would be decided as talks with stakeholders progressed.

The initiative would simply formulate a common standard and include traditional retailers in the electronic payment system and would not push a new regulation, with the result expected to generate helpful information for the government.