The Jakarta Post
The newly launched branchless banking regulation will enable banks to expand their financial services to disadvantaged and low-income segments at affordable costs, a senior official of the Financial Services Authority (OJK) has said.
OJK deputy commissioner on banking supervision Mulya Effendi Siregar said its branchless banking program ' called 'Laku Pandai' ' would provide an incentive for banks wanting to expand their financial inclusion, financial services given to disadvantaged and low-income people.
'They will be able to reach out to new customers easily because they don't have to open up physical branches anymore. That's what we offer to the banks,' he said on the sidelines of the OJK's International Seminar on Financial Literacy for Women and Small and Medium Enterprises (SMEs), held on Tuesday.
Physical branches would require a significant amount of funds that would eventually increase the banks' operational costs, he said. 'With Laku Pandai, they just have to select and appoint agents to carry out basic banking services. Of course, that will reduce costs,' he said.
The Laku Pandai regulation was introduced last week, along with several other rules formulated by the financial superbody.
Under Laku Pandai, banks ' along with other financial services firms such as insurance companies ' will be allowed to recruit individual and legal entities as agents to provide basic financial products,
namely micro-saving, loans and insurance for unbanked and underbanked people.
The OJK sets several criteria for individuals that are looking to become agents. Some of the criteria requires them to reside in a Laku Pandai area, have their own income source for at least two years and must pass a due diligence process carried out by the bank.
Meanwhile, according to the regulation, a basic saving account is defined as an account with a maximum balance of Rp 20 million (US$1,643) and a maximum monthly cash withdrawal or transfer of Rp 5 million.
The account is free of a monthly fee and its holder is entitled to interest with a balance starting from Rp 1.
A micro loan, on the other hand, is defined as a loan with one year in a maximum maturity period and
Rp 20 million in a maximum loan value. The loan interest rate cannot exceed the rates offered by banks at present.
Data from Bank Indonesia (BI) shows that micro loan rates ranged between 6.15 and 22.56 percent as of September. However, a lender may have its own micro loan criteria that differs from other banks.
The OJK would soon issue a circular to follow up the regulations and lenders could participate in the program as early as January 2015, Mulya said.
OJK commissioner for education and consumer protection Kusumaningtuti S. Soetiono said Laku Pandai could hopefully change the behavior of micro businesspeople as most of them still relied on other sources for financing.
According to the OJK's 2014 survey on micro, small and medium enterprises (MSMEs), 26.4 percent of the enterprises opted to borrow from others when they lacked money, while only 7 percent of them went to the bank to borrow money.
'A lack of access to proper banking services was one of the main reasons behind the survey's results, whereas 49 percent of our GDP [gross domestic product] is generated by MSMEs,' she said.
Meanwhile, lenders Bank Central Asia (BCA) and Bank Mandiri expressed their interests in getting on board with the Laku Pandai program.
BCA individual banking director Henry Koenaifi said that the private lender was currently developing an information technology system to support the branchless banking services, adding that it hoped to submit a permit application to the OJK in early next year.
Rico Usthavia Frans, Mandiri senior executive vice president for transaction banking, said that it would eventually join Laku Pandai in the next one or two years. In the meantime, he said, it would focus on developing agent network for its electronic money platform.
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