apec 37 th meeting smes working group 2013 financial inclusion and msme programs in indonesia pungky...
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APEC 37th Meeting SMEs Working Group
2013
FINANCIAL INCLUSION ANDMSME PROGRAMS
IN INDONESIA
Pungky P. Wibowo
Director Department of MSME and Financial Access Development
Bank Indonesia
Access to Finance Condition in Indonesia
Financial Inclusion and MSME Program
Collaboration and Strategic Partnership
OUTLINE
1
2
3
2
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
FACTS OF INDONESIA 3
High income OECD & non-OECD
92%
Central Asia & Eastern Europe
50%East Asia & Pacific
42%
South Asia
22%
Middle East & North Africa
42%
Sub-Saharan Africa
12%
Latin America & Caribbean
40%
Sourcer: Worldbank, Global Financial Inclusion Index , 2011
Indonesia 19.6%Malaysia 66.7%Philippines 26.5%Thailand 77.7%Vietnam 21.4%India 35.2%China 63.8%Russia 48.2%Brazil 55.9%
INDONESIA
20%
World Bank (2011) : There is only 20% of Indonesian adults have owns account balance in formal financial institution
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
Source: Bank Indonesia and Bapepam-LK, 2012
75.80%
1.20%10.10%
2.80%6.10%
0.10% 0.10% 3.30% 0.50%
Market Share of Indonesia Financial System by Total Assets
Commerical BankRural BanksInsurance CompanyPension FundsMultifinance CompaniesVenture CapitalSecurities CompanyMutual FundPawn Broker (Dec'11)
There is a huge gap in poverty level disparity between provinces in Indonesia
(Jakarta = 4%, Papua = 31%, Indonesia = 12 %)
INDONESIAN POVERTY CHARACTERISTIC
Source : BPS, 2012
4
BIG GAP
DKI Jak
arta
Bali
Kalim
anta
n se
lata
n
Bangk
a Bel
itung
Bante
n
Kalim
anta
n Te
ngah
Kalim
anta
n Ti
mur
Kepul
auan
Ria
u
Sula
wesi U
tara
Kalim
anta
n Bar
at
Sum
ater
a Bar
atRia
u
Maluk
u Uta
ra
Jam
bi
Sula
wesi S
elat
an
Jawa
Barat
Sum
ater
a Uta
ra
Indo
nesia
Sula
wesi B
arat
Sula
wesi T
engg
ara
Jawa
Tim
ur
Sum
ater
a Se
lata
n
Sula
wesi T
enga
h
Jawa
Teng
ah
Lam
pung
DI Yog
yaka
rta
Goron
talo
Bengk
ulu
Nusa
Teng
gara
Bar
atAce
h
Nusa
Teng
gara
Tim
ur
Maluk
u
Papu
a Bar
at
Papu
a0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
3.70
3.95
5.01
5.37
5.71
6.19
6.38
6.83
7.64
7.96
8.00
8.05
8.06
8.28
9.82
9.89
10.41
11.66
13.01
13.06
13.08
13.48
14.94
14.98
15.65
15.88
17.22
17.51
18.02
18.58
20.41
20.76
27.04 30.66
Po
or
peo
ple
(%
)
LEVEL OF ACCESS TO FINANCIAL SERVICES 5
• 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
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)
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.
Source: MSME Statistics 2012, Ministry Cooperatives and MSME
Source: Bank Indonesia, June 2013
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MSME, 97.2%
Large Scale, 2.8%
Job Creations
MSME, 59.1%
Large Scale, 40.9%
Contribution to GDP
CONSTRAINT OF POOR HOUSEHOLD AND MSME
SUPPLY SIDE Asymmetric information Transaction cost vs Profit GainedService and Product are not fully fit to the need of people High Technology for effective the distibution channelRegulation and Policy for effective access to finance
DEMAND SIDE Limited financial capability, education, experience and psychological factors
Limited skills and capability in doing businessFormal identity problem
Innovation is needed to address the constraint of financial inclusiveness…
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Access to Finance Condition in Indonesia
Financial Inclusion and MSME Program
Collaboration and Strategic Partnership
OUTLINE
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2
3
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Main Goal
Strategy
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 GroupsMigrant Employee Group and People in Remote Areas
Very PoorWorking Poor/
Productive Near Poor Non - Poor
FINANCIAL INCLUSION FRAMEWORK 9
Poverty reduction
Financial System
Stability
Equitable Income
Distribution
Productive and high purchasing power societyEasy access to financial system
Financial Education
Intermediary/Distribution
Facility
Supporting Regulation/
Policy
Mapping on Financial
Information
Public Financial Facility
6 Pillars of Financial Inclusion
Customer Protection
BALANCING POLICY FOR FINANCIAL INCLUSIVE & PRUDENT OPERATION
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1. Simplicity; 2. Customized; 3. Flexible
1. Equal Treatment;2. Procedural; 3. Standards;4. Compliance based;
Prudent Inclusive
Indonesia Policy
FINANCIAL INCLUSION AND MSME PROGRAMS 11
• Education (poor household & MSME)•National
Campaign•Research and
Diagnostic
• Gov’t Credit Programs•G2P channel
•Financial Identity Number (FIN)•MSME information system
• Multilicensing • Provision of
Credit / Financing by Commercial Bank and Technical Assistance for MSME development• Branchless
banking
• TabunganKu• Branchless
banking • “Start-Up”
Credit• Land
Certification• MSME Rating• Credit Bureau• Micro Insurance
Strategy
Program• Banking
Mediation• Product Transperancy
FINANCIAL INCLUSION AND MSME
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Branchless Banking
Hand Phone number
As account number of no frill account “TabunganKu”
TabunganKu/ basic saving account
Financial Identity Number
Survey FinancialLiteracy
Customer profil data
Credit Rating
Financial Inclusion Information System
Micro credit
G2P transactioneg. Disbursement of social program
Bank Led/Telco Led
database
Price Information
Financial Education
Research & Diagnostic
THE CONNECTIVITY OF FINANCIAL INCLUSION & MSME PROGRAMS 12
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2009 2010 2011 2012 2013 2014
Start-up creditDevelopment of financing scheme and financing generic model
Branchless Banking
Pilot Project
Guiding Principle for Branchless Banking Pilot ProjectResearch on Branchless
Banking Development
Progress of Financial Inclusion Program: What have we done so far? 13
System Information of
Financial Inclusive (SIFI)
Tailoring Strategy for SIFI
Blueprint of Financial Education
National Campaign “Let’s Go to the Bank”
Indonesia Saving Movement (Gerakan Indonesia Menabung)
Financial Education
TabunganKu
Intensive campaign of GIM
Financial Literacy Survey
Let’s Go to The Bank
Financial Identity Number
Baseline and Comprehensive Survey
FIN Information System Development
TabunganKu/ Basic saving
account
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No.Program &
TargetGoal Progress
1. Financial Education
a. Student(elementary, junior high/equal, senior high/equal, university)
• to enhance financial education• to input financial education to
national curriculum
Integrate financial education into National Curriculum for Senior High School in 2013
b. Migrant worker • To enhance financial education Assessment to integrate financial education into basic curriculum of worker training.
c. Certain society group including migrant worker
• To enhance financial education. Preparation of material and financial education plan.
2. Financial Identity Number (FIN)
General society, especially unbanked people.
Provide the database of unbanked people , that can be accessed by financial institution to bridge the an asymmetric information.
FIN Database development :• Baseline survey : 400.000 data• Comprehensive survey : 600 data
3. TabunganKu / Basic Account
General society & student To broaden the financial services access for society through “no frill account” product
TabunganKu June 2013: 3,93 millions accounts in the amount of Rp4,31 trillions
Champaign : Indonesia Saving Movement
General society & Student As an effort to increase society awareness to saving
Bank Indonesia, sent an appeal letter to all banking sectors to support the Saving day (Hari Rajin Menabung)
PROGRESS OF FINANCIAL INCLUSION PROGRAM
PROGRESS OF FINANCIAL INCLUSION PROGRAMNo.
Program &Target
Goal Progress
4. Branchless Banking
Remote area society & Unbanked people
Enhance financial service access using technology instead of physical bank.
Branchless Banking Pilot project • Participant : 5 banks and 3 telecommunication
companies• Conducted in 8 provinces in
Indonesia.Development of supporting regulations for Branchless Banking.
5. Credit for beginner (Start-up credit)
Beginner entrepreneur Developing financing scheme for beginner entrepreneur
Development of Financing Scheme
6. System Information of Financial Inclusive (SIFI)
General Society • Tailoring financial inclusive policy and regulation.
• As a base for decision making• Database study material.
Tailoring Strategy of SIFI
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Access to Finance Condition in Indonesia
Financial Inclusion and MSME Program
Collaboration and Strategic Partnership
OUTLINE
1
2
3
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Banking Association
Bank Indonesia /
OJK
DPR / DPD
Related Ministry
Regional Government
BPD / BPR
Regional Office of
Bank Indonesia
Education institution
• Policy• Regulation
• Championship Sector
• Sectoral fostering and development
•Mapping leading sector & regional creative industry•Business model
development.
•Regional Banks and Rural Banks development•Finance
Infrastructure: PPKD
•Main player and regional host•Pioneer of Decreasing Micro Interest
Rate
•Capacity Building• Infrastructure
Synergy
Capacity Building
•Endorsement & constitution supports
National Economic
Regional Economic
COLLABORATION AND STRATEGIC PARTNERSHIP IN NATIONAL AND REGIONAL ECONOMIC DEVELOPMENT 17
WAY FORWARDIn 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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Thank You