T

he Financial Services Authority (OJK) is planning for more banks to join its campaign to provide financial services without physical branches to boost wider access to banks across the country.

The OJK'€™s branchless banking program, dubbed Laku Pandai, offers banking and financial services to all residents through the help of other parties, such as individual and institutional agents, supported by cell phones and IT facilities.

The program is based on the National Strategy of Financial Inclusion (SNKI) launched by the government in June 2012 to help increase financial access in Indonesia, where only 20 percent of the country'€™s 250 million citizens have access to banks.

'€œWe hope that the number of participants will increase in 2016, including small banks and regional development lenders,'€ OJK chairman Muliaman D. Hadad said recently.

From the program'€™s launch in March 2015, four large banks '€” Bank Rakyat Indonesia (BRI), Bank Mandiri, Bank Central Asia (BCA) and Bank Tabungan Pensiunan Nasional (BTPN) '€” had already signed up as program participants, followed by state-owned Bank Tabungan Negara (BTN) and Bank Negara Indonesia (BNI) in May and September, respectively.

Recently, the OJK decided to expand the Laku Pandai program and allowed Bank Kaltim and BRI Syariah to join as well, respectively becoming the first regional development bank (BPD) and Islamic lender to participate in the program.

The participating banks have implemented the program in accordance with their own strategies and innovations, including the use digital access, so that they can penetrate farther, and at a lower cost, into remote areas and distant islands where access to financial services is difficult.

The 24,865 branchless banking agents of the eight participants collected third-party funds worth Rp 41.3 billion (US$2.98 million) from 1.09 million new customers nationwide, OJK data shows.

With more participants joining, the OJK expects that there will be at least 300,000 branchless banking agents in 2016.

Muliaman said the currently participating banks were only eight of a total 17 lenders that had planned to join Laku Pandai in 2015, but that the remaining nine needed to continue improving several aspects of their businesses before being able to join the program in 2016.

'€œThe OJK needs to ensure that the prospective participants have adequate IT, human capital and risk management systems to support the program,'€ he said.

Muliaman said banks wishing to participate in the Laku Pandai could build partnerships with financial technology (fintech) startups that offer innovative banking payment solutions via smartphones and computers.

For regional development banks, Muliaman said the OJK would push them to increase awareness of the program among stakeholders in their respective regions and encourage regional administrations to motivate lenders to meet the requirements for inclusion in the Laku Pandai program.

OJK deputy commissioner for banking supervision Irwan Lubis said the financial regulator had just given permission to two private lenders, Bank Bukopin and Bank Sinarmas, to launch their Laku Pandai programs in Central Sulawesi and Central Java, in early 2016.

The OJK expects that at least three other Islamic banks, namely Bank Syariah Mandiri, BNI Syariah and Bank Muamalat Indonesia, will be ready to join the program in 2016.

'€œWe will also allow rural banks [BPR] to join the program, but only for those with Rp 50 billion in capital. Some of them have already shown interest, especially the big ones in Bandung, West Java and Lampung, South Sumatra,'€ he said.