Financial Inclusion Development Policy in Indonesia Banking Research and Regulation Department
Outline • The Financial Inclusion Background 1 • The Financial Inclusion Policy Framework 2 • The Financial Inclusion Implementation Program 3
BACKGROUND : HIGHER UNBANKED Higher Unbanked • Financial Inclusion Index Adult has account in formal financial sector Central Asia & Eastern Middle East & Europe High income North Africa 50% OECD and non- 42% OECD East Asia & 92% Pacific 42% South Asia INDONESIA INDONESIA 19.6% 22% 19,6% Sub-Saharan Africa MALAYSIA 66.7% 12% PHILIPINA 26.5% THAILAND 77.7% VIETNAM 21.4% Latin America and INDIA 35.2% Caribbean 40% CHINA 63.8% RUSIA 48.2% BRAZIL 55.9% Source : Worldbank, Global Financial Inclusion Index 2011
Access to the Financial Institutions 20% Adult population who has account at Bank. (World Bank Survey-2011) Access to the Financial Institution is still LOW 48% Household that has saving account at Bank, Financial Institution and Non Financial Institution (BI Household Balance Sheet Survey-2011)
Financial Sector • The financial sector is highly concentrated – Dominated by banks (most profitable, with low levels of intermediation). – Growing capital markets, but are still concentrated. – Penetration of Pension funds, insurance, and other Non Bank Financial Institution is still low. • “More inclusive Indonesia” is a policy objective for the country – Less than 50% of the population has access to banking services. – Less than one-fifth borrows from the bank. – Access to risk management is quite low. (pension fund, insurance) ..... Plenty still has limited means to smooth consumption. • Access to financial products and services is a way to achieve just, developed, properous and sustainable Indonesia. • A National strategy is needed to continue, develop, coordinate financial inclusion programs by the key performance indicator, responsibility and strong commitment.
Indonesian Financial Institution Condition Market Share of Indonesian Financial System by Total Assets, as of Dec 2011 NUMBER OF FINANCIAL INSTITUTION 3.36% 0.88% Commercial Banks 0.06% 120 Commercial Banks 0.06% 0.42% 6.01% 1.669 Rural Banks Rural Banks 2.92% 139 Insurance Companies Insurance Companies 9.75% 270 Pension Funds Pension Funds 1.15% 194 Multifinance Companies Multifinance Companies Venture Capital 86 Venture Capital 75.38% Securities Companies 129 Securities Companies 639 Mutual Funds Mutual Funds Credit Guarantee Company 4 Credit Guarantee Company Pawn Broker 1 Pawn Broker Source: BI and Related Ministries
Banking Services Distribution Economic Banking Financial Criteria Low access to banking financial services growth Services in East Indonesia. (Loan and Saving) High High Underbanked High access to banking financial services High Low Low equlibrium banked in Java and Bali Low Low Middle equlibrium banked Low High Overbanked 1 Source: SEKDA-Bank Indonesia and Statistic Indonesia 2011, data Low High Overbanked 2 (Jawa, Bali) processed, Low Very High Overbanked 3 (DKI Jakarta)
Outline • The Financial Inclusion Background 1 • The Financial Inclusion Policy Framework 2 • The Financial Inclusion Implementation Program 3
Financial Inclusion Strategy The Strategies are designed with the consideration of appropriateness that will support the following three components: Robust and appropriate Targeted to Poverty regulation & Financial poor people Reduction customer protection Stability Economic Growth Encourage local economic development
Financial Inclusion Framework To reach economic welfare through poverty reduction, income distribution, and financial system stability in Main : Indonesia by creating financial system accessible for the entire people in this country Goal Poverty Financial System Equitable Income reduction Stability Distribution Productive society with purchasing power Easy access to financial system Migrant Employee Group and People in Remote Areas Target Working Groups Very Poor poor/ Near Poor Non - Poor Productive Financial Resilience Public Finance Product/Services Intermediation • Subsidy Efficiency • Saving • Fiscal Incentives • Credit • Social welfare Channel • Insurance program Government Financial Institution • Remittance • cash transfer (BLT) (Bank & Non Bank) • Pension Fund • Jamkesmas, etc • Mutual Fund, etc 6 Pillars of Financial Inclusion Mapping Intermediary/ Public Supporting Strategy Customer Financial of Distribution Finance Regulation/ Protection Education Financial Policy Facility Facility Information • Banking customer mediation • Financial Identity • Education (migrant • Multilicensing • PKH Program • Product transparency Number (FIN) • branchless banking worker, people • Jamkesmas • Credit Rating student) • “Start - up” credit • BLT • National Campaign • Bansos
National Strategy Supporting Graduation Migrant worker groups and society groups in remote Areas Pillars and Targets Very Poor Productive Poor Near Poor Non-Poor TabunganKu Financial Education for Society (students, TKI, and public) Financial Campaign to increase the culture of saving Education Financial Literacy Survey Mini website (spesific for customer information and education) Social assistance, in the form of Family Hope Program (PKH), School Operational Assistance (BOS), Community Health Insurance (Jamkesmas), and the Rice Subsidy (Raskin): Increase the funding accessibility for society Improve the availability of basic needs at affordable prices Reduce the expenses for basic needs of the poor Empowering society through increased society participation in development activities Empowerment of Micro and Small Enterprises: Provision of SME Credit Guarantee Scheme, including KUR Public Finance Provision of Revolving Fund for Productive Activities in Micro Scale Facility Empowerment of Economic, Social, and Cultural for Entrepreneur of Fisheries and Coastal Communities Rural Agroindustry Development Development of Transmigration Area and Integrated Independent City National Program for Society Empowerment (PNPM): Family and Poverty Empowerment Through Improved Business Skills Urban Poverty Reduction (Urban PNPM) Improved Society Empowerment and Rural PNPM Rural Infrastructure Development Acceleration Rural Agribusiness Development (PUAP) Accelerated Development for Remote Area Financial Identity Number Financial Credit Rating Agency for MSMEs Information Credit Information Bureau Mapping MSMEs Database
National Strategy Supporting Graduation Migrant worker groups and society groups in remote Areas Pillars and Targets Very Poor Productive Poor Near Poor No Poor Policy/ Regulatory Branchless Banking Policy Support Land certification Mobile Financial Services Remittance Operations (KUPU) Branchless Banking Regional Credit Guarantee Board(LPKD) Intermediation facilities & Start up credit Distribution APEX Bank Linkage Program Program of economic clusters Financial Consultant Partner Bank Program Lending Model dan Baseline Economic Survey Product Transparancy Special unit handling customer complaints Customers Protection Banking Customer Mediation Customer Education
Outline • The Financial Inclusion Background 1 • The Financial Inclusion Policy Framework 2 • The Financial Inclusion Implementation Program 3
Financial Inclusion Implementation Program 2012 2013 • Education for Students • Education for Students Financial education be a part of curriculum Financial education be a part of curriculum Financial for elementary, junior high, senior high school for elementary, junior high, senior high school Education in some pilot project schools in West Java Madrasah schools • Education for TKI • Education for TKI Financial education for TKI and be based on Give financial education for TKI TKI training modules • National Campaign • National Campaign Saving day campaign supporting banking Optimize the national campaign industry • Financial Literacy Survey • Survey Financial literacy Do in 5 areas Do the survey results Financial Identity Number (FIN) Financial Identity Number (FIN) Mapping of • Data collection for unbanked people • Data collection for unbanked people through a comprehensive and baseline through a comprehensive and baseline Financial survey survey • Development of FIN Information • Improvement of FIN Information Information Systems Systems Policy/ • Regulation of Multi-licensing for banks • Branchless Banking Guiding Principle Regulatory To improve the effectiveness of banking To support the implementation of branchless operation banking Support
Implementation of Financial Inclusion Program 2012 2013 • TabunganKu Intermediation • TabunganKu National campaign of TabunganKu National Campaign of TabunganKu and Survey of TabunganKu Survey of TabunganKu Distribution Facilities • Branchless Banking • Branchless Banking Finalization of Branchless Banking Implementation of Branchless Banking concept Project pilot in 8 provinces • Start-up Credit • “ Start-Up ” Credit Tailoring the generic model of “ Start- Finalization of “ Start-Up ” credit Up ” credit concept
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