Following Bank Indonesia's (BI) decision to revise its electronic money regulation, major lenders are now preparing to venture into the new frontier of branchless banking, with an aim to reach those underserved by banks.
Bank Rakyat Indonesia (BRI), known for its extensive network coverage, plans to employ around 5,000 agents this year alone to implement e-services, officially called 'Digital Financial Services' (LKD).
According to BRI president director Sofyan Basyir, the state-owned lender had submitted its LKD plan and time frame to BI and expected to get the central bank's approval soon.
Djarot Kusumayakti, BRI director for micro-, small- and medium-enterprise businesses, said that the 5,000 agents would be its own debtors. According to its latest financial report, BRI had 6.7 million micro-loan customers as of March.
'We want to implement this service simultaneously in all the regions where we operate. As soon as we get approval, we will provide each agent with a registration number, so that people can check their legitimacy,' he said recently.
BI's revised regulation stipulates only banks that fall under the BUKU IV category, with minimum core capital of Rp 30 trillion (US$2.6 billion), can use digital financial services. Besides BRI, three other banks qualify: Bank Mandiri, Bank Central Asia (BCA) and Bank Negara Indonesia (BNI).
The regulation also states that the participating lenders must cooperate with 'agents' to extend their network. The agents may be in the form of business entities or individuals, with the latter required to have their own business and to have run it for at least two years.
BI's director of the financial access development department, Eny Panggabean, said that the LKD was expected to provide instant financial access to more than 190 million people across the country.
'The LKD will enable people to carry out financial transactions with their cell phones. If things go smoothly, we hope this will reduce financial inequality,' Eny said.
Indonesia's population is currently around 240 million, but data from the World Bank reveal that only 20 percent of the population (above the age of 15 years old) has an account with a formal financial institution.
The figure is in a stark contrast to telecommunications data, which show that there are some 236 million cell phones in use in the country.
Meanwhile, BRI has high hopes that its LKD will achieve similar success to the one it reported during an LKD pilot project initiated by BI last May.
BRI carried out the pilot project in Banyuwangi, East Java, and Kebumen, Central Java. It employed 11 agents, handling an average 200 transactions each per day. When the project concluded in November, it claimed to have collected Rp 61.94 million in deposits.
Mandiri, CIMB Niaga, Bank Tabungan Pensiunan Nasional (BTPN) and Bank Sinar Harapan Bali took part in a similar iteration of the BI pilot project, serving some 1,000 customers in Cirebon and Indramayu in West Java and Ogan Ilir in South Sumatra.
Mandiri micro and retail banking head Hery Gunardi said the bank sought to attract a higher number of homemakers, small-scale vendors and low-paid labors with the new program.
'The potential is there. If we can serve half of those not using banks, with an average deposit size of
Rp 1 million each, we will see a big improvement in financial inclusion,' he said.
Separately, Suwignyo Budiman, a BCA director in charge of retail and commercial business, said that the private lender was preparing to take part in the LKD.
BCA currently runs its e-money service via a card-based platform and needs to develop a server-based platform to allow it to launch its own branchless banking activities in rural areas.
'We have not submitted our plan to the central bank, nor have we decided on future LKD coverage because our priority is still on establishing the server-based platform,' he said, adding that the new platform was expected to be ready this year.