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Trail blazing for digital financial inclusion
Most Indonesians still lack access to financial services, meaning that they do not have bank accounts and lack opportunity to engage in broader economic activities. According to the World Bank Global Findex in 2017, the unbanked population was about 50 percent. Therefore, there is still much to do.
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Most Indonesians still lack access to financial services, meaning that they do not have bank accounts and lack opportunity to engage in broader economic activities. According to the World Bank Global Findex in 2017, the unbanked population was about 50 percent. (JP/R. Berto Wedhatama)
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ndonesia has made significant progress in financial inclusion over the last five years. In 2017, the World Bank reported Indonesia had the biggest account ownership increase in the East and Asia Pacific Region between 2014 and 2017, up from 36 to 49 percent. Additionally, the second national survey on financial literacy and inclusion conducted by the Financial Services Authority (OJK) in 2016 revealed that the financial inclusion indexes stood at 67.82 percent. That is about 8 percent higher than in 2013.
However, most Indonesians still lack access to financial services, meaning that they do not have bank accounts and lack opportunity to engage in broader economic activities. According to the World Bank Global Findex in 2017, the unbanked population was about 50 percent. Therefore, there is still much to do.
Last month, the National Council for Financial Inclusion hosted the Indonesia Financial Inclusion Forum 2019 to review progress in financial inclusion and to take progressive action. Government representatives, international experts and industry players discussed a wide range of policy options for financial inclusion, highlighting the needs to be met and analyzing the unique opportunities and challenges.
All of the speakers were actively involved in financial inclusion issues and were thus able to provide the audience with key insights and experience. I learned a lot from this great opportunity. Here are my key three takeaways from the inspiring forum. These fronts may determine if the technology can deliver on its potential to serve the unbanked segment.
First, promoting regulation to create a level playing field for banks and nonbank financial institutions. Financial technology (fintech) has grown in recent years. The number of members in Indonesia’s fintech association has increased from six to over 250 members in the last three years.
The association also reported that were more than 30 million fintech electronic money users and over 6.9 million digital credit borrowers in 2019. Fintech holds particular promise to accelerate financial inclusion but we need to promote a more inclusive regulatory environment.
For instance, nonbank financial institutions like digital finance services and other e-money providers — such as LinkAja, Gopay and OVO — are at a disadvantage in providing electronic money as they are unable to use individual agents or non-registered business as agents, unlike banks.
