Many Indonesians, especially those living in rural areas, remain unbanked or have yet to become part of financial inclusion.

Being unbanked means not having access to financial products and services such as transactions, payments, savings accounts, credit and insurance.

Data shows that unbanked citizens account for an estimated 66 percent of the country’s 275 million population.

Given the large number of people with no financial accounts, breakthrough efforts must aim for greater financial inclusion. It has been proven that financial inclusion can help the poor and most vulnerable in society break out of poverty, reduce inequality, develop entire communities and drive economic growth.

One of the breakthrough ways is by utilizing financial technology (fintech) to expand financial inclusion to reach unbanked people, with a grassroots approach.

Experts say fintech aims to compete with traditional financial methods in the delivery of financial services. It is an emerging industry that uses technology to improve activities in finance.

At its core, fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes and lives by utilizing specialized software and algorithms that are used on computers and, increasingly, smartphones.

Indonesian technology company Grab, one of the biggest names looking to make a mark in the segment, is engaged in expanding financial inclusion by adopting a grassroots strategy.

“When we expanded into the fintech space in 2017, we started by acquiring an online-to-offline business, Kudo or now known as GrabKios. At the beginning, we are focusing on empowering traditional mom-and-pops stalls or known as warung by enabling them to purchase the goods for their stalls via the app and also provide various digital products,” says Grab Indonesia’s financial technology strategy director, Anandhita Kasetra,

“Our goal now is to empower our agent network to bring financial services to every Indonesian in every corner of the country. It’s an exciting space with unexplored opportunities, especially since according to OJK [Financial Services Authority], 51 percent of the adult population in Indonesia does not have a financial account.”

Empowering traditional sellers, helping the unbanked

Under the grassroots strategy, Grab empowers traditional sellers and helps the unbanked gain access to financial products and services. In implementing the strategy, Grab has found that this is a mammoth challenge, given that technological and financial literacy rates are relatively low and basic infrastructure for internet connectivity is lacking, particularly in rural areas.

For Grab, the solution lies in an open ecosystem approach, and a grassroots strategy that leverages a ubiquitous fixture in Indonesian society – warungs (kiosks) found in every neighborhood of Indonesia.

“We have realized that as a vast archipelago with a huge population, user preferences of Indonesian are fundamentally different from location, socioeconomic, and background,” he explains.

“The best way we can serve our customers and encourage adoption of financial products is by making sure we make what they need easily available to our users, at the point when they need it. That’s why we emphasize an open ecosystem approach, working with partners to bring the best products to our consumers that are best suited to their needs,” he adds.

Cooperatives and Small-and-Medium Enterprises (SMEs) Minister Teten Masduki stated that there are 3.5 million traditional warungs in Indonesia, making it an ideal catalyst to drive financial services.

“One very tangible way of bringing financial services to the masses - is by putting them within physical reach of every Indonesian,” continues Anan. “And in Indonesia, almost everyone is within walkable distance to a warung.”

“Today, millions of GrabKios agents available in more than 500 cities across Indonesia are helping the unbanked and underbanked society in Indonesia to access financial services. It’s available in their neighborhood, and also local markets. They can enjoy the services anytime, at their convenience,” Anan said.

GrabKios enables traditional warung owners and also individuals to offer digital and financial services to their community, including remittance to all banks in Indonesia, electricity and insurance (BPJS) payment, phone credit top up, bill payment, gold savings and insurance protection products to customers that they can purchase via the preferred agents.

Sugiyati, 50, has taken advantage of this.

She equipped her grocery store with the ability to extend financial and digital products to her customers by becoming a GrabKios agent in Jayapura.

“With GrabKios, I have been able to sell digital products, including phone credit top-up and digital financial transactions such as remittance to my customers. This service helps more customers, most of whom are sellers at the Abepura Old Market. They can directly transfer money from their daily income easier without having to go to a bank, which is quite far from the market,” she told The Jakarta Post.

Financial inclusion for driver-partners

As Grab pushes forward on its financial inclusion mission, it is also paying special attention to its own driver-partners.

Tenggara and CSIS Research in 2020 also found that being a part of the Grab ecosystem improves partners’ access to financial services. As many as 19 percent of GrabBike and 12 percent of GrabCar driver-partners opened their very first bank account when they joined Grab. More importantly, earning opportunities offered by Grab have enabled many of them to start saving money on a regular basis.

Specifically, 75 percent of GrabBike partners and 69 percent of GrabCar partners now regularly save money in the bank, with average savings of Rp 890,000 and Rp 1.4 million a month respectively.

In addition, 46 percent of GrabBike partners, 34 percent of GrabCar partners and 50 percent of GrabFood partners reported that they had better and easier access to lending after joining Grab, as financial institutions trust them more. This gives them the means to take loans to further grow their business or invest in new motorcycles or cars.

Since 2018, Grab has rolled out microloans, insurance protection, and other financial services that are tailored to the unique needs and circumstances of its driver-partners.

“By understanding our driver-partners’ historical earnings and driving patterns, we are able to offer suitable financing options that are more accessible for them. Based on the financing products we have extended, which many of our partners use to tide through unexpected healthcare needs or education payments, we estimate that 1 in 4 of the recipients would have been turned down by traditional banks because they didn’t meet the minimum income threshold. Many more would have been turned down given the complex documentation required,” said Anan.

A focus on inclusivity

According to Anan, financial and digital inclusion are broad challenges that affect millions of Indonesians. “But for certain segments of the community, like the differently abled, the challenge is twofold,” he said.

In December 2020, Grab formed a partnership with the Communications and Information Ministry and the Indonesian Inclusive Connections Community (Konekin).

This program opens opportunities for persons with disabilities to receive a series of training to equip them to be able to find income opportunities as GrabKios agent partners.

“The COVID-19 pandemic has been hard on everyone, but it can be especially challenging for those with disabilities, who may have already faced stigma in finding job opportunities even before the pandemic,” Anan said.

“The program is part of our commitment to create a more inclusive platform. With GrabKios, we hope that many differently abled people will be able to find business opportunities so that they can #TerusUsaha [find possibilities] and survive amid the pandemic through digitalization.

Gilang Rizky Hendrayana, a blind GrabKios Agent Partner, is excited about his prospects. “Never in my life I imagined that I would be able to take advantage of the digital platform. Let alone joining a training. This gives me opportunity and hope that a blind person like me can do so much more in life," he told The Jakarta Post.

It’s just the beginning

Looking ahead, Anan feels strongly that Grab is just at the cusp of its financial inclusion mission.

“We are proud of what we have accomplished, but we realize that we still have responsibility to do more. The importance of collaboration to achieve financial inclusion in the country motivates us to invest in LinkAja and we will continue to work closely with our partners including OVO and other companies to help move the needle in a meaningful way,” Anan added.

One financial inclusion challenge that the company has already started to make inroads on is low insurance ownership, with insurance penetration (total premiums/GDP) at just nearly 3 percent. More than 80 percent of Indonesians live on less than US$ 4.50 per day, with regular insurance products unaffordable to many.

"We will continue to create innovative digital financial services solutions that are accessible and affordable to every Indonesian. Given the current climate, it’s so important for Indonesian society to be better insured,” Anan said.

Last September, Grab introduced the Hospital Cash Cover product, which provides a lump sum payment per day for hospitalization, between Rp 150,000 and Rp 250,000 per day. Premiums start from an affordable Rp 9,900 / month (will depend on ages and chosen plan) with a total benefit of Rp 29 million coverage.

Earlier this month, Grab also launched Community Cover, its first critical illness insurance product, in partnership with PFI Mega Life. Users will pay a monthly premium to be covered for 36 Critical illnesses including cancer, heart disease and stroke, in which a lump sum up to Rp 100 million will be paid out when they are diagnosed. Community Cover has several innovative features, including a premium structure that is not fixed. Users pay a competitive premium of Rp 20,000/month to be part of the program, but with a cashback component, they can be rewarded with monthly discounts depending on the number of participants in the program and the number of claims in the prior month.

That said, Grab’s work is hardly complete. Improving the quality of life for Indonesians means continuously iterating its products and checking in with customers on what can be done better.

“We regularly ask agents and customers about their experience on our platform and their evolving pain points,” Anan says.

“As living conditions change, needs change, too. We intend to focus on our GrabForGood mission of ensuring everyone can benefit in this digital-first era by improving our financial solutions and making Indonesians’ lives better.”

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