In Indonesia, the unbanked population, or people who do not have bank accounts, is still very large. The Financial Inclusion Index (Global FIndex) for 2014 shows that only 36 percent of adults in Indonesia have bank accounts, which means there are approximately 120 million adults categorized as unbanked.

Despite this, unbanked communities cannot be seen merely as a condition resulting from poverty. Unbanked communities in a number of coastal areas in Indonesia are instead relatively prosperous as they live at the center of economic activity in which money cycles through the community quickly and reliably from the fishing industry.

Analysis of the financial potential of these unbanked communities in the fishing industry, as released by Bank Indonesia last year, shows that personal income of coastal communities was between Rp 300,000 (US$22.46) and Rp 11.4 million in Demak regency, Central Java, and Rp 200,000 and Rp 4 million per month in North Gorontalo regency, Gorontalo.

In comparison, average monthly incomes of unbanked communities ranged from Rp 532,000 to Rp 8.4 million in Demak and from Rp 521,000 to Rp 1.2 million in North Gorontalo.

It must, however, be acknowledged that the level of financial literacy in Indonesia, especially among lower socio-economic groups, is still low. In addition to social factors, geographical obstacles have also become huge challenges in connecting the lowest socio-economic communities with the financial sector.

Financial service providers are burdened with the high expense and complicated nature of establishing banking facilities, including branches, in rural areas.

On the other hand, the expense of accessing services and completing paperwork requirements, as well as a lack of education, hamper the access of rural communities to banking services.

In fact, there are many communities that are still unable to enjoy the most basic of banking services, such as borrowing and saving money.

According the 2016 Survey for National Financial Inclusion and Literacy Survey, the national financial literacy index increased from 21.8 percent in 2013 to 29.7 percent in 2016 while the national financial inclusion index went from 59.7 percent to 67.8 percent. Despite there being an upward trend, these figures remain the lowest compared to four major Southeast Asian economies, namely Singapore, Malaysia, Thailand and the Philippines.

The Financial Services Authority (OJK) is optimistic that the index for national financial inclusion will increase to 75 percent by 2019. Through a support program that has been prepared by the government, it is hoped that financial literacy and inclusion will increase at a faster rate. The government has already achieved a number of breakthroughs. The introduction of the Laku Pandai program, for example, has started to yield social and financial benefits, despite there still being a long way to go to achieve the ultimate goal of full financial inclusion.

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Electronic wallets

In contrast to the rate of bank account possession, 132.7 million Indonesians are already connected to the internet, according to the Indonesian Internet Providers Association (APJII). Of the figure, 92.8 million users access the internet through mobile devices. In short, many Indonesians have not used electronic banking despite having access to the internet and technology.

This data indicates the great opportunity for financial technology (fintech) to eliminate obstacles to financial inclusion faced by conventional financial services. The geographical problem, for example, can be solved with the use of cellular phone networks, which now serve 99 percent of Indonesia’s area.

One of the most interesting examples of fintech innovation are the electronic wallet applications that are offered by e-money license holders in the country. The DOKU e-wallet, for example, provides convenience for a community to open an account that is connected to various other available financial services.

Users can start by loading DOKU e-wallet credit in minimart outlets that can be found throughout Indonesia.

They can then make routine monthly payments, shop at the store, transfer money to multiple bank accounts, receive funds and invest, all on a smartphone, whenever and wherever.

Among other e-wallet services are private lender Bank Central Asia’s Sakuku and telecommunications operators Telkomsel’s T-Cash and Indosat Ooredoo’s Dompetku.

Indonesia can reflect on the achievements of M-Pesa, which was successful in assisting millions of people in rural Kenya to easily conduct various types of financial transactions, such as money transfers and payment for clean water and agricultural produce.

The key to this solution is convenience. The fintech industry must continue to develop new innovations that can provide financial services and products that are suitable for the needs and circumstances of the Indonesian community to close the gap of economic disparities in Indonesia.

No less important, fintech players and other stakeholders in the economy must share a single vision, that people from all socioeconomic groups have the right to access basic financial services. Financial inclusion is a pathway leading toward opportunity for a higher standard of living.

When a community is financially literate and supported by sufficient financial services and proper consumer protection, there are greater opportunities for Indonesia to create prosperity and economic equality.