T

he Financial Services Authority (OJK) is preparing a regulation on branchless banking, expecting to significantly boost access to finance in a country where only a quarter of its more than 240 million people has access to banks.

That'€™s in stark contrast to mobile phone penetration, since on average every Indonesian owns one or two cell phones.

The high use of mobile phones is what the OJK wants to take advantage of through the upcoming regulation, according to the regulator'€™s banking research and regulation department head Gandjar Mustika.

Under the regulation, domestic banks would be able to provide basic banking services to a higher number of Indonesians, especially low-income people in remote places, by partnering with local agents.

'€œEach bank participating in the Laku Pandai [the name of OJK'€™s branchless banking program] will appoint its own agents, who will assist people with the three basic products,'€ he said on Tuesday.

The products would consist of savings accounts, micro loans and micro insurance and they would all be provided from the agent'€™s premise, he added.

The OJK, according to Gandjar, is optimistic that the Laku Pandai will be able to generate up to Rp 200 trillion (US$16.9 billion) in savings within the next five years.

To reach the target, it plans on widening the scope of banks that can join the program to include lenders under the BUKU II, III and IV categories.

BUKU II banks are those with core capital of between Rp 1 trillion and Rp 5 trillion, while BUKU III banks hold from Rp 5 trillion to Rp 30 trillion in capital. BUKU IV lenders, on the other hand, have core capital exceeding Rp 30 trillion.

'€œTalks and discussions are ongoing and we hope to issue the regulation by the end of the year,'€ Gandjar said.

The Laku Pandai program is expected to go hand in hand with a similar program promoted by Bank Indonesia (BI), dubbed '€œDigital Financial Services'€ (LKD), which also employs agents in the form of institutions or individuals. In the LKD program, however, only BUKU IV banks participate.

Executives at the nation'€™s major banks have expressed interest in joining the OJK'€™s branchless banking program.

OCBC NISP president director Parwati Surjaudaja said that the bank would first facilitate low-income people to acquire savings accounts before providing micro loans or micro insurance.

'€œWe are designing the product as we speak. We want to apply for the program'€™s license once the regulation officially comes out,'€ she said in a telephone interview. OCBC NISP would focus on West Java in the initial stage of the program.

Separately, Rita Mas '€˜Oen, CIMB operations and information technology director, said that it would utilize its '€œRekening Ponsel'€ platform to help the lender venture into the Laku Pandai. As of now, the platform is being used to enable banking transactions and payments by its customers.