Financial inclusion is an important component of poverty alleviation. It is about increasing access to financial services, especially for the working poor, who typically rely on irregular, low-paid work in the informal economy.
In Indonesia, 36 percent of the population has a bank account and just 13 percent have borrowed from banks, compared with East Asia and the Pacific where the rate is 69 percent.
The working poor tend to access credit informally through pawn brokers and money lenders who can charge exorbitant interest rates as high at 10 percent per day. Added to this, they don’t have insurance that can provide a buffer against shocks or pensions that help give long-term security. They often lack financial literacy allowing them to plan or expand their enterprise to give them a real chance of climbing out of poverty.
Expanding access to financial services e...