Transcript Slide 1
FINANCIAL INCLUSION AND MSME PROGRAMS IN INDONESIA
Pungky P. Wibowo Director Department of MSME and Financial Access Development Bank Indonesia APEC 37 th Meeting SMEs Working Group 2013
OUTLINE
Access to Finance Condition in Indonesia Financial Inclusion and MSME Program Collaboration and Strategic Partnership
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FACTS OF INDONESIA
World Bank (2011) :
There is only 20% of Indonesian adults have owns account balance in formal financial institution
High income OECD & non OECD 92% Middle East & North Africa 42% Central Asia & Eastern Europe 50% East Asia & Pacific 42% Indonesia
Malaysia Philippines Thailand Vietnam India China Russia Brazil
19.6%
66.7% 26.5% 77.7% 21.4% 35.2% 63.8% 48.2% 55.9%
Sub-Saharan Africa 12% Latin America & Caribbean 40% South Asia 22% INDONESIA 20% 3
• • • •
Indonesia has a huge economic potential and large market for financial services
• More than 13,000 islands Population: + 234 million 1) GDP Growth 2012: 6.23% yoy 2) GDP per capita Dec 2012: USD 3.051
2) Banking industry covers ± 75.8% of assets in financial sector Source: 1) BPS, 2010; 2) BPS, 2012 Sourcer: Worldbank, Global Financial Inclusion Index , 2011
Market Share of Indonesia Financial System by Total Assets
2,80% 10,10% 1,20% 0,10% 0,10% 6,10% 3,30% 0,50% 75,80% Commerical Bank Rural Banks Insurance Company Pension Funds Multifinance Companies Venture Capital Securities Company Mutual Fund Pawn Broker (Dec'11) Source: Bank Indonesia and Bapepam-LK, 2012
NUMBER OF FINANCIAL INSTITUTION
Commercial Banks 120 Rural Banks 1.653
Insurance Companies 1397 Pension Funds 269 Multifinance Companies 200 Venture Capital 89 Securities Companies 754 Credit Guarantee Company 6 Pawn Broker 1
INDONESIAN POVERTY CHARACTERISTIC
There is a huge gap in poverty level disparity between provinces in Indonesia (Jakarta = 4%, Papua = 31%, Indonesia = 12 %) 4
35,00 30,00 25,00 20,00 15,00 10,00 5,00 0,00 BIG GAP Source : BPS, 2012
LEVEL OF ACCESS TO FINANCIAL SERVICES
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• • More than 50 per cent of Indonesia household have no access to bank financial services Less than 20 per cent of Indonesia poor household have access to bank financial services Source : Improving Access to Financial Services in Indonesia, World Bank, 2010
THE ROLE OF MSME IN INDONESIAN ECONOMY
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MSME are the back bone of Indonesia’s economy but they get only a small portion of banks’ financing MSME play a crucial role in Indonesia’s economy:
MSME are dominating the business units with share up to 99,9% of total business units.
MSME absorbs around 97,2% of total labor force.
MSME contributes around 59.1% to the GDP.
Job Creations MSME, 97.2% Contribution to GDP MSME, 59.1% Large Scale, 40.9% Large Scale, 2.8%
The trend of MSME Credit
The Medium Scale Enterprise loan dominates the MSME Credit (49,73%) The growth of MSME Credit around 15,39% (yoy) and around 10,83% (yod) Source: MSME Statistics 2012, Ministry Cooperatives and MSME Source: Bank Indonesia, June 2013
CONSTRAINT OF POOR HOUSEHOLD AND MSME
Innovation is needed to address the constraint of financial inclusiveness…
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SUPPLY SIDE
Asymmetric information Transaction cost vs Profit Gained Service and Product are not fully fit to the need of people High Technology for effective the distibution channel Regulation and Policy for effective access to finance DEMAND SIDE Limited financial capability, education, experience and psychological factors Limited skills and capability in doing business Formal identity problem
OUTLINE
Access to Finance Condition in Indonesia Financial Inclusion and MSME Program Collaboration and Strategic Partnership
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FINANCIAL INCLUSION FRAMEWORK
9 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
Target Groups Equitable Income Distribution Poverty reduction Productive and high purchasing power society Easy access to financial system Financial System Stability
Very Poor Migrant Employee Group and People in Remote Areas Working Poor/ Productive Near Poor Non - Poor
Strategy
Financial Education
6 Pillars of Financial Inclusion
Public Financial Facility Mapping on Financial Information Supporting Regulation/ Policy Intermediary/ Distribution Facility Customer Protection
BALANCING POLICY FOR FINANCIAL INCLUSIVE & PRUDENT OPERATION
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Inclusive
1. Simplicity; 2. Customized; 3. Flexible Indonesia Policy
Prudent
1. Equal Treatment; 2. Procedural; 3. Standards; 4. Compliance based;
FINANCIAL INCLUSION AND MSME PROGRAMS
11 FINANCIAL INCLUSION AND MSME Strategy Program
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Education (poor household & MSME)
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National Campaign
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Research and Diagnostic
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Gov’t Credit Programs
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G2P channel
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Financial Identity Number (FIN)
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MSME information system
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Multilicensing Provision of Credit / Financing by Commercial Bank and Technical Assistance for MSME development Branchless banking
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TabunganKu Branchless banking “Start-Up” Credit Land Certification MSME Rating Credit Bureau Micro Insurance
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Banking Mediation
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Product Transperancy
Survey Financial Literacy
Research & Diagnostic Financial Education Branchless Banking
G2P transaction eg. Disbursement of social program Bank Led/Telco Led Hand Phone number
Price Information As account number of no frill
account “
TabunganKu”
TabunganKu/ basic saving account
database
Financial Identity Number
Financial Inclusion Information System Customer profil data
Credit Rating Micro credit
Progress of Financial Inclusion Program: What have we done so far?
Financial Education TabunganKu/ Basic saving account 2009 Let’s Go to The Bank Financial Identity Number Branchless Banking Start-up credit System Information of Financial Inclusive (SIFI) 2010 2011 2012 2013 Blueprint of Financial Education National Campaign
“
Let’s Go to the Bank
”
TabunganKu Indonesia Saving Movement (Gerakan Indonesia Menabung)
Intensive campaign of GIM Financial Literacy Survey
Baseline and Comprehensive Survey
FIN Information System Development
2014 Research on Branchless Banking Development Guiding Principle for Branchless Banking Pilot Project Pilot Project Development of financing scheme and financing generic model Tailoring Strategy for SIFI
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PROGRESS OF FINANCIAL INCLUSION PROGRAM
Program & Target Financial Education
a. Student (elementary, junior high/equal, senior high/equal, university) b. Migrant worker • •
Goal
to enhance financial education to input financial education to national curriculum • To enhance financial education c. Certain society group including migrant worker
Financial Identity Number (FIN)
• General society, especially unbanked people.
To enhance financial education.
Provide the database of unbanked people , that can be accessed by financial institution to bridge the an asymmetric information.
TabunganKu / Basic Account Progress
Integrate financial education into National Curriculum for Senior High School in 2013 Assessment to integrate financial education into basic curriculum of worker training.
Preparation of material and financial education plan.
• • FIN Database development : Baseline survey : 400.000 data Comprehensive survey : 600 data
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General society & student To broaden the financial services access for society through “no frill account” product
Champaign : Indonesia Saving Movement
General society & Student As an effort to increase society awareness to saving TabunganKu June 2013: 3,93 millions accounts in the amount of Rp4,31 trillions Bank Indonesia, sent an appeal letter to all banking sectors to support the Saving day (Hari Rajin Menabung)
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PROGRESS OF FINANCIAL INCLUSION PROGRAM
Program & Target Branchless Banking Goal Progress
Remote area society & Unbanked people Enhance financial service access using technology instead of physical bank.
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• Branchless Banking Pilot project Participant : 5 banks and 3 telecommunication companies • Conducted in 8 provinces in Indonesia.
Development of supporting regulations for Branchless Banking.
Credit for beginner (Start-up credit)
Beginner entrepreneur Developing financing scheme for beginner entrepreneur
System Information of Financial Inclusive (SIFI)
Development of Financing Scheme General Society • • • Tailoring financial inclusive policy and regulation.
As a base for decision making Database study material.
Tailoring Strategy of SIFI
OUTLINE
Access to Finance Condition in Indonesia Financial Inclusion and MSME Program Collaboration and Strategic Partnership
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COLLABORATION AND STRATEGIC PARTNERSHIP IN NATIONAL AND REGIONAL ECONOMIC DEVELOPMENT
• Endorsement & constitution supports Policy Regulation Bank Indonesia / OJK DPR / DPD Related Ministry • • Championship Sector Sectoral fostering and development Banking Association
National Economic
Education institution
Regional Economic
• • Capacity Building Infrastructure Synergy • Rural Banks development • Finance Infrastructure: PPKD Regional Government Regional Banks and BPD / BPR • Main player and regional host • Pioneer of Decreasing Micro Interest Rate Capacity Building Regional Office of Bank Indonesia • Mapping leading sector & regional creative industry • Business model development.
WAY FORWARD
• • • In order to improve access to finance services, particularly for the unbanked people, Indonesia recognising: The importance of combating financial illiteracy that can increase financial capability and assist the effectiveness of financial inclusion through financial education; The importance of innovative delivery channel (namely branchless banking and Financial Identity Number (FIN)) in order to increase access and to broaden the outreach financial services for unbanked people; The importance of a strong collaboration and coordianation among the parties involved to achieve synergy and avoiding redundancy for efficiency and effectiveness because financial inclusion is an ongoing process.
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