Indonesia reaches out to unbanked

Dylan Amirio and Grace D. Amianti

The Jakarta Post

Despite holding the accolade of being Southeast Asia’s largest economy, Indonesia continues to face the basic problem of low financial literacy, but now the government wants to change that.

Husnul Asikin tended his stall located amid the beautiful rolling tea fields of Puncak in West Java. The 33-year-old sells refreshments from herbal cigarettes to coffee, and tea picked fresh from the highlands not far above.

However, unlike at other such stalls, people can save their money at Asikin’s place, a service made available by his status as a BTPN Wow! agent.

One of Asikin’s regular customers, 43-year-old tea seller Susanti, said she had been saving money for her eldest son’s education, depositing between Rp 3,000 (23 US cents) and Rp 200,000 per visit.

Asikin said that before he became an agent for 139 customers in and around his area, people living there had never really used bank services and those who did had to travel several kilometers to the nearest bank branch to conduct even the simplest transaction.

The services offered by Asikin are part of a larger effort called the Laku Pandai program initiated by the Financial Services Authority (OJK) in March 2015 to reach out to the unbanked and unbankable by recruiting laypersons as banking agents and offering simple, basic services.

As many as 13 banks have registered in the program. They comprise private and state-owned lenders, conventional and sharia banks, and regional development banks, including Bank Tabungan Pensiunan Nasional (BTPN).

By June, the program had already enrolled more than 104,000 agents and managed 1.63 million savings accounts, worth Rp 63 billion.

However, that is not enough as the OJK is seeking to launch a National Savings Movement. The campaign will be officially launched by President Joko “Jokowi” Widodo on Oct. 31.

OJK head of banking supervision Teguh Supangkat said the campaign was expected to raise awareness about banking and improve financial literacy in Indonesia, where only 36 percent of adults have bank accounts, according to the World Bank’s 2014 Global Findex database.

This figure is actually a significant improvement from the 20 percent in 2011, but only 22 percent of the poorest population in the country has access to bank accounts, the data show.

The OJK has set a rather ambitious target for the Laku Pandai program, with the nationwide total of savings forecast to reach Rp 2.6 trillion by the end of this year and a total of 27 banks participating in the program.

Teguh acknowledged various challenges faced by both the regulator and banks in publicizing Laku Pandai given the vastness of the archipelago, with so many islands isolated from banking access.

The geographical challenge was especially highlighted by the Asian Development Bank Institute in its “Financial Inclusion in Asia” report, published in 2014.

“The geographic diversity and mass population pose natural obstacles to financial inclusion. The remote location of small islands and the limited banking potential of their inhabitants discourage banks from reaching out and providing financial services,” it said.

In addition to banks, the efforts to improve financial literacy are also being carried out by other financial institutions, including life insurer Prudential Indonesia through its Cha-Ching program.

It has been conducting the program since 2012 and visits schools to teach students the basic concepts of earning and saving money.

Separately, economists have welcomed the upcoming National Savings Movement.

Samuel Asset Management economist Lana Soelistianingsih suggested the campaign should target senior high school students as they were mature enough to know that they should start saving money for their future needs.

People who live in villages should also be the government’s concern. “They should be informed that money for saving should be allocated once they receive their wages,” she said.

Enny Sri Hartati, the Institute for Development of Economics and Finance (Indef) executive director, said the government needed to diversify efforts in a bid to reach a greater proportion of the population currently without access to banks. (wnd/fac)