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Jakarta Post

Branchless banking introduced for poor households

  • Satria Sambijantoro

    The Jakarta Post

Jakarta   /   Thu, October 9, 2014   /  09:51 am

Bank Indonesia (BI) officially launched on Wednesday an electronic payment system to support the transfer of government direct cash assistance to poor families in several provinces in the country.

The cash transfer program is expected to initially involve 1,860 low-income households in Jakarta, West Java, East Java and Nusa Tenggara.

State-run lenders Bank Mandiri and Bank Rakyat Indonesia (BRI) will be involved in the infrastructure of the new electronic banking mechanism, which was jointly designed by BI, the Finance Ministry, the Social Affairs Ministry, the National Team for Accelerating Poverty Reduction (TNP2K) and the National Procurement Agency (LKPP).

Under the mechanism, low-income households will be able to access their funds by texting Bank Mandiri and BRI mobile banking lines.

The households will then receive an identification number that they can use to access cash by showing the number to the banks'€™ registered agents in their neighborhood.

'€œThis national economic model will open the door for millions of poor households to social assistance through access to the formal financial sector as part of the national financial inclusion program,'€ BI Deputy Governor Ronald Waas said Wednesday in Koja, North Jakarta, which hosts a pilot project for the trials.

If the program is successful, then it could be used to support government programs such as the channeling of social funds, such as direct cash assistance (BLSM) as compensation for fuel price increases, Ronald said.

The BI executive added that the new branchless banking mechanism could also be utilized for the programs of president-elect Joko '€œJokowi'€ Widodo, such as smart cards or health cards, which ensure affordable education and health facilities for low-income households.

'€œThe main aim of this program is financial inclusion, as we hope that all Indonesian citizens, even schoolchildren, can have bank accounts,'€ Ronald said, adding that financial inclusivity played a role in ensuring stability in the local financial system.

A 2010 survey conducted by the World Bank revealed that only 49 percent of Indonesian households have access to formal financial institutions, with the remaining people still relying on conventional methods to stash and spend their money.

'€œCases in other countries have proven that the broadening of financial services and other banking facilities contribute to the reduction of poverty and inequality levels,'€ said Rahma Iryanti, the deputy for poverty, manpower and small and medium enterprises affairs at the National Development Planning Board (Bappenas).

However, locals interviewed by The Jakarta Post complained that the mobile banking mechanism provided by Bank Mandiri and BRI was too complicated, with some expressing a desire to use manual cash transfers provided by state-owned postal company PT Pos Indonesia instead.

'€œThis is a poor area where the citizens are not that smart in dealing with complicated banking facilities, so I guess it will take a very long time before this program can be utilized by many people here,'€ said Ratna, a 42-year-old housewife living in Koja.

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