Background

Policy & Strategy

1

2

Challenges

4 Achievement

3

The Way Forward

5

01

The Level of Banking Services

Source : WEF, Redefining the Emerging Market Opportunity, 2012

5

• Percentage of poor people (rural & urban), Sep 2013 • Poor people: people who have an average expenditure/income per GDP/ month under poverty

line • Poverty line under US$25.9/GDP/month (Sept 2012)

Indonesia’s Bank Branch Distribution and

Percentage of poor people in the population

sumber: Bank Indonesia, BPS, 2012

17.7

31.5

6.4

14.3

3.7

4.5

Source: Bank Indonesia, BPS, Sept 2013

Percentage of household have saving account based on the type

of institution

Saver’s Financial Inclusion

Source: World Bank, 2011

Source: Household Balance Sheet Survey- BI, 2011

Save 48%

Don’t save 52%

74%

5%

3%

2%

5% 6% 5%

Saving only in Bank

Saving only in Non-Bank Financial Institution (NBFI)

Saving only in Non-Financial Institution (NFI)

Saving in Bank & NBFI

Saving in Bank & NFI

Saving in NBFI & NFI

Saving in Bank, NBFI, NFI

Based on World Bank Survey, 68% of Indonesian households are financially

included (do saving)

Based on Bank Indonesia’s survey, 48% of Indonesian household already saving their money. Majority of them, saved only in Bank (74%)

Percentage of household borrowing based on the source of financing

Borrower’s Financial Inclusion

Source: World Bank, 2011

Source: Household Balance Sheet Survey- BI, 2011

Borrow 45%

Can’t Borrow 55%

23%

17%

30%

6%

11%

9%

4% Borrow only from Bank

Borrow only from Non-Bank Financial Institution (NBFI)

Borrow only from Non-Financial Institution (NFI)

Borrow from Bank & NBFI

Borrow from Bank & NFI

Borrow from NBFI & NFI

Borrow from Bank, NBFI, NFI

Based on World Bank Survey, 60% of Indonesian households are financially

included (have credit)

Based on Bank Indonesia’s survey, 45% of Indonesian household have access to credit. Majority of them, borrow only from Non Financial Institution (30%)

International Concern

• Many countries have made efforts to improve access to financial services

• Financial inclusion become a concern in international fora, among others:

AFI – Maya Declaration

G20 – Global Partnership on Financial Inclusion

APEC – Financial Inclusion Initiative

OECD – International Network for Financial Education

ASEAN – Financial Inclusion Initiative

• More comprehensive way through national strategy on financial inclusion

*) source: Ros Grady, Asia-Pacific Economic Co-operation, “Accelerating Financial Inclusion in Asia and the Pacific: An Operational Dialogue on Innovative Financial Inclusion Policies”, Hawaii, 15 September, 2011

ASIA ASIA

Cambodia Indonesia Laos Nepal Pakistan Phillipines Vietnam Malaysia

AFRICA AFRICA

Benin Burkina Faso Cameroon Congo Ethiopia Gambia Liberia Madagascar

Mali Malawi Mauritania Mozambique Nigeria Rwanda Sierra Leone Senegal

South Africa Tanzania Togo Uganda Zimbabwe Côte d'Ivoire

Kyrgyz Republic Russia Uzbekistan

Egypt Jordan Syria Yemen

EUROPE & CENTRAL ASIA EUROPE & CENTRAL ASIA

MIDDLE EAST MIDDLE EAST

02

Before 1999

Developmental Role

1999 - 2013

Promotional Role 2014 - ...

New Bank Indonesia

Background Background :

• Financial market have not fully evolved yet.

• The development of priority sectors needs financial support.

• Monetary policy instruments directly affects the economy liquidity.

Legal basis:

Legal basis:

Central Bank Act No. 13/1968

Background :

Background :

• The need of financial market deepening.

• Monetary policy instrument has little impact on the economy with abundant liquidity.

Legal

No.3/2004

Legal basis:

Central Bank Act No. 23/1999 revised to Central Bank’s Act No.3/2004

Background

Background :

Role of Bank Indonesia after the establishment of OJK :

• the development of

financial access and MSMEs Framework;

• Inflation stabilization from the supply side & supporting inclusive economic growth.

Instruments :

• Technical Assistance

Instruments :

• Providing liquidity credits (financial assistance)

• Regulation of Quota on Lending to micro and small enterprises.

• Regulation for Sectoral Credit • Technical Assistance

InInstruments :

• Technical Assistance • Regulation • Strategic Partnership

1010

Regulation Before & after year 2000

InInstruments :

• Technical Assistance • Regulation • Strategic Partnership

Legal

No.3/2004

Legal basis:

Central Bank Act No. 23/1999 revised to Central Bank’s Act No.3/2004

Indonesia National Strategy for Financial Inclusion

Intermediary/

Distribution

Facility

Supporting

Regulation/

Policy

Mapping on

Financial

Information

Public

Financial

Facility

Financial Institution

(Bank & Non Bank)

• Banking mediation

• Product transparency

• TabunganKu • Digital Financial

Services • “start-up” credit • land certification

• Multilicensing • Digital Financial

Services • “Start-up” credit

• Education (for example: migrant worker, student)

• National Campaign

• Financial Identity Number (FIN)

• Credit Rating

Poverty reduction Financial System Financial System

Stability Equitable Income Equitable Income

Distribution

Productive and high purchasing power society & Easy access to financial system

Program

Strategy

Channel

6 Pillars of Financial Inclusion

Customer

Protection

Target Groups

Financial

Education

Public Financial

• Subsidy • Fiscal

Incentives • Social

welfare program

Financial

Product/Services

• Saving

• Credit

• Insurance

• Remittance

• Pension Fund

• Mutual Fund, dll

Migrant Employee Group and People in Remote Areas Migrant Employee Group and People in Remote Areas

Very Poor Very Poor Working poor/

Productive Non - Poor

• PKH • Jamkesmas • BLT • Bansos

Resilience

Intermediation

Efficiency

Government

Main

Goal

To reach economic welfare through poverty reduction, distribution income, and financial system stability in

Indonesia by creating financial system that can be accessed by whole people in this country

Financial Inclusion Programs by Bank Indonesia

Digital Financial Digital Financial Services

Mobile phone Number

Mobile phone Number

Mobile Phone Number linked with E-Money and Account Number

Financial Identity Number

Customer Data Profile

Website & Financial Inclusion Information System

Bank Led

Database Development

Agriculture Price Information

(SMS)

Financial Education

E-KTP

• Very poor, • Near poor, • Poor

G2P G2P

Electronic Money/ Electronic Money/ TabunganKu/

basic saving account

Digital Financial Services by Bank Indonesia

240 juta pengguna

telepon genggam

2 juta agen & retailer

telco

12,5 juta mobile money

diterbitkan

240 million user of mobile phone

2 million agent &

retailer of telcos

12,5 juta mobile money issued

Implementation of Digital Financial Services will be made possible and will enlarge access to financial and payment services for urban and rural areas

Partnership Program Between BI and related ministries

List of Regional Champion

Product

Lending

Model Cluster

Training/

Assistance

/Promotion

Bank &

MSME

financing

institution

MSME

Business

Development

Service Provider

Policy

Setting

MSME

Profile

Database

New

Entrepreneurs

Training

Regional Credit Guarantee Agency

MSMEs’ credit MSMEs’ credit

rating Land

Certificate

Livestock

Insurance 1414

MSME programs by Bank Indonesia

15

Sumber : Data BPS (diolah)

Distribution of BI’s Cluster Development1) for Food Security Commodity

1) Clusters are geographic concentrations of interconnected companies, specialized suppliers, service providers, and associated institutions in a particular field that are present in a nation or region. Cluster development initiatives are an important new direction in economic policy, building on earlier efforts in macroeconomic stabilization, privatization, market opening, and reducing the costs of doing business (Delgado M, Porter ME, Stern S, 2011)

16

Collaboration And Strategic Partnership

Banking Association

Related Ministries

Parliament Bank

Indonesia HQ / FSA

International

International/Domestic

Organization Regional

Government

Regional

Indonesia

Regional Office of

Bank Indonesia

Banking system

• Policy • Regulation

• Policy • Regulation • Surveillance

• Synergy of FI program • In charge to conduct FI

programs in region

•Regional Policy & Regulation • Synergy Program

•Regulation • Synergy of

Infrastructure and program

• Synergy infrastucture

•Endorsement & constitution supports

National Economic

Regional Economic

•Research, development, and training

03 ACHIEVEMENTACHIEVEMENT

1818

NUMBER OF BANK BRANCH OFFICE & ATM

The number of bank branches and ATMs increased every year.

The number of bank branches in January 2014 reached 35.931 offices, and 76,348 ATMs.

1. ACCESS DIMENSION

Source : Bank Reports, LPBR BI-OJK, January 2014 (analyzed)

Bank Office Growth Bank Office

Bank Office/Unit Percentage

19

NUMBER OF ACCOUNT (GIRO, SAVING, TIME DEPOSIT)

2. USAGE DIMENSION

Savings accounts still dominate banks’ total deposit (95.7% in January 2014).

The dominance of this savings account continues to increase gradually every year (94.4% in 2010 to 95.7% in January 2014).

Number of Account (Giro, Saving, & Time Deposit)

Saving Time Deposit

March 2013 June 2013 December

2013

January

2013

September

2013

2020 Source: TabunganKu Report from 74 Bank, February 2014

In January 2014, the number of TabunganKu (as basic saving account) reached 9.2 million accounts. This increases more than 1 million since December 2013.

2. USAGE DIMENSION

1,138,452

2,177,230 3,635,619

8,127,031

9,222,191

933,945 1,128,241 1,084,226 936,283

890,094

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

The growth of The growth of TabunganKu’sTabunganKu’s Account Account and The and The average balanceaverage balance

Number of Account

Average Balance

Dec'10 Dec'11 Dec'12 Dec'13 Jan'14

2121

Source: Monitoring report, Bank Indonesia, Dec 2013

From the pilot project of digital financial services (previously called Branchless Banking) we learned a very positive responses from society in the rural areas in term of financial and payment services. During the pilot project the frequency of transaction through agent banking increased significantly. Hence, BI prepared to launch regulation to accomodate society needs.

2. USAGE DIMENSION

The graphics display significant increases of financial and payment transaction digital financial services through agent. Its also shows that the frequent transaction through

agent is cash deposit and followed by payment transaction.

4% 23%

51% 60% 67%

47% 45%

6%

6%

6%

10% 8%

10% 9%

30%

50%

37% 19% 13%

9% 7%

60%

21% 6% 11% 12%

35% 39%

0%

20%

40%

60%

80%

100%

May'13 June'13 July'13 Aug'13 Sept'13 Oct'13 Nov'13

Precentage of Financial and Payment Transaction's Frequency

Cash deposit Withdrawl Transfer Payment

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

May'13 June'13 July'13 Aug'13 Sept'13 Oct'13 Nov'13

Fre

qu

ency

Frequency of Financial & Payment Services

Banks’ MSME outstanding loan in

December 2013 reached Rp608,8

trillion. Most of the credits was

disbursed to the middle enterprises

(49,9%).

2222

MSME outstanding loan based on Region

Source : Bank Reports, January 2014

20,7%

57.2%

7,2% 7,4%

2,3%

5,0%

Based on Region, MSME credit disbursement are

still focus in Java and Bali (62,0%)

MSME Credit GrowthMSME Credit Growth

Middle-sized Enterprises

Micro-sized Enterprises

MSME Credit Share (rhs)

Small-sized Enterprises

Growth MSME Credit –yoy (rhs)

Currently Indonesia is developing financial inclusion index (national and regional), which content usage

and access dimension based on international theory or practices.

04

• Demographic and geographic condition of Indonesia are the main challenges for financial inclusion program.

• Sharing role on some financial inclusion programs among institutions need collaboration and coordination effort effectively and efficiently.

• High level of financial illiteracy caused people hard to accept the new technology and innovation of financial services.

• Change the people way of life from traditional view to use formal financial services and its products.

05

1 1

2 2

3 3

The importance of improving financial literacy that can increase financial capability through financial

The importance of improving financial literacy that can increase financial capability and assist the effectiveness of financial inclusion through financial education.

The importance of innovative delivery channel and new technology in order the

The importance of innovative delivery channel and new technology in order to increase access and to broaden the outreach financial services for the unbanked people

The importance of a strong collaboration and coordination among the parties efficiency and improving Digital

The importance of a strong collaboration and coordination among the parties involved to achieve synergy and avoiding redundancy for efficiency and effectiveness, ie Education program, implementing and improving Digital Financial Services

In order to improve access to finance services, particularly for the unbanked people, Indonesia recognising: In order to improve access to finance services, particularly for the unbanked people, Indonesia recognising:

The

The importance of social-reenginering to change people way of life.

4 4