Indonesia, the fourth most populous nation in the world after China (1,368 billion), India (1,260 billion) and the United States (319 million), is expected to see its population grow to 252.2 million people in 2014.

Around 67.2 percent or 169.5 million people in the country are of productive age, meaning that Indonesia is currently experiencing a period of demographic bonus. A demographic bonus is a dividend enjoyed by a country as a result of the proportion of people in the productive age group (15-64 years old) being very high, as part of the country'€™s population evolution. For that reason, the government should be able to take proper advantage of the opportunities that this demographic bonus offers.

The National Development Planning Agency (Bappenas) predicts that the country'€™s population will reach 306 million people by 2035. A higher population followed by a lower dependency ratio '€” from 48.9 percent in 2014 to 47.3 percent in 2035.

Low dependency ratio occurs when the number of people within the productive age bracket is higher than the number of elderly people and children. As such, the government needs to optimize human resources to boost Indonesia'€™s economic growth and competitiveness going forward. The high number of productive citizens also constitutes both a source of labor and a potential customer base for businesses in the country.

The government and young people have to start preparing now. Otherwise, they will lose the chance to enjoy the demographic bonus. According to National Population and Family Planning Board (BKKBN) data in 2013, there were 114 million workers in Indonesia, 86.5 percent of whom were unskilled; 9.7 percent were lightly skilled; 8 percent were trained, and only 3.8 percent were skilled. A majority of productive-aged people would only increase the government'€™s burden if they are not provided with adequate job opportunities and skill-development programs.

On the other hand, this high number of productive age people could act as agents of social change, economic growth, as well as technological innovation. It has been widely acknowledged that a nation'€™s level of competitiveness lies with its human resources, as opposed to its natural resources. This is understood because a country cannot rely largely on unsustainable commodities, which sooner or later will run out. As such, the government needs to support ongoing and also create new innovative programs that aim to take advantage of the demographic bonus by promoting entrepreneurship.

However, the danger is that the relatively rapid growth of Indonesia'€™s population could also have a negative effect on Indonesia'€™s workforce. This could happen if the growth in the country'€™s job market is not commensurate with the growth of its population. In addition, the threat of competition for jobs from citizens of other countries as a result of an open market might make finding employment difficult. These scenarios present an additional reason as to why the demographic bonus ought to be exploited by improving the quality of Indonesia'€™s human resources.

As such, the provision of employment opportunities matching with the number of people of productive age is something that must be strived for. A lack of job opportunities is one of the main obstacles to the alleviation of poverty in Indonesia. Conversely, an increase in the number of employment opportunities will have a positive impact on the per capita income of the Indonesian public. To this end, effort should be made to expand the number of entrepreneurs in Indonesia. This must be backed by providing easy access to the banking sector, especially in terms of funding. In short, the demographic bonus must be prepared from now so that Indonesians of productive age have the capacity to increase productivity and, in doing so, improve the national economy.

On the other hand, World Bank Survey in 2010 found that only 49 percent of households in Indonesia had access to formal financial institutions. This coincides with the findings of Bank Indonesia in its Survey of Household Balance Sheets in 2011, which revealed that the percentage of households in Indonesia that save funds in financial institutions and non-financial institutions stood at 48 percent. These similarly low figures are the result of low-income levels, complicated banking procedures, a lack of education on finance and banking, high bank administration fees as well as long distances from people'€™s homes to bank branches.

Various challenges still exist in improving the entrepreneurial spirit of Indonesian society. Entrepreneurship among the public starts with the establishment of microenterprises. The very large number of microenterprises in Indonesia requires coordination between all relevant parties to reach out to all of them. The government said that the number of micro-entrepreneurs in the country stood at 55,856 people or 98.79 percent of the total number of businesspeople in Indonesia in 2012. Nevertheless, the contribution of micro-enterprises to the economy remains relatively small even though, in terms of numbers and labor absorption, these kinds of businesses are hugely dominant.

With the establishment of the Financial Services Authority (OJK), financial literacy in the country is expected to improve. The OJK also bears the responsibility of educating people to become more financially literate. A recent survey conducted by the OJK on 8,000 respondents revealed that over 75 percent of Indonesians have insufficient literacy when it comes to financial products and services.

This survey also revealed that around 57.3 percent of the respondents had utilized banking services. However, only 21.8 percent of the total 57.3 percent actually understood bank products and services, while 78.2 percent of the respondents were unaware of most of the products offered by banking institutions. Therefore, the OJK will provide a banking education program intended to educate housewives on banking products and services.

Financial literacy can be defined as knowledge and understanding of money and finances and the ability to confidently apply that knowledge and understanding to make effective financial decisions. The changes in Indonesian society and the growing range of financial products and services have increased the importance of having sound financial literacy skills. Improved financial literacy can boost economic participation and social inclusion, drive competition and market efficiency in the financial services sector, as well contribute to the economic health of society.

In the future, it is hoped that the demographic bonus being enjoyed by Indonesia can be directed in such a way as to support it in becoming highly competitive and lifting itself up from a lower-middle income country to an upper-middle income country. In light of this, the demographic bonus presently being experienced by Indonesia needs to be utilized even more effectively.

These goals can be attained with the full support of the government, for non-poor people, micro-enterprises are very important because they are large in number and have the potential to develop rapidly. Nevertheless, micro-enterprises are very vulnerable and if not empowered can increase the poverty rate, which will further burden the government. In light of this, these enterprises need to be supported and empowered through appropriate policy so as to evolve into small enterprises, which later might transform into medium enterprises. As such, microfinance has been likewise seen as one of the tools to combat financial exclusion and conversely promote financial inclusion.

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The writer is a financial analyst at Bank Mandiri

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