Evidence from a Survey of Three Provinces
Enhancing Access to Finance for Indonesian Overseas Migrant
Workers:
Australia - Nusa Tenggara Assistance for Regional Autonomy(ANTARA)
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THE WORLD BANK OFFICE JAKARTA
Indonesia Stock Exchange Building, Tower II/12-13th Fl.
Jl. Jend. Sudirman Kav. 52-53
Jakarta 12910
Tel: (6221) 5299-3000
Fax: (6221) 5299-3111
THE WORLD BANK
The World Bank
1818 H Street N.W.
Washington, D.C. 20433 USA
Tel: (202) 458-1876
Fax: (202) 522-1557/1560
Email : [email protected]
Website : www.worldbank.org
Printed in June 2010
Enhancing Access to Financial Services for Migrant Workers in Indonesia is a product of staff of the World Bank. The fi ndings,
interpretation and conclusion expressed herein do not necessarily refl ect the views of the Board of Executive Directors of the World
Bank or the government they represent.
The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denomination and other
information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of
any territory or the endorsement of acceptance of such boundaries.
Enhancing Access to Finance for Indonesian Overseas Migrant
Workers:
Evidence from a Survey of Three Provinces
ii
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Acknowledgements
Acknowledgements
This report is the result of a team eff ort involving staff and consultants of the World Bank, as well as
representatives from donor agencies and agencies of the Government of Indonesia. The report team was
led by Yoko Doi with major contributions from P.S. Srinivas; Lloyd Kenward; Djauhari Sitorus; Cynthia Clarita
Kusharto; I Gede Putra Arsana; Neni Lestari; Chitra Buchori and Rodolfo Wehrhahn. The team gratefully
acknowledges government support from the Coordinating Ministry of Economic Aff airs; BNP2TKI; the
Ministry of Manpower and Transmigration; and Bank Indonesia. The Survey work was conducted by REDI.
The report was prepared under the overall guidance of Tunc Uyanik, Sector Manager, Finance and Private
Sector Development at the World Bank. Peer reviewers for the report were: Bobby Hamzar Rafi nus, Assistant
Deputy Minister of the Indonesian Coordinating Ministry of Economic Aff airs; Gillian Brown, Gender Advisor
(AusAID); and Tatiana Nenova, Senior Economist, Private and Financial Sector Development, the World
Bank.
Financial support was provided by the Dutch Trust Fund for Improving Indonesia’s Investment Climate;
the Australia Nusa Tenggara Assistance for Regional Autonomy; and the World Bank’s Gender Action Plan
(GAP).
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
iii
List of Abbreviations
List of Abbreviations
A2F Access to Finance
ANTARA Australia Nusa Tenggara Assistance for Regional Autonomy
APEC Asia-Pacifi c Economic Cooperation
API Arsitektur Perbankan Indonesia (API)
ASEAN Association of Southeast Asian Nations
ATM Automated Teller Machine
Bapepam-LK Indonesia Capital Market and Financial Institution Supervisory Agency
BI Bank Indonesia
BNP2TKI Badan Nasional Penempatan dan Perlindungan Tenaga Kerja Indonesia
(National Agency for the Placement and Protection of Indonesian Overseas Workers)
BP3TKI Balai Pelayanan Penempatan dan Perlindungan Tenaga Kerja Indonesia
(Service Offi ce for the Placement and Protection of Indonesian Overseas Workers)
BPD Bank Pembangunan Daerah (Regional Development Bank)
BPR Bank Perkreditan Rakyat (People’s Credit Bank)
BPS Badan Pusat Statistik (Central Bureau of Statistics)
BRI Bank Rakyat Indonesia
CGAP Consultative Group to Assist the Poor
FMW Female Migrant Worker
GDP Gross Domestic Product
GoI Government of Indonesia
GTZ Gesellschaft fur Technische Zusammenarbeit
IDIC Indonesian Deposit Insurance Corporation (LPS)
INPRES Presidential Instruction
MFI Micro Finance Institution
MICRA Microfi nance Innovation Center for Resources and Alternatives
MoF Ministry of Finance
MSME Micro Small and Medium Enterprises
MMW Male Migrant Worker
MW Migrant worker
MoU Memorandum of Understanding
MYR Malaysian Ringgit (currency)
NTB Nusa Tenggara Barat
NTT Nusa Tenggara Timur
NGO Non-Government Organization
PAM Perusahaan Air Minum (Water Utility Company)
PDAM Perusahaan Dareah Air Minum (Local Government Owned Water Utility Company)
PPTKIS Pelaksana Penampatan Tenaga Kerja Indonesia Swasta (Privately-owned Indonesian
Manpower Placement Company)
PODES Statistik Potensi Desa (Village Potential Statistics)
Rp Indonesian Rupiah (currency)
SKB Surat Keputusan Bersama (Joint Ministerial Decree)
TKI Tenaga Kerja Indonesia (Indonesian Overseas Workers)
iv
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Table of Contents
Table of Contents
Acknowledgements ii
List of Abbreviations iii
Table of Contents iv
Executive Summary 7
Chapter 1 Introduction 13
1.1 The Importance of migrant workers in the World, the Region and Indonesia 13
1.2 Objectives of this Report 16
1.3 Approach of this Report 16
1.4 Organization of this Report 20
Chapter 2 Profi le of Surveyed Migrant Workers and Their Households 21
2.1 Introduction 21
2.2 Results of the Village Head Survey 21
2.3 Key Characteristics of the Surveyed migrant workers’ Households 23
2.4 Profi le of the migrant workers 30
2.5 Strategic Matters Arising in this Chapter 33
Chapter 3 Migrant Workers and Financial Services 35
3.1 Introduction 35
3.2 Pre-Departure Costs & Financing 36
3.3 Remittances 39
3.4 Migrant Workers and Savings Accounts 45
3.5 Strategic Matters Arising in this Chapter 47
Chapter 4 Surveyed Migrant Worker Households’ Use of Financial Services 49
4.1 Introduction 49
4.2 Who Saves and Where? 50
4.3 Who Are ‘Financially Excluded’ from Saving? 56
4.4 Econometric Results Concerning Access to Savings 59
4.5 Who borrows? Where? How much? And at what price? 60
4.6 Who Are ‘Financially Excluded’ from Credit? 64
4.7 Econometric Results Concerning Access to Credit 66
4.8 The ‘Truly Financially Excluded’: No Savings Account and No Credit 66
4.9 Households of Migrant Workers and Insurance 68
4.10 Econometric Results Concerning Access to All Types of Insurance 70
4.11 Migrant Workers and Their Insurance 71
4.12 Strategic Matters Arising in this Chapter 73
Chapter 5 Summary of Gender-Based Results 75
Chapter 6 Policy Conclusions 79
6.1 General 79
6.2 Policies on Access to Savings 79
6.3 Policies on Related to Access to Credit 80
6.4 Policies on Remittances 81
6.5 Policies on Insurance 82
6.6 Broader Policy Issues 82
Annexes 85
Annex A: Comparison of Results with the Nationally Representative Survey 85
Annex B: Comparison with Bank Indonesia’s Survey Results 87
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
v
Table of Contents
Annex C: Analytical Results Concerning Savings 90
Annex D: Analytical Results Concerning Credit 93
Annex E: Analytical Results Concerning Insurance 97
Annex F: Special Documents Required for TKI Insurance Claims 98
List of References 99
List of Boxes
Box 1: Considerations in the Survey Design 17
Box 2: Portrait of the Typical Migrant Worker 30
Box 3: Key Features of the Recruitment Process for Migrant Workers 30
Box 4: Financing Pre-Departure Costs 37
Box 5: Indonesian Migrant Workers and Issues Concerning Mobile Banking 41
Box 6: Village Culture and Banking 47
Box 7: Migrants’ Use of Financial Services, Evidence from the Field: West Java 53
Box 8: Migrants’ Use of Financial Services, Evidence from the Field: West Kalimantan 58
Box 9: Diagnostic Review of MWs’ Insurance 72
List of Figures
Figure 1: Migrant Worker Placement, by Gender 14
Figure 2: Remittances Received, East Asia-Pacifi c Region (in millions of US$) 15
Figure 3: Forms of Saving in the Village (% of villages) 22
Figure 4: General Characteristics of Surveyed Households of Migrant Workers (in %) 24
Figure 5: Economic Characteristics of Surveyed Households of Migrant Worker (in Rupiah or %) 25
Figure 6: Household Amenities of Surveyed Migrant Worker Households ( in%) 28
Figure 7: Financial Interest & Literacy of Surveyed Migrant Worker Households ( in %) 29
Figure 8: Key Characteristics of Surveyed Migrant Workers (in %) 31
Figure 9: Migrant Workers’ Needs for Financial Services 35
Figure 10: Surveyed Migrants’ Pre-departure Costs & Financing (in %, except as indicated) 38
Figure 11: Characteristics of Remittances as Surveyed (in%, except as indicated) 42
Figure 12: Characteristics of Remittances as Surveyed , continued (in%, except as indicated) 43
Figure 13: Use of Remittance as Surveyed (%) 45
Figure 14: Financial Service Use as Surveyed (in %) 50
Figure 15: Financial Service Use as surveyed, by Province (in %) 50
Figure 16: Overlap Among Savings Providers, as Surveyed 51
Figure 17: Use of Bank Savings Accounts by Surveyed Households 52
Figure 18: Usage of Bank Accounts by Surveyed Households of Migrant Workers (in %, except as
indicated) 54
Figure 19: Usage of Bank Accounts as Surveyed, Continued (in %, except as indicated) 55
Figure 20: The Financially Excluded From Savings, as Surveyed (in%, except as indicated) 57
Figure 21: The Financially Excluded from Savings, as Surveyed continued (in%) 58
Figure 22: Overlap Among Credit Providers, as Surveyed 60
Figure 23: Use of Credit by Surveyed Households of Migrant Workers (in %, except as indicated) 61
Figure 24: Use of Credit by Surveyed Households of Migrant Workers, Continued (in %, except as
indicated) 62
Figure 25: The Financially Excluded from Credit, as Surveyed (in %) 64
Figure 26: The ‘Truly Financially Excluded’, as Surveyed (in %) 67
Figure 27: Insurance on Surveyed Households of Migrant Workers (in %, except as indicated) 69
Figure 28: More Gender-Related Results (in %) 77
vi
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
List of Abbreviations
List of Tables
Table 1: Remittances, by Region 14
Table 2: Basic Data on Surveyed Provinces 17
Table 3: Comparative Data on Surveyed Villages & migrant workers 19
Table 4: Key Characteristics of Villages Surveyed 22
Table 5: Villages’ Use of Financial Institutions (of 50 villages) 23
Table 6: Indicators of Indebtedness of Surveyed migrant workers’ Households 26
Table 7: Cost of Remitting to Indonesia (Cost in %) 40
Table 8: International Comparison of Remittance Costs (Average Cost, in %) 40
Table 9: Sample Savings Products Off ered by Banks and the Post Offi ce 46
Table 10: Statistically Signifi cant Determinants of Access to Saving
(at 95% level of signifi cance, or higher) 59
Table 11: Statistically Signifi cant Determinants of Access to Credit
(at 95% level of signifi cance, or higher) 66
Table 12: Coverage & Documentation of TKI Insurance 71
Table 13: General Documents Required for Claiming Against TKI Insurance 73
Table 14: Comparison of Survey Structures
(* Indicates important information not covered by other survey) 87
Table 15: Comparison of Survey Results 88
Table 16: Linear Probability Regressions for Savings of Any Kind 90
Table 17: Linear Probability Regressions for Formal Savings 91
Table 18: Linear Probability Regressions for Informal Savings 92
Table 19: Linear Probability Regressions for Credit from Any Source 93
Table 20: Linear Probability Regressions for Formal Credit 94
Table 21: Linear Probability Regressions for Semi-formal Credit 95
Table 22: Linear Probability Regressions for Informal Credit 96
Table 23: Linear Probability Regressions for All Types of Insurance 97
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Executive Summary
The number of Indonesian migrant workers has increased steadily in recent years. More than 800,000 legally registered Indonesian workers now go abroad each year, in addition to many more workers without legal status, particularly in Malaysia. In 2007, Bank Indonesia estimated that the total number of Indonesian workers abroad was approximately 4.3 million. Balance of payments statistics indicate that the combined total value of net remittances amounted to US$6 billion in 2008, with the gross infl ows be in considerably higher.
Nonetheless, among countries in the East Asia–Pacifi c region, Indonesia ranks third in terms of the total dollar value of remittances received (behind China and the Philippines, and comparable to Vietnam). As a proportion of GDP, the total value of remittances from Indonesian workers is considerably lower than that of the Philippines, Vietnam and Cambodia.
This report builds upon the World Bank (2009b) report, which presents a general, nationally representative examination of households’ access to fi nancial services in Indonesia. The earlier study singled out households of overseas migrant workers for further study, owing to their unique needs for access to fi nancial services and their pivotal role in poverty alleviation. This report’s higher-level Goal is to identify policy interventions that will improve migrant workers’ access to fi nancial services in cost eff ective ways. Its more immediate, primary Purpose is to inform policy-makers which sectors of society do not have access to fi nancial services and what are the constraints to broader access.
The key analytical tool of this study is an extensive Survey conducted in three provinces (East Java, Nusa Tenggara Barat (NTB) and Nusa Tenggara Timur (NTT)) from where large numbers of migrant workers originate. Although these provinces are not nationally representative, the broad issues facing migrant workers in these provinces are likely to be similar to the kinds of issues facing migrant workers and the households throughout Indonesia. The study takes a broad perspective on migrant workers’ needs for fi nancial services, including savings, remittances, credit and insurance, and suggests policy reforms to improve services in each of these areas.
8
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Executive Summary
Profi le of Indonesia’s Migrant Workers and Their Households
The majority of Indonesian migrant workers are females from rural regions with lower levels of educational
attainment. The most popular destinations for migrant workers are in the Asia-Pacifi c region (especially
Malaysia) followed by the Middle East (mainly Saudi Arabia). The majority of female migrant workers with
legal status work in the informal sector as domestic helpers. Roughly half of these female migrant workers
are working abroad for the fi rst time. Male migrant workers are more likely to have a job in the formal sector,
working in environments such as factories, plantations and construction sites. Men and those working in the
Middle East are more likely to be working abroad on second or later contracts.
Migrant workers mainly come from poor households in rural areas where agriculture is the main economic
activity. In terms of religious belief, just over half of Survey respondents are Muslims, which is well below
representative national levels. This is due to the inclusion of NTT, where a signifi cant proportion of the
population is not Muslim, in the Survey. A high proportion of surveyed migrant workers’ households are at
least moderately indebted, which limits the room for narrowly defi ned policies intended simply to increase
their use of credit. A more appropriate strategy would be to increase the reach of fi nancial service providers
that off er relatively low-cost credit (e.g., banks versus MFIs and MFIs versus private money lenders).
Migrant Workers’ Needs for Financial Services
Savings Accounts: The single most important fi nancial service for surveyed households is a savings account.
A savings account provides a safe, convenient means of remitting money as well as a repository for
personal savings. A rate of ownership of a savings account is low relative to the national average, including
in representative rural areas. However, rates for the use of a savings account are much higher, because
households of migrant workers often receive remittances by bank transfer through the account of a trusted
third party. There is a strong positive correlation between income levels on the likelihood of holding savings
account. The vast majority of savings accounts are held at BRI’s Unit Desa.
At present, Government regulation makes it compulsory legal migrant workers to open a bank account
before they leave the country. Such an account appears to be a good entry point for the migrant workers
and their families to access formal fi nancial services. However, rates of utilization of these accounts are very
low, with the great majority of these accounts being inactive. Apparently, a high proportion of migrant
workers quickly abandon these accounts. There appears to be a need to improve savings products to make
them more appropriate to the needs of migrant workers and their families.
Credit: Access to credit is also important to surveyed households of migrant workers. At present, migrant
worker households seek loans from a wide variety of service providers, banks being the least popular choice.
Many migrant workers—especially females on their fi rst work contract—borrow from high cost sources
(usually their recruiting agency, known as a PPTIKS) to cover roughly 80% of their up-front expenses. There
are also signifi cant taxes in the host country; various administration fees; and, in the case studied, a large
‘guarantee fund’ that is returned to the migrant worker at the end of the contract if all goes well. In addition,
the tenor of these credits is much shorter than the migrant workers work contract, draining a large part of
the worker’s earnings during the fi rst year abroad. For their part, banks—even those that specialize in small
scale lending—believe that migrant workers are excessively high risk unless there is a local guarantor.
Remittances: Bank services for remittances are relatively expensive, but they are very popular and appear
to work reasonably well, subject to two important qualifi cations. First, it may not be easy for the migrant
workers to visit a bank during operating hours, especially if cultural norms do not encourage females to
journey outside the household independently, as in some Middle Eastern countries. Secondly, the recipient
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
9
Executive Summary
needs to live reasonably close to a bank branch. Unless these prerequisites are fi lled, the migrant workers
normally rely upon the employer to remit the money; they utilized other informal money transfer agencies,
or they ask a trusted third party to deliver the money to intended recipients by hand.
The cost of remittances to Indonesia is about average relative to available comparators, and there is a range
of services available to meet diff erent needs, with varying levels of speed, convenience, security, low cost,
etc. Migrant workers can reduce the cost of remittances by a third or more, just by shopping around to fi nd
a service appropriate to their needs. Of course, this implies that they understand the options off ered by the
various service providers, or can fi nd out at low cost.
Insurance: Take-up rates for insurance are low in Indonesia, with insurance being mainly regarded as a
fi nancial product for higher income, urban households. By contrast, legal migrant workers, who are required
to have migrant workers’ insurance before going abroad, come from poor, rural areas. Not surprisingly, the
current, compulsory system does not provide a high level of benefi t to the migrant workers.
This study fi nds that the current system of supervision and regulation of insurance for migrant workers is
ineff ective. This results in regulatory duplication in some areas; contradictory interpretations of claims;
policy exclusions that contradict regulations; the revocation of licenses by diff erent agencies; and gaps
in supervision. In addition, not all the benefi ts can be managed in an eff ective way through insurance
and several of the risks currently covered are related to poor performance of the PPTKIS. Furthermore, the
current system of a consortium of insurance companies using their appointed broker is expensive; it adds
administrative complexity; and confl ict of interests is involved. Moreover, mandated reporting requirements
are inadequate to determine claims’ costs and settlement delays; the quality of underwriting; and claim
patterns that could prevent fraud. As a fi nal matter in this area, data reported are not easily accessible to the
consortiums nor the public.
Who Are ‘Financially Excluded’?
Financial exclusion is high among surveyed migrant worker households (27% for savings and 59% for credit),
with the rates being considerably higher in rural areas. Survey evidence from the three provinces indicates
striking similarities among the ‘fi nancially excluded’, independent of the type of fi nancial service from which
they are excluded. The excluded tend to be at the lower end of the income distribution, at the extremes of the
age distribution and living in rural areas. The ‘truly excluded’ (that is, those with no savings and no credit)
represent slightly more than 18% of the population, which is only slightly above the national average of 17%.
This probably refl ects migrant workers’ origins in predominantly poor regions of the country, which roughly
off sets their need for a remittance channel.
Physical accessibility is not perceived as a signifi cant problem by Survey respondents, although the implicit
costs involved in travel to banking facility and waiting once having arrived appear to be substantial. Gender
diff erences tend to be small and not statistically signifi cant, with the exception that men are more likely to
use certain savings services providers than women. This said, there is some indirect evidence that supports
the view that women’s saving rates from migrant worker earnings are higher than men’s.
The data suggest a strong element of voluntary exclusion from fi nancial services, mainly for economic reasons.
For example, more than three quarters of ‘excluded savers’ state that they lack suffi cient money or a job
to justify opening a bank account. Other reasons (such as physical accessibility or high fees) are relatively
unimportant. As for ‘excluded borrowers’, roughly 75% see no perceived need to borrow. Such a high level of
voluntary exclusion is clearly made with reference to the prevailing prices of fi nancial services. It is likely that
the level of voluntary exclusion would change if the prices were to change, especially for credit.
10
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Executive Summary
Another important point concerns the relationship between income and access to credit. Namely, access to
credit does increase in a statistically signifi cant way as incomes increase. However, sources of credit also change
markedly. As incomes rise, there is signifi cantly greater use of banks, but not micro-fi nance institutions and
community welfare schemes. Indicative interest rates are generally in the range of 15 to 45% per annum,
with banks and shop credit at the lower end. Rates of interest on loans from friends, neighbors and family
are at the higher end of the scale.
The Way Ahead: Policy Suggestions
Broader PoliciesThe Government of Indonesia has made a high priority of increasing access to fi nancial services for a larger
portion of the population--including migrant workers. The government acknowledges that the low level of
access to fi nancial services is a key constraint to development. It is important for policymakers to maintain
certain broad, strategic objectives when addressing issues of access to fi nancial services. Given that higher
income levels are a major determinant of access to fi nancial services, the most important strategic objective
should be the implementation of broad-based policies to raise economic growth and incomes. Likewise, it is vital
to maintain the stability of the fi nancial sector in order to ensure confi dence in the system on the part
of the population at large. Likewise, the provision of better rural infrastructure and improved public services,
including basic education and health services, would also assist lower-income populations. Policies aimed
at increasing access to fi nancial services are likely to be much more eff ective if based on the foundation of
policies aimed at sustainable growth and fi nancial sector stability.
Continuing at the broad policy level, certain institutional reforms appear to have the potential to off er
enormous benefi t. In particular, policies for licensing and supervision of migrant workers recruitment agencies
(PPTKIS) need reform. This could begin with revoking the licenses of known, under-performing PPTKIS. As
follow-up, the licensing process should be placed under the management of a Licensing Board that would
include the Offi ce of the Coordinating Minister for Economy. The number of well-functioning PPTKIS
and associations of PPTKIS could be increased with intentional overlap among jurisdictions to increase
competition. To improve supervision and to encourage better self-regulation, there could be greater use of
independent external stakeholders, including NGOs and the industry associations. The Government might
also consider joint-venture PPTKIS where one role of the foreign partner would be to safeguard the interests
of the migrant workers while they are overseas.
Also at a broad level, Memoranda of Understanding (MoU) with host countries concerning migrant workers could
be re-negotiated to address specifi c matters. The main objective would be to better balance protection of
the migrant workers with the commercial interests of the employer and the recruiting agency. Specifi c
issues include matters such as acceptable forms of identifi cation for migrant workers to access fi nancial
services abroad; and exemptions to Know Your Customer regulations for small remittances.
SavingsTurning to narrower policies, the most important fi nancial service required by migrant workers and migrant workers’ households is a savings account. Any of the regulatory reforms mentioned below (under Credit) for extending the reach of banks and MFIs would be helpful, as would be public programs to meet minimum standards of access to fi nancial services. Other possibilities include:
• The Introduction of ‘No Frills’ Bank Savings Accounts: Bank Indonesia is encouraging banks to off er very basic, low-cost savings services to all customers, including migrant workers and their households. However, many banks already off er such a service, and it will be important not to disrupt this service. It is also important to minimize the cost of regulatory compliance. In refi ning its approach, Bank
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
11
Executive Summary
Indonesia could set minimum acceptable standards, letting the banks decide the details of meeting those standards. Also, explicit exemptions could be permitted for banks with limited branching networks;
• A Review of the Compulsory Bank Account Requirement for Migrant Workers: The current system of requiring migrant workers to open a bank account appears to be an ineff ective means for meeting the migrant workers’ needs. The Government could consider allowing wider access to the account by permitting joint accounts with family members who will rely on the MW’s remittances and/or replacing the current, compulsory system by a voluntary system, bolstered by upgraded fi nancial literacy training.
CreditAs mentioned, surveyed migrant workers’ households are characterized by at least a moderate level of debt,
which limits the role for narrowly-defi ned policies intended to increase access to credit. A better strategy
would be to increase access to relatively low-cost sources of fi nance by encouraging the substitution of
banks for MFIs and MFIs for informal lenders. Specifi cs include:
• Encouraging the Development of More Credit Providers and a Broader Range of Providers: Almost any of the many policies advocated in the recent World Bank study (2009b) for improving access to fi nancial services amongst the general population would benefi t migrant workers and their households. To cite just a few examples detailed in that study, these include regulatory changes to encourage commercial banks to increase their branching and ATM networks and to reduce reporting burdens. For rural banks (BPRs), these recommendations include opening up ownership of BPRs to include foreign investors and NGOs; the establishment of lower tier of capital adequacy requirements for small BPRs in isolated regions; and restructured reporting and managerial requirements for small BPRs in remote areas. For pawnshops, these recommendations include opening up the state monopoly and encouraging private competition. For MFIs, these recommendations include resolving certain legal issues concerning the status of some institutions (the former LDKPs) and implementing the joint degree on microfi nance institutions, while restoring momentum to drafting a new microfi nance Law in early 2009, lead by the Coordinating Ministry of Economic Aff airs (CMEA), a joint decree was signed between the Ministries of Finance, Cooperatives, Home Aff airs and Bank Indonesia. The joint decree created a regulatory framework under existing laws to govern non-bank and non-cooperative MFIs that currently operate outside a regulatory framework. The joint decree recognize four categories of MFIs; (1) People Business Credit (BPR); (2) Saving and Loan Cooperatives; (3) Village-owned microfi nance institutions (BUM Desa); or (4) Venture Capital Companies. However, the joint decree has yet to be fully implemented.
• Co-signers for TKI Credits: One simple, eff ective way to improve access to credit would be for NGOs and development partners with special interests in this area to act as co-signers for commercial bank loans directly to migrant workers (not to the PPTKIS). A relatively small investment, perhaps a few million dollars, could facilitate great improvements. The initiative could be undertaken on a pilot basis to demonstrate to commercial banks that migrant workers are low risk borrowers.
RemittancesExtending bank branch and ATM networks would make it easier for migrant worker households to receive
remittances. Likewise, re-negotiations of MoU on migrant workers with more host countries could help
migrant workers, even illegal migrant workers, to make remittances. In addition, the following steps could
help:
• The Development of Mobile Banking: Advances in mobile banking hold considerable promise for facilitating remittances. On the side of banks, it is a low-cost option compared to wider branching networks. For the migrant workers, the transactions costs are very low and there is already wide access to mobile phones, even among the poor in remote areas. However, signifi cant regulatory
12
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Executive Summary
hurdles need to be overcome. For example, it is necessary to allow service providers to use networks of non-bank agents to off er and maintain their products and to sign-up new customers.
• The Provision of Remittance Services as a Public Service Obligation: the Indonesian government could explicitly subsidize remittance services by asking Indonesian banks abroad to make remittances at no cost to the remitter. The government could then reimburse the bank for its costs and pay them a small fee. The subsidy scheme could be justifi ed as a poverty alleviation measure or on the basis of the positive externalities of remittances.
InsuranceIt would greatly benefi t migrant workers to simplify insurance products and the claiming process. Pre-
departure fi nancial literacy training could also encourage migrant workers to derive added value from
insurance products. Other, more specifi c steps could be taken in the area of supervision and reporting.
Most importantly, the responsibility for supervision should be transferred to Bapepam-LK (the regulatory arm of
the Ministry of Finance for insurance); BNP2TKI could retain authority for the special regulations applicable to
migrant worker insurance, and MoMT could continue to evaluate regulatory impact and suggest regulatory
changes. Also, data reporting requirements need to be improved in order to monitor actors such as the time
required for payment; cause of claim; and brokerage and other fees collected.
Also, the insurance product should be re-designed in some areas. Helpful steps include separation of individual
protection for migrant workers from corporate protection for the PPTKIS, with non-insurable risks covered
by the government. Also, diff erent classes of insurance could be introduced for diff erent destinations and
diff erent types of work. Moreover, the role of the broker should be re-considered with a cap placed on
the brokerage fee, particularly given the mandatory nature and full regulation of benefi ts and costs of the
product. Furthermore, the consortium model could be re-considered, taking into consideration the costs
and benefi ts of this approach.
Other Policy SuggestionsA recurring theme in this study is the potential for fi nancial literacy training. In general, the objective of
such training should be to better inform migrant workers and their households of the available options for
services such as the sending of remittances and cheaper sources of credit. The World Bank, with the support
of the Dutch Government, is currently piloting an initiative along these lines.
Finally, it would be helpful to off er better counseling services for migrant workers through the Indonesian
government’s embassies, possibly beginning in the most popular migrant worker destination countries,
Malaysia and Saudi Arabia. The Indonesian government might also consider encouraging third parties such
as NGOs to provide such services; recruiting expatriate Indonesians on a volunteer basis; or out-sourcing
this service to the private sector through a competitive bidding process. Another option, mentioned
above, would be to establish joint-venture PPTKIS where the contractual obligations of the foreign partner
would include the provision of counseling services in the host country and pre-departure fi nancial literacy
training.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 1
Introduction
This report follows a major, more general World Bank study relating to access to fi nancial services in
Indonesia (World Bank 2009b). This study involved the collection of data related to the accessibility of
fi nancial services amongst a signifi cant subset of the general population in Indonesia, these being migrant
workers. The great majority of Indonesians working abroad are unskilled and from lower income households
in rural areas where job opportunities are scarce. The availability of work abroad, with relatively high salaries,
therefore has considerable signifi cance for poverty alleviation. Making fi nancial services more accessible to
migrant workers could benefi t not just the workers themselves, but also their dependents and extended
families in their villages of origin, thereby contributing directly to poverty reduction and regional economic
development.
The current study singles out migrant workers (migrant workers) for further study, using two surveys
very similar to those implemented for the collection of data in the earlier report (World Bank 2009b). To
supplement these surveys, World Bank staff made two fi eld trips to West Java and West Kalimantan for
additional input.
This study takes a broad perspective on the range of fi nancial services that may be required by migrant
workers, including remittance services, savings facilities, credit and insurance, rather than focusing merely
on remittance services, as has been the case with a number of previous studies.
1.1 The Importance of migrant workers in the World, the Region and Indonesia
Globally, overseas migrant workers make up a signifi cant portion of the world’s population. The particular needs and circumstances of groups of migrant workers, including in Mexicans in the United States; Turks in Germany; citizens of former Soviet states in Russia; and Indonesians in Malaysia have formed the focus of a number of studies.1 In 2005, migrant workers were estimated to number approximately 190.6 million worldwide, which is about 3% of world population (United Nations 2005). The vast majority of these migrant
1 Many of the problems of Indonesians in Malaysia run parallel to those of Mexicans in the United States, especially in the respective border areas. The Mexican-US experience points towards the productive, proactive role that can be played by various kinds of NGOs (for example, service oriented; grassroots support organizations; and binationals; see Zabin (1996)). The potential for NGOs is a recurring theme of this report.
14
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 1Introduction
workers are from developing countries.2 Migrant workers are a human resource that provides valuable low-cost labor to host countries and who remit large sums of money to their countries of origin. The combined value of remittances sent home from the top labor exporting countries (India, China, Mexico and the Philippines) amounted to tens of billions of dollars in each case in 2007.
In terms of the geographical distribution of host countries, the greatest proportion of migrant workers resides in Europe (64 million in 2005). Asia provides employment to the second largest number, with some 53 million; North America is third with more than 44 million. In terms of the combined total value of remittances, the East Asia and Pacifi c region ranks fi rst as remittance receiver and second as sender (see Table 1).
Table 1: Remittances, by Region
Remittances Received Remittances Sent
(US$, bn) (% of GDP) (US$, bn) (% of GDP)
East Asia & Pacifi c 65.2 1.6% Europe & Central Asia 25.9 0.9%
Latin America & Caribbean 63.1 1.8% East Asia & Pacifi c 12.9 0.3%
South Asia 52.1 3.7% Middle East & North Africa 5.5 1.6%
Europe & Central Asia 50.4 1.8% Sub-Saharan Africa 4.4 0.6%
Middle East & North Africa 31.3 4.5% Latin America & Caribbean 3.6 0.1%
Sub-Saharan Africa 18.6 2.6% South Asia 2.0 0.1%
Source: International Monetary Fund 2008. Data are for 2007.
Figure 1: Migrant Worker Placement, by Gender
0
200.000
400.000
600.000
800.000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
MALE FEMALE
Source: National Authority for the Placement and Protection of Indonesian Overseas Workers
(BNP2TKI)
As stated previously, the number of Indonesian migrant workers, especially female workers, has increased steadily in recent years (Figure 1).3 Indeed, remittances from migrant workers now total approximately US$6 billion (2008)4 , making it one of the most signifi cant infl ows of revenue to the country. Around 800,000 offi cially registered migrant workers go abroad each year. In addition, there are a large number of unrecorded illegal workers, 5 particularly in Malaysia.6 In total, Bank
Indonesia estimates that there were approximately 4.3 million Indonesians working overseas in 2007.
2 World Bank fi ndings (World Bank 2008) show that over 47% of migrants are working in other developing countries.
3 The drops in 2001 and 2003 are largely the result of a temporary bar on placements in Middle East and Taiwan; a stricter approach to migrant worker departure requirements; spread of the SARS epidemic in several migrant destination countries; and rising inter-national tensions in the Middle East.
4 See http://www.bi.go.id/seki/tabel/TABEL5_2.pdf. These are reported on a net basis, that is, gross infl ows minus gross outfl ows. The gross infl ows are likely to be considerably larger than the reported net number. For example, estimates by the Ministry of Manpower and Transmigration put the annual gross infl ow at US$10 billion.
5 See, for example, World Bank 2008b and 2009b.
6 Joseph Liow (‘Malaysia’s Illegal Indonesian Migrant Labour Problem: In Search of Solutions’, on http://www.questia.com) writes that Indonesians into Malaysia are arguably the second largest fl ow of illegal migrants in the world (after Mexicans into the United States).
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
15
Chapter 1Introduction
Despite these developments, Indonesia does not rank highly as a recipient of worker remittances on a worldwide basis.7 Compared to other countries in the region, in absolute terms, in terms of the total combined value of remittances in dollars, Indonesia ranks third behind China and the Philippines, and almost equal to Vietnam (see Figure 2). As a proportion of GDP, the total value of remittances received by Indonesia is considerably lower than that received by the Philippines, Vietnam and Cambodia.
In light of the Indonesian government’s stated concern with poverty alleviation and the potential of migrant
workers to play a role in the achievement of this goal, it is clear that there is a need to improve access for
members of this group to fi nancial services and physical infrastructure. Bank Indonesia has taken a lead
through its Indonesia Banking Architecture (API), launched 9 January 2004, which contains a number of
“pillars”, including Pillar #1 (Healthy Banking Structure) and Pillar #5 (Adequate Infrastructure).8 In addition,
the new government is expected to pay increased attention to the needs of migrant workers over the next
fi ve years. Furthermore, issues related to the welfare of migrant workers are integrally related to the various
other major issues, particularly women’s rights and human traffi cking, because, as stated previously, the
great majority of Indonesian migrant workers are female (Figure 1).
From an economic point of view, migrant workers have particular signifi cance for a number of reasons. First, they hold relatively high-paying jobs abroad, when they might otherwise be unemployed (or seriously underemployed) at home. Bank Indonesia’s 2008 Remittance Survey of migrant workers found that the main reason for migrating is to earn a higher income.9 Second, their remittances are a major, stable source of foreign currency earnings. Third, remittances are usually sent to migrants’ families, typically in poor remote areas of Indonesia, where fi nancial resources are sorely needed. Fourth, many migrant workers will return home with new skills and experiences that provide added value to the community in which they live. While the contribution of migrant workers is already extremely signifi cant, it appears that with structural and other support, remittances could have a larger and more sustainable impact on poverty reduction in rural areas.
Figure 2: Remittances Received, East Asia-Pacifi c Region (in millions of US$)
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
China Philippines Indonesia Vietnam Malaysia Thailand
Source: International Monetary Fund, Balance of Payments Yearbook, 2008 (data for 2007).
7 For example, see Figure 12 in World Bank 2009b.
8 Pillars #1 and 5 (see http://www.bi.go.id/web/en/Perbankan/Arsitektur+Perbankan+Indonesia/) emphasize, among others, fi nan-cial access by the poor. They are the basis for BI’s interest in the area of fi nancial inclusion.
9 The great majority (78.5%) of respondents cited this reason. The second reason (collecting capital for new business) was cited by only 29.5%; the third reason (additional income for the family, 29.0%) is essentially the same as the most popular reason.
16
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 1Introduction
Given this potential, the Indonesian government is aware of the need to improve the required services, with
this commitment being expressed in numerous public statements10 and in discussions with the World Bank
and other donors. Indeed, the Government has made access to fi nance one of three cornerstones of its
fi nancial sector reform agenda.11 However, at this stage, it is not entirely clear exactly what interventions are
most likely to yield results. The key goal of policymakers should be to identify important barriers that can be
overcome by relatively low-cost means.
1.2 Objectives of this ReportThis report demonstrates two main points:
• Migrant workers are an important instrument in poverty alleviation and regional economic development; and
• The fi nancial system can be more eff ective in meeting the needs of migrant workers and their
families.
The report’s primary Goal is to identify policy interventions that will help migrant workers by facilitating improved
access to fi nancial services in cost eff ective ways.
It’s more immediate, primary Purpose is to raise the awareness of policy-makers regarding the identity of
groups whose access to fi nancial services is currently limited and of the constraints to broader access.
In more practical terms, the report is a response to a request from the Offi ce of the Economic Coordinating
Minister, which asked for assistance in the preparation of them analytical basis for the development of
policies to improve access to fi nancial services. However, the report has a much broader audience within
government. For example, other government agencies (including Bank Indonesia, BNP2TKI and the Ministry
of Manpower and Transmigration) have expressed interest in the report’s fi ndings and recommendations.
Outside government, the results of the household survey may encourage increased interest on the part of
fi nancial institutions to broadening their services to migrant workers.
The report also identifi es opportunities for other aid donors, including NGOs, to contribute signifi cantly to
wider access, sometimes on a demonstration basis.
1.3 Approach of this ReportThis report is primarily based on a large survey which should be discussed at this point. The Survey involved
three provinces (East Java, Nusa Tenggara Barat (NTB) and Nusa Tenggara Timur (NTT)) from where a
signifi cant proportion of migrant workers originate. The Survey’s key features are presented in Box 1. To
provide some contextual information on the Survey’s underlying demographics and its coverage, some
details on these provinces, the villages and the migrant workers are presented here.
Geographically, the three provinces are located in the eastern half of Indonesia. East Java, a very populous
10 See, for example, the statement of 1 April 2009 by the Minister of Manpower and Transmigration to the Indonesian Workers Pro-tection and Development Association in the Cilacap City Hall. Also, the speech by the President of the Republic on Developing Educated Workers, 30 August 2006, at the offi cial opening of the TKI waiting lounge at the Soekarno-Hatta International Airport.
11 The other two, which overlap with access, are: reducing the cost of fi nancial services; and increasing the stability and diversity of the fi nancial system. The three are articulated in GoI’s fi rst Financial Sector Policy package of 5 July 2006, which was a joint decree (SKB) of the government and Bank Indonesia. A follow-up package (INPRES Number 6 of 2007), released 12 June 2007, continued the fi nancial sector reform initiative while broadening the agenda to include empowerment of MSMEs.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
17
Chapter 1Introduction
province, occupies the eastern one third of the island of Java; NTT and NTB comprise groups of islands
further to the east, immediately beyond Bali. All three lie along the confl uence of the Indo-Australian and
Eurasian tectonic plates, which leaves them vulnerable to natural disasters, including volcanic eruptions,
earthquakes and tsunamis.
From the data on the three provinces presented in Table 2, three features stand out. First, the provinces
together include approximately 20% of Indonesia’s total population. By far the largest proportion in terms of
absolute numbers is East Java, where the population density is also far higher than in NTT and NTB. Second,
the three provinces are relatively poor, especially NTT. Third, Muslims constitute a very low proportion of the
total population in NTT.
Table 2: Basic Data on Surveyed Provinces
Characteristic East Java NTB NTT Indonesia Notes
Land mass (1,000 of sq km) 48.0 20.2 47.4 1,910
Population (millions) 34.8 4.0 4.0 206.3 For 2000
Population density (number/sq km) 725 198 84 108
Number of poor (millions) 6.7 1.1 1.1 35 For Mar 2007-08
Incidence of poverty (%) 18.5% 23.8% 25.6% 15.4% For Mar 2007-08
Average monthly income (Rp) 882,788 986,205 1,147,068 1,077,312 For 2007
Minimum monthly needs (Rp) 458,755 643,557 735,000 766,350 For 2007
Ratio of average income to needs 1.92 1.53 1.56 1.41
Muslims as % of total population 96.2% 95.7% 9.7% 87.2% For 2005
Source: BPS and Ministry of Religion in the Province of NTT.
Box 1: Considerations in the Survey Design
This report’s Survey is a follow-on to the large survey used in World Bank (2009b), using virtually the same questionnaire (see Annex B of World Bank 2009b for more details). That survey was designed to be nationally representative on certain criteria, but not as regards MWs. Nonetheless, that Survey provided substantial information on 241 individuals and 340 households of migrant workers, and underscored the importance of MWs in poverty alleviation. To extend that work, this report’s Survey covered 3,368 individual migrant worker and 2,724 migrant worker households in East Java, Nusa Tenggara Barat (NTB) and Nusa Tenggara TimurTimurTimur (NTT).a/ These provinces supply large numbers of overseas migrant workers.
Practical considerations dominated the choice of regions for this Survey. Most importantly, it was not possible to design and implement a survey that was nationally representative of migrant workers or their households, due to budgetary considerations. As originally conceived, the Survey would cover villages in East Java with large numbers of migrant workers abroad. However, the region was expanded to include NTT and NTB, owing to the interests and fi nancing of ANTARA, a Government of Australia program in eastern Indonesia. A subsequent guideline was established to focus on 30 families in the 8 villages with the largest numbers of migrants in each province, with close attention to gender balance. b/ Signifi cant deviations from these guidelines are noted below.
Exact village selection criteria varied slightly by region, but were based upon numbers of migrant workers as indicated by the PODES 2005/06 Survey. c/ In the case of East Java, Kabupaten Gresik was chosen because it had the largest number of migrant workers (some 36,500 or roughly 10% of the total from East Java). In choosing villages within Gresik, several candidate villages (in sub-districts Tambak and Sankapura) were excluded because of their very remote location and poor transport access. Ultimately, 5 villages were selected with 2 more held ‘in reserve’ in the event that PODES data proved unreliable.
18
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 1Introduction
Box 1: next
Turning to NTT and NTB, 5 island clusters were chosen in consultation with ANTARA, 3 in NTT (Sumba Barat, TimurTimurTimur-Kupang and East Flores) and 2 in NTB (Sumbawa and Lombok TimurTimurTimur). The choice of villages in NTB proved the simplest; the 8 with the largest number of migrants were selected in each of the two clusters. For NTT, the size-of-village criterion was eased for Kabupaten Kupang, for the sake of urban-rural balance. Ultimately, roughly half of the largest villages were substituted in favor of smaller, but more representative villages. In total, the surveyed villages cover approximately ¼ million persons or 1/10th of 1% of Indonesia’s overall population. Surveyed MWs are a bit less than 1/10th of 1% of the estimated total number of Indonesian MWs.
The Survey itself is in two parts. The fi rst Survey is an extensive (50-page) survey of MWs’ households (HHs), and the topics covered by this Survey are noted in the right half of Table 14 in Annex B. Respondents of this survey are considered to be representative of MWs’ households in the three provinces, and the issues facing MWs in these provinces are likely to be a good indicator of issues that face MW households throughout Indonesia. The second Survey, of village heads, is much shorter (8 pages) and covers characteristics of fi nancial services available in the selected villages.
A few other characteristics of the HH Survey need to be mentioned at the outset. The Survey is a hybrid household and individual level survey that blends individual level socio-economic characteristics with household level fi nancial statistics. (For a discussion of this approach, see Annex B of World Bank 2009b.) Questions concerning household expenditures refer to the entire household on the premise that the household is the level at which these types of decisions are normally made. Questions pertaining to migrant workers refer specifi cally to the migrant worker. This has some important implications. For instance, in sorting household data by specifi c attributes (age, education, gender, etc.), the attribute of the Survey respondent is normally used to sort the data.
Sorting the data in this manner is very useful because the respondent is in a position of authority in the household. d/ This process may, however, dilute the signifi cance of the conclusions to the extent that the respondent is responding on behalf of the entire household, not the respondent herself. It should be noted that for matters where the decision is made at the household level, (e.g., expenditure or determining credit risk), this is exactly the right approach. Still, this represents a signifi cant analytical complication for addressing issues related to individual members of the household (e.g., women’s access to fi nancial services).
Field work for this Survey was conducted in two phases. All of NTT and NTB and roughly half of East Java were surveyed during the period from mid-July to the fi rst week of August 2008. The second half of East Java was surveyed in December 2008.
a/ The incidence of poverty is high in each of these provinces. NTT is the highest at 25.6% of the population, followed by NTB at
23.8% and East Java with 18.5%. The national average is 15.4%. East Java, being very populous, has about 6 times as many poor
as either NTT or NTB.
b/ In East Java, the target ratio of male to female households was 50:50. In NTT and NTB, it was 1:2.
c/ Village Potential Statistics (PODES) is a nation-wide census of all villages in Indonesia and contains information on various socio-
economic conditions at the village level. The Survey teams were expected to verify the PODES information on migrant workers
by consulting with local authorities and specialized, local NGOs. Also, a particular eff ort was made to ensure implementation in a
manner that did not introduce unintended biases into the response patterns.
d/ In a majority of cases (59%) the survey respondent was the head of household. In other notable cases (spouse and son/
daughter, 23% and 13%, respectively), the respondent was the person with fi nancial decision-making power. The Survey
respondent was female 58% of the time.
Contextual data for surveyed villages and migrant workers are provided in Table 3, with a breakdown by
kabupaten/island cluster. The standards for comparison are the two available PODES Surveys (see footnote
c in Box 1).12 For villages, the sample coverage is very good (averaging more than 4% of villages) at the
kabupaten/island cluster level. However, the level of coverage is lower at the provincial level and it is very
12 More detailed information (for example, a breakdown by gender) are not available on a comparative basis as between the two PODES surveys.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
19
Chapter 1Introduction
small (1/10th of 1%) at the national level. For migrant workers, the sample coverage is exceptionally good
at the village level, especially for NTT (18½%). At the national level, migrant worker coverage is about twice
that of village coverage (these villages were chosen because them had large numbers of migrant workers),
but coverage is still limited (about ¼ of 1%).
Table 3: Comparative Data on Surveyed Villages & migrant workers
Number of Villages with migrant workers Number of migrant workers
PODES 2005 PODES 2008 Current Study PODES 2005 PODES 2008 Current
Study
East Java
Kabupatan Gresik 224 220 5 36,604 23,126 388
Kabupatan Malang 369 378 5 31,040 32,380 302
NTB
Sumbawa 143 158 6 8,347 8,304 495
East Lombok 119 115 6 32,022 38,215 513
NTT
West Sumba 140 88 9 1,405 1,255 508
Kupang 167 234 12 2,120 3,693 509
East Flores 240 333 7 13,134 30,046 653
Total for Indonesia 35,955 39,913 50 1,108,834 1,335,417 3,368
Source: BPS
These fi gures underscore a point that is repeatedly emphasized in this report, namely, that the data cannot be
considered nationally representative.13 Nonetheless, the results provide striking evidence of the challenges
that migrant workers face in accessing fi nancial services with current interest rates and regulatory policies.14
Related discussions with the Indonesian government and other stakeholders have indicated many steps
that could be taken to improve the situation.
As a further, presentational matter, this report is intentionally drafted in a compact format with sharply
focused points of discussion. The objective is to minimize the length of the document while at the same
time presenting the maximum possible amount information in a readable format.
To assist in this regard,15 each of the large survey-related Chapters begins with a brief summary of the issues
discussed in chapter. Each of these Chapters ends with a section that identifi es the strategic issues that
emerged in the course of the Chapter. In addition, italics are used to emphasize key points throughout the
report. Technical material is usually assigned to Annexes or Boxes, usually with summaries in the main text.
The footnotes are intended to serve as an integral part of the report.
Chapter 4 is the analytical heart of the report. In this chapter, extensive use is made of Charts that are presented
in clusters of types of fi nancial service, for quick reference. Of course, these Charts are two-dimensional,
13 As follow-up, the World Bank is in discussions with Bank Indonesia as to whether the Bank’s results and experience can contribute to strengthening Bank Indonesia’s biannual survey in this area (see Annex B).
14 For changes to regulatory policies that would improve access to fi nancial services, see Chapter 4 of World Bank (2009b).
15 To assist further, survey results are generally not presented by region, that is, for each of the three provinces, as this would eff ec-tively treble the volume of the Survey material to be reported. Instead, regional variation is reported on an exceptional basis, that is, when it is considered noteworthy.
20
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 1Introduction
which creates limitations in the analysis of a multi-dimensional problem such as access to fi nancial services.
To address the multi-dimensional nature of the issues in question, Chapter IV also summarizes the results
of multivariate linear probability regressions, which identify the statistically signifi cant determinants of access
to the major fi nancial services. In addition, the magnitude of the coeffi cients in these regressions is an
indicator of the relative importance of 19 socio-economic factors infl uencing access to fi nancial services.
Details are presented in Annexes.
1.4 Organization of this ReportThe remainder of this Report is divided into fi ve chapters:
Chapter 2: Characteristics of the Surveyed Groups: This section begins with information on the surveyed
villages, followed by the profi le of surveyed households with migrant workers and concluding with the
characteristics of the migrant workers themselves. This Chapter includes the results of an assessment of
households’ fi nancial literacy and interest in fi nancial matters.
Chapter 3: The Special Needs of Migrant Workers: This section discusses two areas where migrant workers
have special needs for fi nancial services. Specifi cally, it discusses the need of migrant workers for a source
of funds to fi nance their pre-departure costs and the need for a means for sending money home once they
are working overseas. The Chapter also covers certain issues related to migrant workers’ use of bank saving
accounts.
Chapter 4: Migrant Workers Households’ Uses of Financial Services: This section looks at the use of the services
and the prioritization of the needs for these services by migrant workers. The main fi nancial products
examined here are savings accounts and credit facilities. The section seeks to determine who is ‘fi nancially
excluded’ from each product and from both products. This Chapter also looks at insurance, which is a fi nancial
product with special signifi cance for migrant workers, because all offi cial migrant workers are required to
have insurance before they go overseas.
For each of the major fi nancial products (savings, credit and insurance), Chapter 4 also presents certain
analytical, econometric results. These indicate the statistically signifi cant socio-economic variables that
determine the probability of having access to those fi nancial services.
Chapter 5: Gender Related Issues: This section addresses issues specifi cally related to gender.
Chapter 6: Policy Recommendations: This section draws upon discussions surrounding the preparation of this
report to make recommendations. The recommendations are extensive and specifi c, intended to extend
this report beyond a documentation of Survey results or an advocacy report in support of migrant workers.
In some cases, policy options are discussed and areas for further investigation are noted.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 2
Profi le of Surveyed Migrant Workers and Their Households
2.1 IntroductionThis Chapter looks at the characteristics of the groups covered by the two surveys that are the primary
source of data for this report.16 The presentation cascades downwards, beginning with an overview of
the villages as described by the relatively small Survey of Village Heads. Moving lower in the hierarchy, it
continues with a description of the demographic and socio-economic characteristics from the large Survey
of Households with overseas migrant workers, including an assessment of their fi nancial literacy and interest
in fi nancial information. It concludes with a profi le of the migrant workers themselves, covering areas like
demographics, legal status and education
.
2.2 Results of the Village Head SurveyThe general characteristics of the 50 surveyed villages are presented in Table 4. These villages are largely
rural. The total combined population of these villages is more than ¼ million persons, including some 19,000
overseas migrant workers, of which more than 1/3rd are female.17 This proportion of migrant workers in the
total population (6.66%) is more than three times the estimated national average (see Section 5.2 World
Bank 2009b), refl ecting the deliberate choice of these villages for the Survey (Annex A) because of the high
proportion of migrant workers in these locations.
16 For a comparison of results with the nationally representative survey, see Annex A. A comparison with the results of a similar Survey by Bank Indonesia is provided in Annex B. As will be noted later in this report, regional variations largely refl ect the state of economic development in each of the three provinces.
17 It should be noted that this proportion (taken from the Survey of Village Heads) is signifi cantly lower than reported by the House-hold Survey (almost 62%). The Household Survey is considered more reliable in this regard, because its respondents are more familiar with the details of issues being addressed by the questionnaire.
22
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 2Profi le of Surveyed Migrant Workers and Their Households
Table 4: Key Characteristics of Villages
Surveyed
Characteristic Number
Number of villages 50
o/w rural 70%
Total population 282,980
Total households 72,484
o/w poor 44%
Total migrant workers 18,927
o/w female 37%
Proportion of Villages with Stated Facilities
Landline phone access 54%
Mobile phone access 96%
Internet access 16%
These villages represent more than 72,000
households, which are disproportionately ‘poor’,
with village amenities refl ecting this status. For
example, barely half of the villages have access to
a landline telephone and only 16% have Internet
access. Nevertheless, 98% have access to a
mobile phone (Table 4).
As reported by the Village Heads, the dominant
vehicle for saving in these villages is a bank account
(see Figure 3),18 although many villages use
several forms of savings. Saving in various forms
of real assets (such as cattle, property and jewelry)
is also signifi cant. Indeed, the total value of real
assets is higher than the total value of funds
deposited in bank savings accounts. Among the
least important forms of saving are non-bank
fi nancial institutions, including cooperatives,
savings associations and credit unions. These
rankings are similar by province, although NTB
tends to have a higher incidence of saving in real
assets.
Figure 3: Forms of Saving in the Village (% of villages)
0
20
40
60
80
100
Bank Savings Account
Land/Property Jewelry/Gold Other
The villages’ use of diff erent
fi nancial institutions is
presented in Table 5. Almost all
villages make use of BRI’s Unit
Desa system. Other popular
institutions include
government banks other than
the Unit Desa; shop credit;
pawnshops; and rotating
savings schemes. It is important
to note that a relatively small
percentage of these services
are actually available in the
villages themselves, the
exceptions being various forms
of community welfare schemes and some cooperatives. However, virtually all these services are available
within one hour’s travel of the village.19
18 It should be noted that the percentages reported in Figure 3 are percentages of villages (with many village heads reporting more than one form of saving). There is no information on the relative value of savings by instrument (for example, saving in real assets versus saving in a bank account).
19 Time travelled is one-way, by the respondent’s choice of transport mode.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
23
Chapter 2Profi le of Surveyed Migrant Workers and Their Households
Table 5: Villages’ Use of Financial Institutions (of 50 villages)
Type of Institution
# of villages using
the institution
# available in
the village
Accessible within
1 hour (in %)
Bank:
BRI Unit Desa 47 7 93.6
BPR 18 5 100.0
Government Bank (excluding BRI Unit Desa) 40 1 80.0
Private Bank 14 2 100.0
Credit union/savings association:
Cooperatives 16 10 93.8
Village credit institution 6 6 100.0
Village credit fund institution 2 2 100.0
Other credit union/savings association 12 11 91.7
Community welfare scheme:
Community revolving fund 28 23 96.4
Other neighborhood rotating savings group 34 34 100.0
Other community welfare scheme 25 21 100.0
Other:
Pawn shops 36 6 100.0
Daily banks 25 8 100.0
Shop credit 40 9 87.5
2.3 Key Characteristics of the Surveyed migrant workers’ Households
This section presents a profi le of migrant workers households in terms of four broadly defi ned
characteristics:
1. socio-demographic features;
2. economic traits;
3. household amenities; and
4. fi nancial literacy.
The section demonstrates that the surveyed households are mainly in poor, rural areas of three provinces:
East Nusa Tenggara (NTT); West Nusa Tenggara (NTB); and East Java. The age distribution is fairly uniform;
education levels are low; women and Muslims are in the majority; and levels of gross debts are moderately
high.
Socio-demographic Characteristics: Beginning with socio-demographic details (see Figure 4), all surveyed
households are in one of three provinces, for reasons discussed in Box 1. Almost half come from NTT;
one-third from NTB and the rest from East Java. The surveyed households are predominantly rural (see the
24
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 2Profi le of Surveyed Migrant Workers and Their Households
upper panel of Figure 4)20 and poor. The age of survey respondents is tilted towards the prime age category
with smaller representation from the older groups; the younger groups are barely represented (see the
middle-left panel of Figure 4).21 By level of education, respondents tend to be relatively poorly educated,
with less than one third having completed junior high school or above; only about half having attended
or completed primary school; and more than 10% never attended school (see the middle-right panel of
Figure 4). By gender, somewhat more than half of respondents are female. By religious belief, just over half
are Muslims, which is considerably lower than the overall proportion for Indonesia.22 Of the non-Muslims,
approximately 20% are Catholics, with Protestants making up a similar proportion and a small proportion
consisting of adherents of Marapu.23 The average size of a family (see Table 4) is 3.9.
Economic Characteristics: Turning to surveyed households’ economic characteristics (Figure 5), the income
distribution (using income as the metric) is relatively uniform in urban areas;24 rural incomes are highly
skewed towards lower incomes, with almost two thirds of households falling into the two lowest income
categories. Using expenditure as the metric, the middle classes are relatively well represented, especially in
the rural category. In relation to the offi cial poverty line, 25% of urban households are below the poverty line,
compared with approximately 20% in rural areas. In dollar terms, the average yearly expenditure (Table 4)
and average household size of 3.9 persons (Table 4) imply per capita expenditure of less than US$2 per day,
which is very low. Looking at employment information (the lower panel of Figure 5), two thirds of members
of households are involved in agriculture, with smaller proportions involved in services, trade and other non-
agriculture fi elds. The great bulk of respondents are self-employed or casual laborers. Government or private
employees (or employers) make up a very small proportion of the total.
Figure 4: General Characteristics of Surveyed Households of Migrant Workers (in %)
by Province
18.4 32.5 49.1
East Java
West Nusa Tenggara
East Nusa Tenggara
0 25 50 75 100
by Regional Area
17.0
83.0
Urban Rural
20 The Survey included no urban areas in East Java.
21 On a regional note, the population of NTT is markedly older than the other 2 provinces.
22 This relatively low proportion of Muslims stems from the selection of NTT for this Survey (see Box 1). Inhabitants of this province tend to be Christians.
23 This is a religion common among the people of the Sumba Islands of NTT. It is based upon ancestor worship.
24 By province, East Java had a relatively large concentration of high income earners in the Survey.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
25
Chapter 2Profi le of Surveyed Migrant Workers and Their Households
by Age
0.78.8
36.9
32.7
20.9
0
20
40
60
80
100
>55
40-<55
25-<40
17-<25
<17
by Education Level
11.7
20.8
35.3
15.6
14.8
1.7
0
20
40
60
80
100 University
Senior high school/eq.
Junior high school/eq.
Primary school/eq.
Did not complete primary school
Never go to school
by Gender
42.3
57.7
Male Female
by Religion
2.8
21.3
21.5
54.4
0
25
50
75
100
Moslem
Catholic
Protestant
Marapu
Figure 5: Economic Characteristics of Surveyed Households of Migrant Worker (in Rupiah or %)
Income Level
by Urban-Rural
< 5 mln
5-<10 mln
10-<14.6 mln
14.6-<29.2 mln
>29.2 mln
Rural Urban
Expenditure Level
by Urban-Rural
< 5 mln
5-<10 mln
10-<14.6 mln
14.6-<29.2 mln
>29.2 mln
Rural Urban
26
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 2Profi le of Surveyed Migrant Workers and Their Households
Poverty Line
by Urban-Rural
25.0 19.2
75.0 80.8
Urban Rural
Below Above
by Field of Work
67,5
32,5
Agriculture Non-agriculture
by Type of Work
1.0
2.5
4.2
14.4
22.5
55.3 Self employed
Freel anceworker/Casuall abor
Unpaid familyworker
PrivateE mployed
Governmentemployed
Employer
66.7
12.9 11.8 8.7
Farming
Service
Trade
Other
Another important feature of these households is that gross indebtedness is already moderately high (see
Table 6), although roughly in line with the representative national average reported in World Bank 2009b.
For most socio-economic groups, total outstanding debt ranges from 13-27% of annual income. For the
poor (that is, for those below the poverty line), total household debt is 21% of annual income, which is
appreciably above average levels of indebtedness (17 ½%).
Table 6: Indicators of Indebtedness of Surveyed migrant workers’ Households
Total Household
Indebtedness* (in Rp)
Average Yearly Household
Expenditure (in Rp)
Debt/Expenditure
(in %)
Amount 4,429,599 25,300,000 17.5
- Rural 4,045,027 25,900,000 15.6
- Urban 6,167,711 22,600,000 27.3
- Male 5,539,220 23,200,000 23.9
- Female 3,546,502 26,900,000 13.2
- Above poverty line 4,951,399 28,700,000 17.3
- Below poverty line 2,042,748 9,672,286 21.1
* Loan amount = household total loans from all sources.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
27
Chapter 2Profi le of Surveyed Migrant Workers and Their Households
These levels of gross indebtedness constitute a sizable burden for households. For example, at typical rates
of interest (say 35%; see Section 4.5), the average household needs to spend roughly one tenth of its income
on interest payments, if it can continually rollover its short-term debt. If the principal has to be re-paid, about
a quarter of an average household income will be assigned for the servicing of the dead in that year. For
the poor (that is, those below the poverty line; see Table 6) the situation is even more troublesome, because
debts are larger in proportion to income and the interest rates will probably be considerably higher. If
their short-term debt cannot be rolled over, the poor may be required to dedicate up to a third of a year’s
household income to the repayment of debt.
From a policy point of view, it is a risky strategy to increase access to credit, if borrowers are already having
diffi culty meeting their obligations. It would be a safer strategy to reduce the costs associated with servicing the
debt by increasing their access to lower-cost fi nancing. For example, it may be an eff ective strategy to promote
the use of a bank or MFI, rather than the village money lender.
Amenities of surveyed households are summarized in Figure 6.25 The Survey indicates that the great
majority of households with migrant workers own their homes, with access to electricity. More than half own
a mobile phone, which stands in sharp contrast to the very limited availability of telephone land lines. Water
sources are predominantly wells or lakes and streams, with less than a quarter of these households obtaining
water through a public service provided by the government water company (PDAM/PAM) or similar service
provider. The most common building materials are tile roofs; cement fl oors; and brick walls (see the lower
panel of Figure 6).
This Survey also collected information on the fi nancial interests and math skills of respondents.26 The vast
majority (85%) of survey respondents—of both genders—indicate an interest in fi nancial issues (see the top
panel of Figure 7); a third or more say that they often follow fi nancial issues closely, with a slightly higher
proportion for males. Their main sources of information on fi nancial issues are their friends and relatives and
radio or television.
Test results of these households’ fi nancial literacy and math scores compare quite unfavorably with those of
the broader population (see the lower panels of Figure 7). The respondents’ test scores were, on average,
about 10 points lower than for the national average, and they scored lower in every category reported in
Figure 7.27 Financial literacy is higher among urban households and households with a bank account, while
gender diff erences are minor. Math scores are low and relatively homogeneous. As for fi nancial literacy,
households with a bank account score appreciably higher on the math test than non-savers.28
25 By province, East Java has much better access to electricity and phone service (both landlines and mobiles). NTT is markedly worse off in almost all categories.
26 All respondents to the Household Survey were administered a set of simple questions on mathematics and interest rates. The answers yielded the math and fi nancial literacy scores, respectively, which are reported in Figure 7. Data on the national average (used in the lower panels of Figure 7) are drawn from World Bank 2009b.
27 By region, NTB scored lowest in every category.
28 In this context, a ‘non-saver’ has neither a formal or informal savings account.
28
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 2Profi le of Surveyed Migrant Workers and Their Households
Figure 6: Household Amenities of Surveyed Migrant Worker Households ( in%)
House Ownership
89.5
0.4 10.1 Own
Rent
Resident withoutrent
Do You Have Electricity?
Landline Phone
2.3
97.7
0255075
100
Have Don'th ave
Mobile Phone
0 20 40 60 80 100
Have Don't have
41.9 58.1
Water Source
6.611.0
13.321.1
48.0 Well
Lake/stream
Public hydrant
0 10 20 30 40 50
Main Material of Floor
0.04
15.8 18.1 18.4
47.7
01020304050
Other Soil Tile Wood/bamboo Cement
Main Material of Roof
47.2
40.3
12.5
Tile Tin Other
Main Material of Wall
0.5
0.2
0.1
0.10.1
BrickBambooWoodLime stoneOther
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
29
Chapter 2Profi le of Surveyed Migrant Workers and Their Households
Figure 7: Financial Interest & Literacy of Surveyed Migrant Worker Households ( in %)
Interest in Fin. Issues
14.9
15.5
85.1
84.5
Male
Female
Interested Not Interested
0 20 40 60 80 100 10.5
11.1
48.4
53.6
41.1
35.3
Male
Female
Often Seldom Never
0 15 30 45 60
Sources of Fin. Info
0.22.93.44.3
7.857.9
74.5
OthersRelated institution
Adverti sementMagazines, books
NewspaperRadio/TV
Friends& rel atives
0 20 40 60 80 100
Fin. Literacy Avg. Level
by Urban Rural
0.42 0.47
0.470.60
00.250.500.75
1.0
Rural Urban
TKI
Nationwide
Fin. Literacy Avg. Level
by Gender
00.250.500.75
1.0
0.42 0.44
0.50 0.54
Female Male
TKI
Nationwide
Fin. Literacy Avg. Level
by Savings Ownership
00.250.500.75
1.0
0.39 0.51
0.410.62
Non-savers Bankaccount
TKI
Nationwide
Avg. Math Score
by Urban Rural
00.250.500.75
1.0
0.69 0.69
0.77 0.86
Rural Urban
TKI
Nationwide
Avg. Math Score
by Gender
00.250.500.75
1.0
0.67 0.70
0.79 0.83
Female Male
TKI
Nationwide
Avg. Math Score
by Savings Ownership
00.250.500.75
1.0
0.65 0.75
0.710.89
Non-savers Bankaccount
TKI
Nationwide
30
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 2Profi le of Surveyed Migrant Workers and Their Households
2.4 Profi le of the migrant workersThe following subsection contains the story of a typical Indonesian migrant worker of the sort survey, in Box
2. Issues related to recruitment are covered in Box 3.
Box 2: Portrait of the Typical Migrant Worker
Bela Dapa Bulu, a composite character, is a thirty-year old, single mother of three from Kupang, NTT. Despite barely
fi nishing primary school, she can read and write well in Bahasa Indonesia and she speaks a little English.
Bela had heard of work opportunities overseas from her friends and she was easily recruited by an agent who
works for a Jakarta-based international employment agency (PPTKIS) with an offi ce in Kupang. Originally, she left
NTT almost 5 years ago, looking for a better way of life, working as a domestic helper with legal status in Malaysia.
However, she is fi nding the search for a better life to be elusive. Bela’s employer has treated her well enough during
this, her second contract. But her take-home pay still is not as much as she had hoped; the children in her care are
spoiled and she does not dare to discipline them; she gets very little time off ; and she misses her children, especially
her teenage daughter. All of Bela’s children are currently living with their grandparents in Kupang.
Still, Bela considers herself to be lucky because she has heard terrible stories of mistreatment among her friends,
especially the illegal newcomers. Bela fi nds that if she is careful with her money, she is able to send home a few
million rupiah every few months and she knows that her children and parents rely heavily upon her earnings. None
of them has a regular job that pays as well as hers, and the money that she sends provides her with considerable
status back in the village.
Looking back, Bela recognizes that life has been easier during her second contract. She has repaid most of her
debts and learned the pitfalls to avoid (like borrowing excessively from the village loan shark in Kupang). Also, she
has learned to cope with the confusing, intimidating processes that banks use for moving money between places
like Malaysia and Kupang. It would have been very helpful if she had been better prepared for these processes
before her fi rst contract, because she had to learn so many things on her own.
On balance, Bela remains hopeful for the future, especially for her teenage daughter who will be better prepared to
follow the same path in a few more years.
Box 3: Key Features of the Recruitment Process for Migrant Workers
The process of recruitment of legal migrant workers appears simple enough, but it is important to understand
certain institutional and licensing details, presented below.
From the villagers’ viewpoint, the key player is a local recruitment ‘agent’ or ‘sponsor’, who may work independently
or for a so-called PPTKIS.a/ b/ In due course, the agent turns the would-be migrant worker over to a PPTKIS whose
main functions are:
• To receive placement requests from overseas clients;
• To recruit migrant workers in Indonesia;
• To prepare all necessary documentation for migrant workers (e.g., ID card, family card and passport); and
• To provide training, especially for those who plan to work as household domestics.
Depending on the type of job and the timing of the job order from overseas, migrant workers usually stay at the
PPTKIS’s training center (with accommodations for migrant workers) for 2 ½ to 9 months before departing for the
destination country. The training includes 1 or 2 days of familiarization with fi nancial matters, near the end of the
training period. The available information indicates that PPTKIS normally work with counterpart hiring agencies in
host countries.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
31
Chapter 2Profi le of Surveyed Migrant Workers and Their Households
Box 3: next
According to government offi cials, there are roughly 900 PPTKIS, which are privately owned. The vast majority have
head offi ces in Jakarta and regional offi ces throughout the country. The PPTKIS are organized into 4 associations of
PPTKIS, mainly it seems for purposes of internal coordination. Both the PPTKIS and their associations are licensed
and supervised by the Department of Manpower and Transmigration, which is under the umbrella of the Economic
Coordinating Minister.
a/ PPTKIS = Pelaksana Penampatan Tenaga Kerja Indonesia Swasta (Privately Owned Indonesian Placement Agency). b/ Interviews with government offi cials indicate that independent sponsors are declining in numbers. Apparently, they
are being recruited to work as representatives for specifi c PPTKIS.
The key attributes of surveyed migrant workers are presented in Figure 8. To summarize the details very
briefl y, the migrant workers closely refl ect the surveyed households, described above. Most are poorly
educated females from East Nusa Tenggara (NTT), followed by West Nusa Tenggara (NTB) and East Java. For
the most part, they are bound for the Asia-Pacifi c region followed at a distance by the Middle East, usually as
legally registered workers. Roughly half are on their fi rst contact.
Figure 8: Key Characteristics of Surveyed Migrant Workers (in %)
by Province
20.5
29.9
49.6
East Java
West NusaTenggara
East Nusa Tenggara
by Regional Destination
20.5
79.5
0
20
40
60
80
100
Middle East
0 20 40 60 80 100
by Gender
38.4 61.6
Male Female
Freq. of Working Abroad
by Gender
48.5 56.0
51.5 44.0
0255075
100
Male Female
First time Repeater
32
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 2Profi le of Surveyed Migrant Workers and Their Households
Freq. of Working Abroad
by Destination
41.356.158.7
43.9
015304560
Middle East
First time Repeater
Level of Education
by Gender
0.6
14.9
42.3
24.4
16.6
1.2
0.4
9.0
42.7
28.9
18.5
0.4
Never go to school
Inc. prim. school
Primary school
Junior high school
Senior high school
University
Female Male
Legal Status
by Working Sector
4.7
8.0
5.7
15.6
64.6
5.2
10.7
21.9
33.3
24.6
Other
Service
Construction
Plantation
Domestic
Illegal Legal
Legal Status
by Destination
95.459.9
4.6 40.1
0
25
50
75
100
Middle East
Legal Illegal
Legal Status
by Gender
26.074.063.7
36.30
255075
Male Female
Legal Illegal
Continuing with some detail, half of the survey of migrant workers come from NTT; 30% from NTB; and the
rest from East Java. In terms of their destination, 80% were destined for the Asia-Pacifi c region (dominated by
Malaysia) and the remainder to the Middle East (mainly Saudi Arabia).29 Over 60% are female.30
The typical migrant worker tends to be poorly educated (see the rightmost middle panel in Figure 8).
Approximately 10% have not completed primary school and slightly more than 40% have completed only
primary school. Considerably smaller proportions (25% and 17% respectively) have completed junior and
senior high school. At the extremes of the education scale, very few have completed university or never
attended school.
29 As a matter of regional variation, it’s particularly notable that virtually all migrant workers from NTT go to destinations in the Asia-Pacifi c region.
30 This percentage is appreciably lower than the 80% cited in World Bank 2009b, Section 5.2.1. It probably refl ects the particular characteristics of NTT and NTB, namely large numbers of illegal MWs who are usually males.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
33
Chapter 2Profi le of Surveyed Migrant Workers and Their Households
In terms of the number of times that they have travelled abroad to seek employment (the middle panel
of Figure 8), about half are repeat overseas workers, with repeat trips being more common to Middle East
destinations and more common among men. By province of origin, repeat terms abroad are more common
amongst workers from East Java (74%) and less common amongst those from NTT (32%).
In terms of the type of employment with which the migrant workers are involved, amongst legal placements,31
the Survey indicates that the vast majority of migrant workers are employed as domestic helpers (almost two
thirds of the total), followed at a distance by plantation workers and workers in various service industries. The
spread amongst illegal migrant workers is much more even, with workers in this category being employed
on plantations, as domestics, and in the construction and the service industries. By gender, men are much
more likely to work illegally, with illegal migrant workers being far more common in the Asia-Pacifi c region
than the Middle East. In terms of province of origin, the incidence of illegal migration is highest in NTT,
where 45% of migrant workers are illegal.
2.5 Strategic Matters Arising in this Chapter Key Economic Characteristics of the Survey Villages: The key economic characteristics of the surveyed
villages are low levels of income and limited education. In the shorter-term and despite low incomes, the
fi nancial sector could be more eff ective in meeting the needs of migrant workers. For example, 96% of
the surveyed villages have access to a mobile phone. This may constitute an important prerequisite for
participation in mobile banking, which is still not developed to its full potential for this group.
At present, and no savings are held in a savings account at a government bank (usually BRI’s Unit Desa) with
private banks being barely represented. This indicates the potential for private banks in this market, if they can
be convinced that migrant workers are a commercially viable market segment. At the same time, the fact
that most banks used by migrant workers are owned by the government provides the government with a
direct instrument for introducing some of the policies described in Chapter 6.
Characteristics of Migrant Worker Households: Surveyed migrant worker households characteristics are
essentially the same as those of their villages. In addition, their gross indebtedness is already moderately high,
which limits the room for policies designed simply to increase their credit. Curiously, the majority of migrant
worker households own their own home, which ought to provide the collateral necessary for substantial
access to credit. However, for reasons described later, this is not the case.
Key Characteristics of Migrant Workers: The survey indicates that migrant workers’ key characteristics
refl ect those of their villages and households. The majority is females who face many specifi c problems
that are well documented elsewhere (e.g., World Bank 2008b). Also, the majority of migrant workers work
in the Asia-Pacifi c region, which means that regional associations (such as APEC and ASEAN) are viable forums
for raising migrant worker issues. Another key characteristic is that roughly half of migrant workers are on
their fi rst contract. This has implications for initiatives such as fi nancial literacy training, because, given the
large number of workers going overseas every year, it points to the magnitude of the problem. Specifi cally, it
indicates that approximately 350,000 persons would need to be given some initial training every year.
31 Legal migrant workers are defi ned as those who register as a migrant worker to Ministry of Manpower and Transmigration, and hold a proper migrant workers’ passport and working permit in the destination country.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 3
Migrant Workers and Financial Services
3.1 IntroductionBecause of the manner in which they live and work and because of the economic role they play, migrant workers require a range of specifi c fi nancial services to meet their needs.
The fi nancial needs of migrant workers can be divided into three categories (Figure 9). First, migrant workers have pre-departure needs, most notably for fi nancing their up-front costs (see Section 3.2). They have needs for particular fi nancial services during their time abroad. The most important of these are services to send money home (Section 3.3). Finally, migrant workers have post-migration needs (savings, credit and investment), which discussed together with the issues related to Migrant Workers Households’ Uses of Financial Services in Chapter 4.
Figure 9: Migrant Workers’ Needs for Financial Services
SavingsCredits
PostMigration
DuringMigration
Pre-Departure
Remittance ChannelSavingsInsurance
CreditsSavingsInsurance
36
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 3Migrant Workers and Financial Services
3.2 Pre-Departure Costs & FinancingMigrant workers face signifi cant up-front costs before their departure to work abroad. Pre-departure
costs vary widely, mainly depending upon destination country (see the upper left panel of Figure 10).32
Evidence from this Survey indicates a median fi nancial cost of roughly Rp 2.5 million (an average of near Rp4
million), which appears to be on the low side.33 Migrant workers also bear signifi cant costs in terms of their
investment of time into the pre-departure processes. For example, average clearance times, or the time taken
to prepare the required documentation, are between 3-4 weeks, depending upon gender.34 For female
migrant workers, several more months may be spent at the training center of the recruiting agency (PPTKIS;
see Box 3) immediately prior to departure.
Surveyed migrant workers have a limited number of possible sources of fi nancing to cover these costs (see
the middle panel of Figure 10), with some migrant workers using more than one source. The single most
popular source of funds to fi nance pre-departure costs is personal savings, especially among repeat migrant
workers. In total, borrowing from various diff erent sources is more common than the use of personal savings.
However, no one particular source of credit predominates (the middle panel of Figure 10). Among sources of
credit, the most common is the sponsoring employment agency: that is, the PPTKIS or its agent (see immediately
below). Other signifi cant sources of fi nancing are friends; family; and employers. Sale of assets ranks low on
the list, while borrowing from banks is at the very bottom of the list.
As surveyed, there are some notable exceptions concerning fi nancing. For example, females are far more
likely than males to borrow from the sponsor or the employer, possibly because such a high proportion of
the males of the surveyed households are illegal migrant workers. Also, repeat migrant workers are much
more likely to use their accumulated savings as a source of fi nancing, which implies that the fi rst work
session abroad has allowed them to accumulate some savings. Conversely, repeat migrants are less likely to
borrow from the sponsor or the employer.
Among those who do borrow, the size of borrowing (relative to fi nancing needs) is consistent across available
breakdowns (see the bottom panel of Figure 10). Namely, migrant workers borrow about 80% of their fi nancing
needs. Males, illegals, repeat migrants and those headed for the Middle East tend to borrow slightly less than
80%.
Female, fi rst-time migrant workers are particularly likely to borrow funds from the PPTKIS (or its agent). Typically, migrant workers repay these loans through deductions from their salaries during the early months of the work contract. This source of fi nancing is controversial, essentially because some researchers have indicated very high eff ective rates of interest. As discussed in Box 4, analysis here indicates that eff ective interest rates are indeed very high, with the cost structure being complicated. Lower costs would markedly benefi t migrant workers because this is such a common source of fi nancing for vulnerable groups, like women and fi rst-time migrant workers. Options are presented in Box 4 and Chapter 6.
32 These include: the administrative cost of a passport; government levy and working visa for the destination country; medical exami-nation fees; insurance; transportation; and fees for the domestic and foreign recruitment agencies.
33 World Bank (2009b) estimates a nationally representative range of US$335 to US$950 for legal workers. This is some 25-50% higher than cited in the main text. Locational diff erences associated with NTT and NTB do not appear likely to account for this discrep-ancy because NTT and NTB are relatively remote, which should push up travel costs.
34 On average, males have a shorter clearance time, because many are illegals.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
37
Chapter 3Migrant Workers and Financial Services
Box 4: Financing Pre-Departure Costs
If the MW cannot aff ord to pay pre-departure costs from her own savings, she may face problems. Recruitment
fees are high (typically in the range of US$1,200 to US$2,000 for workers in the informal sector, according to Bank
Indonesia; World Bank estimates are roughly half of these amounts). Sources of fi nancing are limited and probably
expensive. For example, comparing recruitment costs with total salary deductions reported by Bank Indonesia,
there is a wide range of eff ective interest rates, some of which seem extremely high, of the order of 15-20% per month.
These are in line with rates reported by MICRA 2008 (p.24), namely 10-20% per month.
Reliable estimates of implicit interest rates require far more detailed information by country than was available for
this study. However, the limited available information does provide insights into one fi nancing scheme for a mid-
sized Asian destination. The following points are relevant in examining the cost structure of this particular source
of fi nancing:
• The loan principal essentially covers recruitment fees, of which roughly 80% goes to the PPTKIS. The remaining 20% goes to the service agency in the host country.
• The nominal interest rate on the loan is low, some 10% per annum and the tenor is 1 year.
• There are additional fees of another 5% and a ‘guarantee fee’ (of the same tenor as the loan) equivalent to
an annual interest rate of about 50%. This guarantee fee protects the lender against risks that the migrant
dies, runs away, is deported, etc. before the loan is repaid. However, if all goes well, the money is paid in full
to the migrant at the end of the work contract.
• In total, these various deductions amount to an annual interest rate of some 65% per annum, with the great
bulk accounted for by the ‘guarantee fee’, which is eff ectively forced savings.
The migrant worker has other large deductions from her salary, too. These include various host government taxes
and admin fees, some of which are paid up-front. In total, these deductions amount to approximately 2/3 of the
size of the migrant’s fi nancing costs noted above.
Taking all this into account—and because many of the costs are front-loaded—the migrant’s average ‘take-home’
pay is barely one third of her gross salary in the fi rst year of the contract. During subsequent years, deductions are
small (insurance and a few taxes), leaving take-home pay at about 85% of gross salary.
To reduce these deductions in a signifi cant way, four options look feasible:
1. Reform of the PPTKIS system to reduce recruitment costs and improve performance (see Chapter 6);
2. Extend the tenor of the loan to match the tenor of the migrant’s contract;
3. Have an external third party (see Chapter 6) guarantee the loan, thereby eliminating the ‘guarantee fee’;
and
4. Spread the costs over a longer time period, by increasing the migrant’s initial contract by an additional year
(in general, from 2 to 3 years).
It would also be helpful if the PPTKIS were to itemize costs for the MW, before a fi nal agreement is reached.
38
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 3Migrant Workers and Financial Services
Figure 10: Surveyed Migrants’ Pre-departure Costs & Financing (in %, except as indicated)
Frequency Distribution of Total Departing Cost
Total Departing Cost (IDR ,000)
Fre
qu
en
cy
0200
400600
800
0 5000 10000 15000 20000 25000
ClearanceT ime
by Gender (in weeks)
34
01.32.53.85.0
Male Female
Clearance Time
by Legal Status (in weeks)
2
5
01.32.53.85.0
Illegal Legal
Sources of Financing
0 10 20 30 40
Borrow from bankGiven by parents
OtherDon't know
Sale of assetsBorrow from employer
Borrow from familyBorrow from friends
Borrow from sponsorPersonal savings
Sources of Financing
by Freq. of Going Abroad
0 10 20 30 40 50
Repeater First Time
Borrow from bankGiven by parents
OtherDon't know
Sale of assetsBorrow from friendsBorrow from family
Borrow from employerBorrow from sponsor
Personal savings
Sources of Financing
by Gender
0 15 30 45 60
Female Male
Borrow from bankGiven by parents
OtherDon't know
Sale of assetsBorrow from friendsBorrow from family
Borrow from employerBorrow from sponsor
Personal savings
by Destination
82.4 79.2
17.6 20.8
0255075
100
Middle East
100% Below 100%
by Freq. of Working Abroad
78.7 82.0
21.3 18.0
0255075
100
First time
100% Below 100%
Repeater
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
39
Chapter 3Migrant Workers and Financial Services
by Legal Status
79.0 83.3
21.0 16.7
0255075
100
Legal Illegal
100% Below 100%
by Gender
83.0 78.6
17.0 21.4
0255075
100
100% Below 100%
An interesting initiative in pre-departure credits is underway in East Java. According to World Bank fi eld
reports, Bank JATIM (The East Java Regional Development Bank, a BPD) is off ering credits through PPTKIS
located around Surabaya and Sidoarjo, in amounts that range from Rp 5-20 million, depending upon the
destination country. The interest rate charged by Bank JATIM is 6% per annum. Not surprisingly, at this price,
the product is proving very popular with the total value of credit is growing by as much as 100% per annum
in recent years. According to press reports, Bank JAKTIM’s target was to provide fi nancial services of this kind
to 5,000 migrant workers in 2008, a signifi cant increase from the average of previous years.
More details35 are needed before an assessment can be made of this program. It would be very useful
to track loan repayment records over several years in order to determine the likelihood of achieving self-
sustainability. If the program proves successful, it will be an important example of a commercial initiative
into the fi eld of fi nancial services specifi cally intended to meet the needs of migrant workers, very diff erent
from the subsidized credit provided by other programs that have failed in the past.
3.3 RemittancesThe broad characteristics of Indonesian workers’ remittances are presented in Figures 11 and 12. The fi gures
show that just over two thirds of Indonesian migrant workers remit money (or something of value) at some
time during their time abroad, usually on special occasions. The typical amounts are small, which means that
the costs associated with sending them in are relatively expensive. On average, a slightly higher proportion of
males make remittances than females (72% versus 66%), but the value of females’ average remittances is
higher.
In addition to this, just over half of migrant workers remit only on special occasions and a relatively small
percentage (13%) remit only once. Among those who remit regularly,36 the most signifi cant proportion
makes remittances once every 3-4 months. Males tend to remit more frequently than females; females
remit more often on special occasions and are more likely to carry money home on return trips. Decisions
regarding the method of remittance are generally made by the migrant worker, and the main criterion is
convenience, with convenience of the recipient dominating those of the sender (Figure 11).
The average size of the remittance is quite low, about Rp 2 million (about US$200), although there are some
notable variations in the value of remittances (see the middle panels of Figure 11). For instance, the average
remittance by females is almost twice as large as that of males, which off sets the tendency of males to remit
more frequently. The average value of remittances from destinations in the Middle East are much higher
than from the Asia-Pacifi c region; legal workers remit much more on average than illegal workers; and repeat
females remit more than others.
35 For example, the extent to which this highly subsidized interest rate is shared between the PPTKIS and the MW. Also, there is the matter of guarantees, if any, through government agencies.
36 By region, migrants from East Java remit signifi cantly more frequently than the others, often once per month.
40
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 3Migrant Workers and Financial Services
As for cost, there is a wide range depending upon the type of service provider (Table 7). Services provided by the
Post Offi ce (data available only for Malaysia) are the cheapest, with charges equal to approximately 4½% of
the value of a small remittance, of about US$200. However, this method is also the slowest, requiring about
a week after remittance to reach its destination. Money transfer agents (such as Western Union or Money
Gram) are the fastest (normally same day service). These services are usually price competitive with those
provided by banks, which are the most expensive of all and generally take a couple days.
Table 7: Cost of Remitting to Indonesia (Cost in %)1/
SourceAverage
Cost
Average Cost
Via Bank
Average Cost
Via Money
Transfer Agent
Malaysia 7 ¼% 10 ¼ % 5 ½%
Singapore 6 ½% 9 ½% 6%
The Netherlands 12% 10 ½% 13 ½%
United States 8 ½% N/A 8 ½%
1/ Cost for small transfer, of roughly US$200.
Source: World Bank; http://remittanceprices.worldbank.org/RemittanceCosts/?to=90
By international standards, the cost of remitting funds to Indonesia is about average, at least among the few
available, direct comparators (Table 8). Among the comparators, it is notable that Pakistani banks do not
charge for remittances made from abroad to Pakistan (see World Bank (2009a), Chapter 5). Indonesia might
consider encouraging the development of this model, treating the transaction as a public service obligation,
for which banks are reimbursed by the government (see Chapter 6).
Table 8: International Comparison of Remittance Costs (Average Cost, in %)1/
Source:Destination:
Indonesia Turkey Philippines China India Pakistan
Singapore 6 ½ n/a n/a 6 4 ½ n/a
The Netherlands 12 11 ½ n/a n/a n/a n/a
United States 8 ½ n/a 7 12 ½ 4 ½ 9 ½
1/ Cost of a small transfer, roughly US$200; for Pakistan, $300 (average of banks and money transfer agents).
Source: Table 5.7, World Bank (2009a) and http://remittanceprices.worldbank.org/RemittanceCosts/?to=90
With the cost of making a small remittance amounting to approximately 5-13% of the value of the remitted
sum (Table 7), it clearly pays for the migrant worker to shop around for the cheapest means of transfer.37 However,
cheap services may not be available at all, or there may be constraints in a way of using these services. For
example, illegal workers often make small remittances and have trouble accessing formal channels. The
policy answer is to encourage lower-cost means for transferring money. This could utilize innovative technologies
to facilitate mobile banking. Issues and opportunities in this area were discussed in detail in Section V.3
of World Bank report (2009b) and will not be repeated here. However, the policy issues currently appear
complicated (see Box 5) and may take considerable time to resolve. T-cash, Telkomsel mobile wallet service,
has domestic transfer ability in the form of airtime but with limited38 amount per month.
37 As another small example of the benefi ts from shopping around, MoneyGram has recently introduced a rewards program whereby members receive, among others, a 5% discount on money transfer fees. This is useful information for MWs, but most would be unaware of it.
38 For registered costumer (comply with KYC) has maximum of IDR 5 million transactions per month, with daily maximum limit of IDR 200,000.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
41
Chapter 3Migrant Workers and Financial Services
Box 5: Indonesian Migrant Workers and Issues Concerning Mobile Banking
Mobile phone technology has great potential to extend accessibility to fi nancial services. Amongst other such
services, it could act as a vehicle for MWs’ remittances. It could off er the unbanked population access to fi nancial
services easily, cheaply, conveniently and securely through a popular, existing delivery channel.
The examples of Kenya, the Philippines and South Africa illustrate the technology’s potential (see World Bank
2009b, Section 5.3.1). Indonesia is moving ahead quickly with mobile banking services, but there are few examples
to date of the successful provision of fi nancial services to low-income Indonesians through branchless banking.
Some of the reasons are related to existing regulations. These and other issues this signifi cance extends beyond
the provision of services merely to migrant workers are discussed in greater length elsewhere (World Bank 2009b,
Section 5.3.2).
In terms of issues directly impacting migrant workers and their remittances, person-to-person fund transfers
through mobile banking services are allowed in some countries under current regulations. Reports indicate that
Pilipino migrant workers in Singapore, Hong Kong and the Middle East send home millions of US dollars every
month over mobile banking networks. The same situation could unfold in Indonesia, if the regulatory framework
were to permit.
According to recent research by the IFC, Telco-led mobile banking players in Indonesia are not allowed to conduct
person-to-person funds transfer; only bank-account-to-bank-account transfers are permitted. Operating within
this framework, Maxis, a cellular operator in Malaysia, provides remittance services to Indonesian migrant workers
in Malaysia and Singapore. Indonesian migrant workers in the two countries can use Maxis services to remit money,
provided that the recipient has a bank account in one of 5 banks that cooperate with Maxis in Indonesia. At the
same time, two operators in Indonesia were working on a pilot with Indonesia banks to allow Indonesian migrant
workers in Malaysia and Hong Kong to remit money using Indonesian mobile operators.
To make further signifi cant progress, mobile operators would need to be allowed to take two large steps. First,
to make person-to-person transfers (with the incoming transfer stored electronically on the mobile phone). And
second, to build a chain of (non-bank) cash-out agents to allow for convenient cash withdrawal. This currently looks
diffi cult, owing in part to Know Your Customer regulations and concerns over terrorism fi nancing. To accelerate the
process, there may be a role a pilot program of some type, possibly in the form of a public-private partnership.
Source: World Bank 2009b, Chapter 5.
42
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 3Migrant Workers and Financial Services
Figure 11: Characteristics of Remittances as Surveyed (in%, except as indicated)
Ever remitt money?
31.6
68.4
No Yes
Freq. of Remittance
0 15 30 45 60
Not appliedCarried on return trips
Once in one yearOther
Every 6 monthsEvery 2 months
Every monthOnly once
Once every 3-4 monthsOnly on special occasions
Who decides remittance channel?
0.1
0.3
0.3
4.3
17.7
77.4
Hiring company (PJTKI)
Others
Sponsor
Family in Indonesia
Employer
The migrant him/herself
Avg. Remittance Value
by Gender (in IDR)
1.500.000
2.700.000
0
1.000.000
2.000.000
3.000.000
4.000.000
Male Female
Avg. Remittance Value
by Regional Destination (in IDR)
1.500.000
4.000.000
0
1.000.000
2.000.000
3.000.000
4.000.000
Middle east
Avg. Remittance Value
by Legal Status (in IDR)
1.000.000
3.000.000
0
1.000.000
2.000.000
3.000.000
4.000.000
Illegal Legal
Time Bef. 1st Remittance
by Gender (in months)
68
0
3
6
9
12
Male Female
Time Bef. 1st Remittance
by Freq. of Working Abroad (in months)
6
11
0369
12
Repeater First time
Time Bef. 1st Remittance
by Regional Destination (in months)
69
0369
12
Middle east
Time Bef. 1st Remittance
by Legal Status (in months)
79
0
3
6
9
12
Illegal Legal
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
43
Chapter 3Migrant Workers and Financial Services
Figure 12: Characteristics of Remittances as Surveyed , continued (in%, except as indicated)
Method of Money Transfer
0 15 30 45 60 75
OtherInformal money transfer agent
Bank cheque through air mailWestern Union
Carry own on return tripsThrough relatives or friends
Bank wire transfer
Who received the money?
50.646.5
2.9
Family member Account Mediator Other
Criteria for Choosing Method of Transfer
0 15 30 45 60
otherFlexibilityReliability
CostSender convenience
SecuritySpeed
Recipient convenience
Reason to Use
Bank Wire Transfer
otherFlexibilityReliability
CostSender convenience
SecurityRecipient convenience
Speed
0 14 28 42 56 70
Reason to Remitt
Through Relatives or Friends
0 14 28 42 56 70other
FlexibilityCost
SecurityReliability
SpeedSender convenience
Recipient convenience
Reason to Remitt
by Carrying Own Money
0 15 30 45 60
otherFlexibility
CostReliability
SpeedSender convenience
Recipient convenienceSecurity
Problems in Remitting
by Types of Transfer Method
0 14 28 42 56 70
Mailed bank cheque
Bank wire transferWestern Union
Informal MTAOther
Carry own on return tripsThrough relatives/friends
Problems in Using
Bank Wire Transfer
0 10 20 30 40 50
OtherLack of legal doc.
Fin./bank illiterateCost
Distance
Time
Bad service
OtherBad service
Lack of legal doc.Fin./bank illiterate
Time
Cost
Distance
Problems in Using
Relatives/Friends Channel
0 15 30 45 0 15 30 45 60
OtherLack of legal doc.
Bad serviceDistance
TimeCost
Fin./bank illiterate
Problems in
Carrying Own Money on Return Trips
44
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 3Migrant Workers and Financial Services
The Survey indicates it takes slightly longer than seven months before the average migrant worker makes
the fi rst remittance, but again there is some important variation (see the lower panel of Figure 11). For
example, females take longer than males to make their fi rst remittance, perhaps refl ecting their greater
reliance (noted earlier) on more costly sources of loans and their lower-paid jobs.39 Repeat migrant workers
make their fi rst remittance relatively quickly, probably indicating more familiarity with the process and less
reliance upon expensive sources of fi nancing. Illegal workers remit faster than legal workers, suggesting that
dire needs at home motivate their decision to work abroad outside the law. Perhaps surprisingly, the wait
before the fi rst remittance is much longer in the Asia-Pacifi c than in the Middle East.
Concerning the type of service used to make remittances (Figure 12), electronic bank transfers are by far
the most popular remittance vehicle. Friends or relatives are the second choice, followed by carrying the
remittance on return trips. Other vehicles (such as Western Union, the Post Offi ce or informal agents) are
relatively uncommon. Most of the time, a family member picks up the money, but it is also common to use
an account mediator.
The main criteria for choosing one service rather than another are: convenience (with recipient convenience
ranked as a more important factor than convenience for the sender); speed; and security. Cost is ranked relatively
low down the list. These rankings are fairly consistent across vehicles, a notable exception being the perceived
security of carrying the money on one’s person during a return trip (see the middle panel of Figure 12).
Most problems are encountered through the use of one or the other of two of the more popular vehicles,
namely friends and relatives and carrying the money on one’s person (see the lower panel of Figure 12).40
The least troublesome, electronic bank transfer, is also the most popular. For the relatively small proportion
of recipients reporting problems with bank transfers (less than 8%), the most common complaints are poor
bank service, cost and implicit costs. Importantly, fi nancial literacy and lack of legal documentation rank
lower on the list. These results suggest that bank transfers already work relatively well as a vehicle for making
remittances. Assistance to migrant workers in remitting would be better focused on raising awareness of the
risks of—and alternatives to—remitting via friends and relatives and carrying sizable amounts of money on
one’s person. Financial literacy training may play a role in raising such awareness.
Once the funds arrive back in the village, questions arise as to the use of the money (see Figure 13). Decisions
in this regard are almost always made by the head of household or by the sender, with the head of household
tending to dominate. The greatest proportion of respondents (53%) stated that the remittance was used to meet
daily needs, refl ecting the high incidence of poverty and acute need in these villages. Other signifi cant
uses remittances were reported to be loan repayment (15%) and various forms of real asset accumulation,
typically housing (about 15%). Emergencies, such as health care expenses, don’t rank high on this list, and
business investment is very low.
Roughly 25% of surveyed households say that they save remittances (lower left panel of Figure 13). This
looks high, but casts no light upon the amounts actually saved. Indeed, it seems very likely that only a
small amount is actually saved, in which case the implied overall saving rate is very low, perhaps only a few
percentage points.41 Among those who do save, saving accounts and other vehicles provided by banks are by far
the most popular choice, but approximately 15% of respondents state that they prefer to keep the money
39 According to Bank Indonesia’s 2008 Remittance Survey of Migrant Workers (p.36), female migrant workers earn roughly 2/3rds as much as males (an average of Rp1 to 1½ million per month versus 1½ to 2 million per month). No information is available on benefi ts, for example, room and board normally provided to household workers.
40 On a regional basis, migrants from NTT had far and away the most problems with remittances. This may refl ect the fact that so many are illegals (see Section 2.4).
41 Offi cial data on personal savings rates are not available in Indonesia because the national accounts do not include any income side information. However, indirect World Bank estimates suggest a private savings rate of around 20%. Personal savings rates would be somewhat lower than private savings rates because the latter includes corporate saving, which is relatively high.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
45
Chapter 3Migrant Workers and Financial Services
at home. Other options are relatively unimportant. By far the most common (98%) reason for not saving is
because the money has all been spent on consumption.42
These reported uses of remittances together with their other characteristics (Figures 11 and 12) off er some
tentative insights into the choice of transmission mechanisms. Namely, the occasional nature of most
remittances, combined with their use for daily consumption back in the village, mean that migrant workers
tend to value the security and convenience of bank transfers, despite the relatively high cost of those
transfers. Still, it is perhaps surprising that there is not a higher rate of usage of low cost Post Offi ce transfers
for routine spending and money transfer agents for emergencies. Financial literacy training may be useful
to ensure that migrant workers are aware of their options for remitting and other benefi ts and costs of each
vehicle.
Figure 13: Use of Remittance as Surveyed (%)
57.7
37.0
5.20.1
0
15
30
45
60
Who decides on use of remittance?
Head of the household
Sender Other family member
Non-family member
0 15 30 45 60
OtherBuying motorbike
Business investmentSpecial occasions
Covering health expenseBuying asset
Payment of school feeBuilt/buy/renovate house
Loan RepaymentDaily needs
Main Use of Remittance
25.2
74.8
Yes No
78.9
15.63.4 2.2
0
20
40
60
80
100
Bank Athome
Other Coop.0.5
1.2
2.7
5.9
98.4
Other
Don't want others toborrow
Don't know how to use
Don't know how to save
All spent on consumption
Do you save the
remittance?
Where do you save the
remittance?
Why don’t you save the
remittance?
3.4 Migrant Workers and Savings AccountsThe survey shows the banks play a very important role in providing services to make transfers (Figure 12)
and to save money (Figure 14). However, there are problems that limit the eff ectiveness of banks providing
services to migrant workers and their families. For example, migrant workers with limited fi nancial literacy
may fi nd banks to be intimidating institutions (see Box 6); the hours of operation in the host country are
likely to be diffi cult for migrant workers with little free time; and considerable travel time (one hour or more,
each way) may be needed to pick up the remittance.
42 Another factor may be a bias in the questionnaire that favors fi nancial saving, rather than saving (or investing in) real assets, like housing or jewelry.
46
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 3Migrant Workers and Financial Services
One promising possibility in this regard is mobile banking (see Box 5). Another frequent proposal is to require
banks to off er a ‘no frills’ account, which would have low opening and minimum balances and small monthly
admin fees. While the number of costly services provided through this account would be limited, it could
still facilitate remittances. However, fi eld discussions indicate that many commercial banks and Peoples’
Credit Banks (also known as BPRs) already off er such a service (see the ‘BNI TKI’ and ‘e-Batara Pos’ lines in Table
9).43 Consequently, it is not clear how much additional value would be provided by requiring all banks to off er
such a service and it might create a compliance burden on banks with limited branching networks.
Table 9: Sample Savings Products Off ered by Banks and the Post Offi ce
Savings
ProductInitial Deposit Minimum Balance
Monthly
CostNotes
e-Batara Pos Rp20,000 Rp20,000 Rp1,500 - Product of BTN Bank jointly
operationalized with PT Pos
Indonesia
- ATM card available
Simpedes Rp100,000 Rp50,000 - Product of BRI Bank
- ATM card available (with an
additional monthly cost of Rp
3,000)
Tabungan
Mandiri
Rp50,000 Rp50,000 Rp9,000 - Product of Mandiri Bank
- ATM card mandatory
- Minimum deposit Rp 10,000
BNI TKI Rp10,000 Rp250 - Product of BNI
- Should be requested collectively
(minimum 10 persons) and
coordinated or recommended
by the PPTKIS
BNI Taplus Rp200,000 Rp6,000 - Product of BNI
- ATM card available
TabunganKu Rp20,000 (commercial)
Rp10,000 (BPR)
Rp20,000 (commercial)
Rp10,000 (BPR)
- BI led savings program provided
by 70 commercial banks and
more than 1,000 BPR
Source: Interview with banks & post offi ce, Cirebon, September 2007; www.posindonesia.co.id; www.btn.co.id; www.bri.co.id; www.
bankmandiri.co.id; and www.bni.co.id.
TabunganKu is a new aff ordable savings product with simple terms, condition, and no administration fees
as its main features. Released in late February 2010, this product is widely commercialized by 70 commercial
banks and more than 1,000 BPR (both conventional and sharia). Although its generic features are meant to
educate the costumer to have saving habit (has limited transaction features), banks are allowed to make
some modifi cations with incurred cost which plainly disclose to customer upfront.
A related issue is the requirement that migrant workers open a bank account before they leave the country
(see World Bank (2009b), Section 5.2). As one immediate benefi t, the account serves as proof of status for
the migrant worker, providing exemption from the Rp 1 million exit tax at the airport. However, discussions
with a key local bank indicate that the great bulk (80%) of these accounts are inactive; the migrants open the
accounts as mandated, but quickly abandon them. To meet their genuine needs for an account while
they are overseas, migrant workers simply open a new account abroad, as convenient, or make other
arrangements.44
43 Staff at a major private bank (not included in Table 9) reports a special TKI account that has zero monthly admin fees.
44 They may also make simple arrangements for transferring money home, like sending an extra ATM card back to the village.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
47
Chapter 3Migrant Workers and Financial Services
Box 6: Village Culture and Banking
A recurring theme in access to fi nance is the intimidation factor in dealing with imposing, modern banks. For
migrant workers, this doubtless stems in large part from their modest, average levels of education and their origins
in relatively poor, remote villages. But they are hardly unique, as illustrated by plight of Stephan Leacock, an English-
born Canadian author, who wrote about the same problem almost 100 years ago.
“When I go into a bank I get nervous. The clerks make me nervous; the little windows at the counters make me
nervous; the sight of the money makes me nervous; everything makes me nervous.
The moment I go through the door of a bank and attempt to do business there, I become an irresponsible fool. I
knew this before I went in, but my salary had been raised to fi fty six dollars a month and I felt that the bank was the
only place for it.
So I walked in with dragging feet and looked shyly round at the clerks. I had an idea that a person about to open an
account was obliged to consult the manager.
I went up to a counter marked ‘Accountant’. The Accountant was a tall, cool fellow. The very sight of him made me
nervous. My voice was deep and hollow.”
Disaster unfolds in this humorous short story. It is only resolved by the author fl eeing the bank’s premises.
“As the big door swung behind me I caught the echo of a roar of laughter that went up to the ceiling of the bank.
Since then I bank no more. I keep my money in cash in my trousers pocket and my savings in silver dollars in a
sock.”
Source: “My Financial Career”, Stephen Leacock, Humourist and Humanist, 1869-1944.
The migrants’ attitude indicate problems with these compulsory accounts. Also, there is no obvious reason
why exemption from the exit tax should be linked to opening a bank account; other proof of status should
suffi ce for the exemption. What is less obvious is exactly what should be done to make these accounts
more relevant to the migrant workers’ legitimate needs. At this point, there are several options that the
Government might consider. For example, the opening of the account could be made voluntary; it could
be supported by better pre-departure fi nancial literacy training, emphasizing aspects that are in the best
fi nancial interests of the migrant worker. Accounts could take the form of joint accounts with other family
members to facilitate remittances, given that convenience for the recipient is the main criterion in choosing
the vehicle for remitting (second left panel of Figure 12).
3.5 Strategic Matters Arising in this Chapter
Strategic Matters Concerning Financing Pre-departure Costs: Migrant workers have large up-front
costs, which are fi nanced most frequently from personal savings, especially among repeat migrants. This
is encouraging because it implies accumulated savings during the fi rst contract. Still, large numbers of
migrant workers borrow, with the most common source of credit being recruiting agencies (PPTKIS),
which charges very high (10-20% per month) eff ective rates of interest. The available evidence indicates
a complicated structure for these PPTKIS loans, not simply usurious nominal rates of interest. Nonetheless,
there are various options to reduce these high eff ective rates of interest. The most promising may involve
a reform of the PPTKIS licensing and supervision system and encouraging the development of lower-cost
credit to migrant workers (Chapter 6). It is also notable that among the various sources of credit, banks
rank at the very bottom of the list in terms of rate of usage, further evidence of banks’ potential, if their risk
concerns can be overcome.
48
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 3Migrant Workers and Financial Services
Strategic Matters Concerning Financial Services Abroad: While abroad, most migrant workers remit at
some time, typically in small amounts, which makes for relatively high costs (roughly 5-13% of the transfer,
depending upon method). Despite being the most expensive, bank transfers are by far the most popular
and the least troublesome. They also seem to work reasonably well, if the migrant worker can get to a bank
during offi ce hours or if the recipient lives near a bank branch or an ATM machine.
Regarding the cost of transfers, Indonesia is about average relative to the available comparators, suggesting
only limited gains from policies that focus on this area. However, the wide range of costs suggests that
migrant workers can reduce their remittance costs by 1/3 or more, just by fi nding the service provider most
appropriate to their needs.
Strategic Matters Concerning Use of Remittances: Once back in the village, the remittance is mainly used
to meet daily needs, refl ecting the high incidence of poverty. Other notable uses are loan repayment; home
improvements; and school fees. Very little is saved or invested. To assist, there may be a role for training in
personal fi nancial management for migrant worker households.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4
Surveyed Migrant Worker Households’ Use of Financial Services
4.1 IntroductionThis Chapter examines the fi nancial services utilized by surveyed migrant worker households and the barriers
to the use of those services. The household nature of the survey on which this report is based has some
important implications. For example, references to socio-economic characteristics (such as gender, age and
education) refer to the characteristics of the survey respondent.45 This would tend to reduce the signifi cance
of lack of access on the part of individual members of the household because the respondent is likely to
answer on behalf of the entire household, not just herself. Still, this is the correct analytical approach, if the
decision in question is made at the household level.
This Survey indicates that the single, most popular fi nancial service is a bank account (see Figure 14). Credit
facilities are important. However, a range of diff erent service providers act as sources of credit, which complicates
policy solutions. Indeed, informal loans (from neighbors, family or friends) are by far the most important
source of credit; at the bottom of the list are the more sophisticated products, such as mobile banking and
credit cards. This ordering of the popularity of credit sources is almost identical to that of the general population,
as indicated in Chapter 3 of World Bank (2009b), although the level of usage of most products by surveyed
migrant workers’ households is substantially lower than that of the general population. This was particularly
evident in the area of bank savings accounts, with only 29% of surveyed migrant worker households hold in
such accounts, compared to more than 40% for the general population,46 despite migrant workers’ special
needs for remittance services, which often go through another person’s account.
45 It is also important to note that Survey respondents were persons of authority in the household. In 59% of cases it was the head of household; otherwise, it was the person with fi nancial authority. 58% of all respondents were woman.
46 This is also low in relation to representative national rural areas (Figure 18 of World Bank 2009b).
50
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
Figure 14: Financial Service Use as Surveyed (in %)
0 5 10 15 20 25 30 35
Credit cardEmployer loan
Mobile bankingDaily bank loan
Bank loanWelfare scheme loan
Pawnshop loanMFI loan
Debit cardCredit from shop
Loan from neighbor, family, or f riendsBank savings account
There is notable regional variation in the rate of usage of these fi nancial services (see Figure 15). Specifi cally,
a signifi cantly greater proportion of the population in East Java than in NTT and NTB hold bank accounts,
probably refl ecting the more advanced state of development of Indonesia’s fi nancial system on Java. As will
be seen later in this Chapter, such patterns largely refl ect the diff erences in income levels and incidence of
poverty between these three provinces.
Figure 15: Financial Service Use as surveyed, by Province (in %)
0
15
30
45
East Java NTB NTT
Credit card
Employer loan
Mobile banking
Daily bank loan
Bank loan
Welfare scheme loan
Pawnshop loan
MFI loan
Debit card
On credit from a shop
The following Sections begin with an examination of the use of bank accounts and continue by examining sources of loans with special attention to the ‘fi nancially excluded’. The fi nal Section in this Chapter looks at Insurance, which is of special interest to migrant workers and their families. For each fi nancial service (savings, credit and insurance), the Chapter includes analytical econometric results that identify the statistically signifi cant socio-economic factors that aff ect access.
4.2 Who Saves and Where? Beginning with a summary of the broader picture, the surveyed households of migrant workers hold
savings with a number of diff erent service providers (see Figure 16). However, banks dominate among both
single- and multiple-use providers, and there is only a moderate amount of overlap among users. Banks
dominate because they have direct and immediate access to the clearing system, which is the main vehicle
for workers’ remittances. Physical access to banks is not perceived as a constraint, although transport and
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
51
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
other associated costs appear to be signifi cant. There is relatively little use of non-bank formal institutions.
In total, 27% of the population does not have any savings with any service providers.
There are a few notable diff erences between migrant worker households and the general population
(see Chapter 3 of World Bank 2009b). For instance, the fi nancially excluded component is slightly smaller
amongst migrant worker households (27% versus 32%). There is a much higher rate of usage of banks and
much less reliance on the informal sector. Again, this refl ects reliance upon the bank clearing system for
transfer of remittances.
Turning to details, Figure 16 hides some regional variation by province. Most notably, NTB relies much more
heavily upon banks (rate of exclusive use of 73% versus the average of 49%), whereas East Java has a higher
rate of usage of informal institutions. NTT has the highest level of fi nancial exclusion, at 38% compared with
the average of 27%. By contrast, NTB’s level of fi nancial exclusion is considerably lower than the national
average, it only 16%.
In looking more closely at the dominant role of banks, it is important to note that the ownership of bank
accounts is not nearly as widespread as the use of bank accounts. In particular, most surveyed households
that use a bank account don’t actually have their own bank account (Figure 17). It is more common for them
to use the account of an intermediary in remittance transactions, especially in NTT and NTB.47 This distinction
accounts for NTB savers’ heavy use of banks, whereas residents of East Java have greater ownership of bank
accounts (Figure 15).
Figure 16: Overlap Among Savings Providers, as Surveyed
48.7%
2.6%
11.9%
4.8%
2.5%1.6%
0.9%
Bank
Formal Other
Informal27.1%
FinanciallyExcluded
A signifi cant proportion of survey of households (almost 60%) have never had their own savings account (see
the upper left panel of Figure 18).48 Not having a savings account is more common in rural areas, but there
is little diff erence between genders (see Figure 18). By province, the proportion of surveyed households
with bank accounts is highest in East Java, despite the fact that urban areas were not included in the Survey.
This probably refl ects the more developed state of the fi nancial system in Java than in the outer islands.
With regard to education, there is a strong positive relationship between educational levels and the likelihood of
holding a bank account (see the lower left panel of Figure 18).
47 The use of someone else’s bank account is not the same as sharing a joint bank account.
48 As noted in Figure 17, 29% currently have a savings account and 12% previously had one.
52
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
Concerning the all-important metric of household expenditure (a reliable proxy for household income),
there is a clear upward relationship between income levels and the likelihood of holding a savings account (see
the lower right panels of Figure 18). The relationship is particularly striking for savings accounts at banks
(rather than savings account at any type of institution). There is little distinction between urban and rural
areas.
Figure 17: Use of Bank Savings Accounts by Surveyed Households
Total observations 100
Currently have bank savings Using other's bank savings No bank savings 29.3 35.2
Always use other's bank savings Previously had Previously had 30.1 bank savings bank savings
5.4 6.3 Never had
bank savings 28.9
Use other savings Never save1.8 27.1
35.5
Regarding the choice of bank, virtually all bank accounts held by surveyed household members are at BRI’s Unit
Desa or at another government bank, with private banks being barely represented (the second-left panel in
Figure 18). In explaining their reasons for having an account, the most common explanation was the stated
need for a vehicle to facilitate the transfer of money, which is not surprising for households with a migrant
worker abroad. Safety and security are the only other signifi cant reasons stated for holding a savings account
(Figure 19).
Looking at those who have previously held a bank account, but who have chosen to close it, the explanations
are dominantly economic, with respondents stating that they do not have enough money to justify holding
an account. Oddly, this explanation drops off only very slowly as incomes rise (see the upper right panel of
Figure 19). This suggests the lack of saving culture, or a low savings rate with low income elasticity.
Physical accessibility is not perceived as a problem. Only 13% of respondents with a bank account rate the
location of the nearest bank as ‘inconvenient’, rural areas are not much diff erent than urban areas (see the
middle panel of Figure 19). Even for respondents without a bank account, inconvenience is not a large issue.
Notwithstanding these favorable perceptions, access to the closest bank looks costly. For instance, almost
50% of respondents require an hour or more to get to the nearest bank, and for nearly 45% of respondents
the Rp12,000 (about US$1.25). Once having reached a bank, waiting times seem to be quite lengthy:
approximately two thirds of respondents estimate wait times of 30 minutes or more with little variation
between respondents in rural and urban locations. The fact that respondents do not rate these wait times
as ‘inconvenient’ suggests a low opportunity cost of their time.49
49 This is not to say that the villagers do not have other important things to do. The point is that the remittance is probably far more valuable than any other immediate use of their time. Consequently, it gets priority and the inconvenience factor seems unimport-ant.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
53
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
Box 7: Migrants’ Use of Financial Services, Evidence from the Field: West Java
In early September 2007, a World Bank team consulted with 26 people in the village of Cangkring,
Kabupaten Cirebon, on the north coast of West Java near the border with Central Java. The fi ndings
focus on ex-migrant workers and the issues are considered typical of the regions covered by the Survey
in the main text, particularly East Java. Of the 26 persons consulted, 10 were female ex-migrant workers
(FMW); 7 were family members of the FMWs; 1 was a village offi cial; 2 were Post Offi ce employees; and
6 were from commercial banks.
Overseas migration in the village began as early as 1988, mostly women going to Saudi Arabia, Malaysia
and Brunei. Villagers usually migrate through a sponsor, who helps with the preparation of the necessary
initial documentation and brings them to a PPTKIS. One sponsor of a PPTKIS lives in the village, assisting
with migration to Brunei. There are other sponsors in neighboring villages and sub-districts.
The main fi ndings of the fi eld trip are:
• Pre-departure costs are commonly fi nanced by salary advances from the sponsor or PPTKIS. Others sell assets or borrow from friends or family. Use of moneylenders is uncommon.
• FMWs normally do not open a bank account in the destination country. The employer keeps
their salary and remits when the FMW is ready, usually by means selected by the employer.
• Bank account transfers are the most common method of remitting. If the family doesn’t have
a savings account, they will open one when the FMW is ready to remit.
• FMWs typically do not have a bank account before going overseas. However, they often open
an account after they return home with money saved abroad.
• FMWs receive little fi nancial training before departure. They learn informally through their
sponsor; experienced peers; colleagues in the host country; and their employer.
• Little information on banks’ fi nancial products is available in the village. FMWs mainly rely on
friends, family and neighbors in deciding to access fi nancial services.
• Bank BNI is far and away the largest player among the commercial banks in the local area.
However, the banks and the post offi ce appear to be interested only in the FMWs’ remittance
business. The FMWs are not seen as good, long-term customers.
The bulk (approximately 65%) of respondents without a bank account are not aware of the requirements
for opening a savings account, which suggests a useful role for fi nancial literacy training. Other identifi ed
problems (like ‘proof of identity’ or ‘minimum balance requirements’) are minor in comparison (the lower
right panel in Figure 19).
54
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
Figure 18: Usage of Bank Accounts by Surveyed Households of Migrant Workers (in %, except as
indicated)
Usage of Bank Account
0.3
0.10.6
Currently Banked
PreviouslyBanked
Never Banked
Usage of Bank Account
by Rural-Urban
0
20
40
60
80
100
Curr. Banked Prev. Banked Never Banked
Urban
Rural
Bank Account Distribution
32.8
62.7
0.1
3.5
0.1
0.8
0 14 28 42 56 70
BRI Unit Desa
Gov't bank ex BRI Unit Desa
DSP
Private bank ex DSP
Bank Syariah
BPR
Usage of Bank Account in Rural Areas
by Province
0 14 28 42 56 70
Curr. Banked
Prev. Banked
Never Banked East Nusa Tenggara
West Nusa Tenggara
East Java
Usage of Bank Account in Urban Areas
by Province
0 10 20 30 40 50
Curr. Banked
Prev. Banked
Never Banked
East Nusa Tenggara West Nusa Tenggara
Usage of Bank Account
by Gender
0 20 40 60 80
Curr. Banked
Prev. Banked
Never Banked
Female Male
Usage of Bank Account
by Education Level
0
25
50
75
Curr. Banked
Prev. Banked
Never Banked
Incomplete primary schoolPrimary school
Junior high schoolSenior high schoolUniversity
Do you have a savings account of any kind?
by Monthly Per Capita Expenditure
0.5
1
0 5 10 0 5 10
Urban Rural
Wei
ghte
d M
eans
Monthly Per Capita Expenditure DecilesNote: Vertical line corresponds to poverty line.
Do you have a bank account?
by Monthly Per Capita Expenditure
0.2
.4.6
0 5 10 0 5 10
Urban Rural
Wei
ghte
d M
eans
Monthly Per Capita Expenditure DecilesNote: Vertical line corresponds to poverty line.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
55
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
Figure 19: Usage of Bank Accounts as Surveyed, Continued (in %, except as indicated)
Reasons to Have Bank Account
0
10
20
30
40 Transfer money
Keep money safe
For predicted future needs
Other
Reasons to Stop Using Bank Account
0
15
30
45
60
75Not enough money
Bank fees too high
No advantage
Got unemployed
Other
Reason to Stop Using Bank Account
by Yearly Household Income
0 20 40 60 80
Not enough money
Bank fees too high
No advantage
Got unemployed
Other
< 5 mln5-<10 mln
10-<14.6 mln14.6 -<29.2 mln
>29.2 mln
Main Bank Location
Respondent with Bank Account
6.8
79.9
13.3
0
25
50
75
100
Inconvenient
Convenient
Very Convenient
Main Bank Location
by Rural-Urban
9.4
6.0
85.6
78.3
5.0
15.7
Urban
Rural
Very Convenient Convenient Inconvenient
Period of Waiting Until Served Respondent with Bank Account by Rural-Urban (in minutes)
010203040
Less than 15'
15 to less than 30'
30 to less than 60'
60' or more
Urban
Rural
4.3
79.1
16.6
0
25
50
75
100
Inconvenient
Convenient
Very Convenient
Nearest Bank Location
Respondent without Bank Account
0 10 20 30 40 50
60' or more
30 to less than 60'
15 to less than 30'
Less than 15'
Est. Travel Time to Nearest Bank
Respondent without Bank Account (in minutes)
0 15 30 45
12000 or more
6000 to less than 120003000 to less than 6000Less than 3000
Est. Cost to Nearest Bank
Respondent without Bank Account (in IDR)
0
15
30
45
60
75 Don't know
Proof of identity
Initial minimum balance
Knowledge of Requirements to Open Bank Account
Respondent without Bank Account
56
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
4.3 Who Are ‘Financially Excluded’ from Saving?The most commonly stated reasons for not holding a savings account were economic (Figure 20). More than three quarters of Survey respondents indicated that they lack suffi cient funds or a job to justify opening a bank account. Other reasons, like physical accessibility (see Section 4.2) or high fees (see the upper left panel of Figure 20) were relatively insignifi cant. Clearly, the great bulk of surveyed migrant worker households voluntarily exclude themselves from holding a savings account. Overcoming their negative perceptions and their belief that there are no benefi ts to be gained from opening a bank account will be no small task. These perceptions are clearly conditional on existing regulatory and pricing arrangements, but they do suggest a role for fi nancial literacy training or a public education program of some sort.
Other summary characteristics include the following (see Figure 20).
• The excluded are mainly lower income earners, with the incidence of exclusion dropping off sharply
as income rises. On this evidence, the threshold for exclusion appears to be somewhere near Rp10
million per annum or roughly US$1 per person per day;
• They tend to be at the extremes of the age distribution (that is, less than 17 and more than 55), with
less education;
• They are a bit more likely to be males than females;
• They are more likely to be in NTT than in other regions; and
• They tend to be agricultural sector workers or not owners of non-farm enterprises.
It is interesting to examine how those without savings accounts facilitate remittances from the family
member who is working abroad. These survey results indicate (see the left panels of Figure 21) that the
preferred method of transfer is still by electronic bank transfer. The main diff erence is that the transfer goes
through a third party, identifi ed in the Survey as an ‘account mediator’. That trusted person picks up the
money from his/her own bank account and makes the delivery to the intended household member.
The dominant role of an ‘account mediator’, combined with limited ownership of own bank accounts and
the dangers of carrying large amounts of cash on one’s person during return trips, underscores a policy
issue that was mentioned earlier (Chapter 3). Namely, if simpler, low-cost means were available for moving
money—for instance, banking by mobile phone—they would probably be very popular among migrant workers
and their households.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
57
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
Figure 20: The Financially Excluded From Savings, as Surveyed (in%, except as indicated)
Reason for Not Opening Bank Account
Respondent without Bank Account
58.8
18.8
7.7 5.9 4.3 4.5
0
15
30
45
60
Not enough money No job No advantage
Unfamiliar with bank Bank fees to high Other
by Income level, in Rupiah
0 15 30 45 60
< 5 mln
5-<10 mln
10-<14.6 mln
14.6 -<29.2 mln
>29.2 mln
by Province
23.315.6
36.0
0
10
20
30
40
East Java
West NusaTenggara
East Nusa Tenggara
by Rural-Urban
23.927.7
0
10
20
30
Urban
Rural
by Gender
28.5 26.0
0
6
12
18
24
30
Male
Female
by Age Distribution
0
8
16
24
32
40
<17
17-<25
25-<40
40-<55
>55
by Education Level
0
7
14
21
28
35 Incomplete primary school
Primary school
Junior high school
Senior high school
University
by Working Category & Enterprise
Ownership Distribution
0
6
12
18
24
30Agriculture Sector Worker
Salaried Employees
Non-Farm Enterprise Owner
Non-Owner of Non-Farm Enterprise
58
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
Figure 21: The Financially Excluded from Savings, as Surveyed continued (in%)
62.6
22.414.4 8.0
0
15
30
45
60
75
Method of Receiving Remmitancefor Never Banked Respondent
Wire Transfer
Through relatives or friends
Carry own on return trip
Other
91.1
6.9 5.5 3.8
0
20
40
60
80
100
Method of Receiving Remmitancefor Respondent Using Other's account
Wire Transfer
Carry own on return trip
Through relatives or friends
Other
57.0
28.7
11.2 15.90
15
30
45
60
Method of Receiving Remmitancefor Previously Banked Respondent
Wire Transfer
Through relatives or friends
Carry own on return trip
Other
89.8 7.82 2.4
Who picks up the money?for Respondent Using Other's Account
Account Mediator Family member Other
Box 8: Migrants’ Use of Financial Services, Evidence from the Field: West Kalimantan
In mid-December 2007, a World Bank team consulted with 37 people in 2 villages of Kabupaten Bengkayang in
West Kalimantan. The fi ndings complement those of Box 7, owing to Benkayang’s location, which is near Indonesia’s
border with Malaysia. Of the 37 persons consulted, 9 were female ex-migrant workers (FMWs); 6 were male ex-
migrant workers (MMWs); 9 were family members of the MWs; 5 were village offi cials; 2 were Post Offi ce employees;
and 6 were from fi nancial service providers (formal and informal).
The two villages are markedly diff erent. The fi rst, Sahan, is rural and mountainous only 30 kilometers from the
Malaysian border with a majority of Catholic Dayaks and a minority of Muslim Javanese who transmigrated in the
1980s. Migration from Sahan to Malaysia has existed for as long as any local can remember. Only Dayaks migrate,
normally without passport or visa, using a Pas Lintas Batas (issued to accommodate this traffi c). Most are women
(only single or divorced women) working as domestic workers or waitresses. As for offi cial recruitment, some
agents work independently, informing potential recruits of job vacancies in Malaysia.
The second village, Sei Pangkalan I, is urban on the west coast of Kalimantan. Road transport is good, but it is several
hours to the Malaysian border. The majority of households are offi cially classifi ed as ‘poor’. Malayu Kalimantan
Muslims are the majority of residents with only a few Javanese Muslims. As with Sahan, overseas migration has
existed as long as anyone can remember. In contrast to Sahan, the majority migrate legally to Malaysia with a
roughly equal gender balance. Married and single men—but only single women—migrate to work in the plywood
mills; informal jobs, like domestic helpers, are perceived as too dangerous, owing to past cases of abuse. Concerning
recruitment, agents operating in the village (or in neighboring villages) are usually formally appointed by a PPTKIS.
The main fi ndings in the area of fi nancial services are:
• Informal service providers dominate fi nancial services, owing to weak services from formal providers.
• The most important services to migrant communities are: a money changer; remittance services; and a savings
account.
• The most popular way of remitting money is by entrusting it to other migrants who are making the trip home.
The last few months of earnings are usually carried home in cash.
• Most MWs remit money every 2-4 months in amount equivalent to US$55-US$200.
• Informal channels are preferred for remittances because of lower cost; door-to-door delivery; and better
exchange rates.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
59
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
4.4 Econometric Results Concerning Access to SavingsThe socio-economic determinants of access to fi nancial services is a multi-dimensional issue that is not well-addressed by 2-dimensional Charts, such as those in the previous Section. This Section goes an analytical step further, by attributing the likelihood of saving to 19 socio-economic characteristics covered by the A2F Survey. As an analytical tool, this report follows the lead of World Bank (2009b), using linear probability regressions to identify the statistically signifi cant socio-economic determinants of savings, including a breakdown as between formal and informal savings.50
Table 10: Statistically Signifi cant Determinants of Access to Saving (at 95% level of signifi cance, or
higher)
Determinant of Formal Savings Informal Savings
Savings of Any Kind (relative to ‘Any Kind’) (relative to ‘Any Kind’)
Household size (-) √ X
Gender (M) (+) √ X
MW in the Middle East (+) √ √ (-)
First time MW (-) √ √ (+)
More than primary education (+) √ X
Consumption (income) (+) √ √ (-)
Some household amenities (+) √ √ (+ and -)
Plus: Urban resident (+)
Plus: Legal status (+)
Plus: MW works in informal sector (-)
Plus: Score on cognitive test (+)
Plus: Urban resident (-)
Plus: MW works in informal sector (+)
Source: Annex C.
Detailed analytical results are presented in Annex C with an abridged version in Table 10, with the direction of
impact indicated by the sign in parenthesis (+ or -). To summarize, overall statistical fi ts are poor, ‘explaining’
only 3 to 15% of sample variation, with informal savings at the lower end. That said, the data identify several
signifi cant determinants of savings of any kind, with probabilities, as follows:
• Consumption (a proxy for income) is positively correlated with (7%) the likelihood of having a savings
account and the probability is roughly trebled by various household amenities, which are probably
secondary proxies for income;
• Gender: There is 7% greater chance of men holding savings account;
• First time migrants are 5% less likely to save;
• Larger households have a slightly lower probability of saving; and
• Families with workers in the Middle East are 6% more likely to save, probably because they have
greater need of a bank account to transfer money. But curiously, this is not refl ected in either the
‘formal’ or ‘informal’ components of saving.
There are some notable diff erences between the components of savings (that is, formal and informal; see the
two rightmost columns of Table 10). For instance, gender is not signifi cant for informal savings; household
size is not signifi cant for informal saving; and directional impact (that is, positive or negative) is often diff erent
for formal versus informal, indicating that informal service providers are sometimes a substitute for formal
ones. The most notable additional factor (+17%) for formal savings is the score of the cognitive tests; urban
residency and legal status add a bit more.
50 In addition to the ‘Basic Results’ (summarized in Tables 10 and 11), Annexes C-E also present results that control for variation across provinces (see columns labeled ‘Province Fixed Eff ects’) and island clusters (see ‘Cluster Fixed Eff ects’). In general the ‘Basic Results’ are robust relative to provincial and island cluster variability.
60
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
4.5 Who borrows? Where? How much? And at what price?
Almost 60% of survey respondents do not have access to credit of any type,51 and may be considered
‘fi nancially excluded’ from credit in these terms (see Figure 22). Of those who are ‘included’, informal sources
are by far the most signifi cant, and semi-formal sources are considerably more signifi cant than banks.52
Among sources of credit access by Survey respondents, the most popular source is friends, family or neighbors,
which accounts for almost 70% of loans (see Figure 23). Shop credit and pawnshops are also notable, but
formal sources (such as banks or MFIs) are only important if the household has a savings account (the upper
panel of Figure 23). In this context, a savings account may allow the household to establish a relationship
with a fi nancial institution and, if necessary, for the savings account to serve as collateral for that institution.
Another possibility is that the fi nancial institution uses the savings account as a low-cost indicator of
repayment capacity.
At the aggregate level, having a loan is almost unrelated to household expenditure, with this remaining true in
both urban and rural areas (see the second panel of Figure 23). In this regard, the only notable characteristic
is that when rural respondents crossed beyond the poverty line, there is a moderate rate of increase in
inclusion.
Figure 22: Overlap Among Credit Providers, as Surveyed
1.8% 0.6%
0.8%
28.6%
6% 0.2%
3.5%
Bank Semi - Formal
Informal
58.6% Financially Excluded
Nonetheless, the Survey indicates major diff erences in the composition of credit relative to income (see the
lower panels in Figure 23). For example, as income rises, there is greater rate of usage of bank loans amongst
both urban and rural households (that is, a loan from a bank is a ‘normal good’). The rate of increase begins
sooner and is more pronounced for surveyed urban households than poor rural households. Informal
loans also tend to rise with income, but the tendency is less marked. By contrast, the use of an MFI loan
51 This looks high, considering the limited fi nancing alternatives for the MW (see Figure 10). As for insurance (see Section 4.9), this casts some doubt on the household’s knowledge of the migrant worker’s actual use of fi nancial services.
52 It should be noted that institutions that provide credit are not exactly the same as those that off er a savings service, especially in the informal and semi-formal sectors. Consequently, Figures 16 and 22 are only comparable in their broader characteristics.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
61
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
declines as urban income rises (that is, an MFI loan is an ‘inferior good’ for urban households). Borrowing from
pawnshops or community welfare schemes tend to be relatively neutral with respect to incomes.
In terms of the sources of loans, borrowing patterns are very similar whatever the breakdown (gender,
province or rural-urban split). Informal sources predominate, with the rate of usage fairly evenly split between
other sources (see Figure 24). Men borrow a bit more often than women (43% versus 40%; see the upper left
panel in Figure 23), although the source of borrowing is very similar for both. This said, women tend to favor
community welfare schemes, whereas men lean towards other sources. As surveyed, rural households make
somewhat greater use of informal sources and community welfare schemes than urban households, where
there is a preference for pawnshops, MFIs and banks.
By contrast, average loan size varies markedly by type of institution (see lower left in Figure 24). Banks
make the largest loans. Loans facilitated by employers and shop credit (which includes credit facilities for the
purchase of consumer goods, such as motorcycles) are smaller, while loans provided by pawnshops and
daily loans are the smallest. By and large, the size of loan repayment by institution simply refl ects the size
of loan (Figure 24).
As for indicative interest rates, most median rates lie in the range of 15% to 45% (at annual rates) with banks and
shop credit at the lower end (lower right in Figure 24). Pawnshops and neighbors, friends and family are at the
upper end of this range and MFIs are right in the middle. The high-side outlier is credit from a daily bank,
because the term is so short (indeed, normally one day), so extrapolated annual rates are extremely high.
Figure 23: Use of Credit by Surveyed Households of Migrant Workers (in %, except as indicated)
0
25
50
75
Have Loan Don't Have Loan
Loan of Any Kindby Gender
Male Female
0 14 28 42 56 70
Ever Borrowed by Savings Account Ownerships
Without Savings Account With Savings Account
Bank LoanMFI Loan
Employer LoanPawn Shop LoanDaily Bank Loan
Comm. Welf. Scheme LoanNeighbor, fam., & friends Loan
On credit from shop
0 15 30 45 60
Bank Loan
MFI Loan
Pawn Shop Loan
Comm. Welf. Scheme Loan
Informal Loan
Purpose of Loan
Business exp.
Inv. Exp.
Cons. Exp.
Paying unforeseen exp.
Paying school fee
Other
0.2
.4.6
0 5 10 0 5 10
Urban Rural
Weig
hted
Mea
ns
Monthly Per Capita Expenditure DecilesNote: Vertical line corresponds to poverty line.
By Monthly Per Capita ExpenditureDo you have a loan?
62
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
0.0
5.1
.15
0 5 10 0 5 10
Urban Rural
Wei
ghte
d M
eans
Monthly Per Capita Expenditure DecilesNote: Vertical line corresponds to poverty line.
By Monthly Per Capita ExpenditureDo you have a bank loan?
0.0
5.1
.15
0 5 10 0 5 10
Urban Rural
Wei
ghte
d M
eans
Monthly Per Capita Expenditure DecilesNote: Vertical line corresponds to poverty line.
By Monthly Per Capita Expenditure0
.05
.1.1
5.2
0 5 10 0 5 10
Urban Rural
Wei
ghte
d M
eans
Monthly Per Capita Expenditure DecilesNote: Vertical line corresponds to poverty line.
By Monthly Per Capita ExpenditureDo you have a pawn shop loan?
.05
.10 5 10 0 5 10
Urban Rural
Wei
ghte
d M
eans
Monthly Per Capita Expenditure DecilesNote: Vertical line corresponds to poverty line.
By Monthly Per Capita ExpenditureDo you have a community welfare scheme loan?
0.2
.4
0 5 10 0 5 10
Urban Rural
Wei
ghte
d M
eans
Monthly Per Capita Expenditure DecilesNote: Vertical line corresponds to poverty line.
By Monthly Per Capita ExpenditureDo you have an informal loan?
Figure 24: Use of Credit by Surveyed Households of Migrant Workers, Continued (in %, except as
indicated)
Loan of Any Kind
by Education
0 20 40 60 80 100
Never go to schoolInc. primary school
Primary schoolJunior high schoolSenior high school
University
Have Loan Don't Have Loan
Types of Loan
by Gender
0 6 12 18 24 30
Formal Loan MFI Loan
Pawn Shop LoanComm. Welf. Scheme Loan
Informal Loan
Female Male
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
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Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
Loan of Any Kind
by Types of Work
020406080
Gov't Employee Private Employee Self Employed Employer Freelance/Cas. Worker
Unpaid Fam. Worker
Have Loan Don't Have Loan
Types of Loan
by Urban-Rural
0 7 14 21 28 35
Formal Loan MFI Loan
Pawn Shop LoanComm. Welf. Scheme Loan
Informal Loan
Rural Urban
Types of Loan
by Province
0 10 20 30 40
Formal Loan MFI Loan
Pawn Shop LoanComm. Welf. Scheme Loan
Informal Loan
East Nusa Tenggara West Nusa Tenggara East Java
0 4 8 12 16 20
Daily Bank Loan
Pawn Shop Loan
Comm. Welf. Scheme
Neighbor, fam., & friends
MFI Loan
On Shop Credit
Employer Loan
Bank Loan
Average Loan Size
by Type of Loans (IDR million)
0 15 30 45 60
Daily Bank Loan
Pawn Shop Loan
Comm. Welf. Scheme
Neighbor, fam., & friends
MFI Loan
Employer Loan
On Shop Credit
Bank Loan
Average Size of Loan Repayment
by Type of Loans (IDR million)
0 50 100 150 200 250
Bank Loan
MFI Loan
Employer Loan
Pawn Shop Loan
Daily Bank Loan
Comm. Welf. Scheme Loan
Neighbor, fam., & friends
On credit from shop
Indicative Annual Interest Rate
by Types of Loan
64
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
4.6 Who Are ‘Financially Excluded’ from Credit?Almost 60% of surveyed households have never borrowed from any source (see the upper right in Figure 25),53
with this proportion being fairly stable across all three provinces. Rates of exclusion are much higher in rural
regions than in urban regions (84% versus 16%). This is striking evidence of the failure of Indonesia’s fi nancial
system to service a large segment of society.
Surprisingly, exclusion from credit bears very little relationship to household expenditure for surveyed urban
households. In the case of surveyed rural households, there is a limited downward relationship at lower
levels of income, but this relationship is not evident above the poverty line (upper left in Figure 25).
Broken down by other factors (Figure 25), there is relatively little variation in the general pattern of 60%
exclusion, noted above. For example, exclusion declines as education increases, but the gains are modest
and they reverse at the university level. In terms of age, only the oldest group is a signifi cantly higher rate of
exclusion than the others (69% compared to approximately 55%). In terms of gender, exclusion is only a bit
more severe for females than males (60% compared to 57%). In terms of type of work, salaried employees
are less likely to be excluded than other categories, particularly agricultural workers or a non-enterprise
owner’s.
As for reasons for not borrowing (see the lower panel in Figure 25), the dominant identifi able reason—
independent of type of lending institution—is no perceived need to borrow.54 The most important secondary
reason is the fear of not being able to repay. Both of these suggest a high degree of voluntary exclusion.
Financial literacy or other training may result in changed perceptions regarding the desirability of credit.
Figure 25: The Financially Excluded from Credit, as Surveyed (in %)
0.2
.4.6
0 5 10 0 5 10
Urban Rural
Wei
ghte
d M
eans
Monthly Per Capita Expenditure DecilesNote: Vertical line corresponds to poverty line.
By Monthly Per Capita ExpenditureNever Borrowed
0 15 30 45 60
East Java
West Nusa Tenggara
East Nusa Tenggara
by Province
53 This is markedly higher than the 40% reported for the typical Indonesian in Chapter 3 of World Bank 2009b. This is also appreciably higher than representative rural areas of Indonesia, which are not much diff erent than urban areas (see Section 3.5.1 of World Bank 2009b).
54 In this context, a weakness of the questionnaire should be noted. Namely that the questionnaire asks ‘reasons for stopping bor-rowing [from various institutions]’; this is reported in the main text. The Survey does not ask about the reasons for never borrowing. The questionnaire also asks ‘reasons for loan rejection [if rejected in the past 12 months]”, which covers diff erent ground, but still does not address the reasons for never borrowing. It is also notable that the number of respondents to the loan rejection question is too small (17, or 0.6% of the total sample) for statistical reliability. For this reason, it is not included in Figure 25.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
65
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
0 25 50 75
University
Senior high school
Junior high school
Primary school
Inc. primary school
Never go to school
by Education
0 20 40 60 80
<17
17-<25
25-<40
40-<55
>55
by Age
56.5 60.1
0
15
30
45
60
75
Male Female
by Gender
61.053.2
63.8
0
25
50
75
Agri. sector worker
SalariedEmployee
Don't have non-farm Ent.
by Selected Categories
56.9 59.3
0
15
30
45
60
Bank savings No bank savings
by Bank Savings Ownership
55.367.6
0
15
30
45
60
75
Have Don't have
by Any Savings Ownership
0 25 50 75 100
Bank Loan
MFI Loan
Pawn Shop Loan
Comm. Welf. Scheme Loan
Informal Loan
Reason to Stop Loan
Don't need to borrow Afraid unable to repay Other
66
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
4.7 Econometric Results Concerning Access to CreditDetailed analytical results of the linear probability regressions for access to credit are presented in the tables
of Annex D and summarized in Table 11. As for savings, the statistical fi t of these regressions is poor, usually
explaining 10% or less of the total variation in access to loans. Still, the data identify several statistically
signifi cant factors aff ecting the probability of having a loan. For loans from any source the most important
factors are (see the leftmost column of Tables 11 and 19):
• The presence of a government worker in the household. This increases the likelihood by a very large 21%;
• The ownership of an enterprise is another important factor (17%);• Consumption expenditure (a proxy for income) is also important; and• Household size makes an additional, small contribution.
These results are robust as regards controlling for provincial and island cluster eff ects (see Annex D)
Table 11: Statistically Signifi cant Determinants of Access to Credit (at 95% level of signifi cance, or
higher)
Determinant of Credit
from Any Source
Formal Credit Semi-formal Credit Informal Credit
(relative to ‘Any Source’) (relative to ‘Any Source’) (relative to ‘Any Source’)
Household size (+) X √ X
Consumption (income) (+) √ X X
Gov’t Employee (+) √ X X
Own an Enterprise (+) √ √ √
Plus: some household
amenities (+)
Plus: fi n. lit. score (+)
Plus: urban (+); some HH
amenities (-); respondent
is Head of HH (-); legal
status (-); and cognitive
score (+).
Plus: urban (-); legal MW status
(+); > primary education (-);
some HH amenities (+ and -);
and cognitive score (-).
Source: Annex D.
Looking at the three components of credit (the rightmost columns in Table 11), the determinants of access
from formal sources are similar to credit from any source, despite accounting for a relatively small proportion
of total credit. However, household size drops out and consumption is boosted by several household
amenities (which also proxy income). Financial literacy makes a sizable, additional contribution.
There is more variation in the determinants of other providers of credit (semi-formal and informal providers),
indicating that these are substitutes for formal providers. This is particularly the case for informal providers,
where diff erent variables are important (for instance, legal status and education) and the direction of impact
sometimes changes (e.g. urban, legal status and cognitive scores) relative to semi-formal providers
4.8 The ‘Truly Financially Excluded’: No Savings Account and No Credit
Slightly more than 18% of respondents to this Survey have never had either a bank savings account or a
loan. This group is referred to here as the ‘truly fi nancially excluded’. The rate amongst the migrant worker
households is slightly higher than the rate of 17% for the general population (World Bank 2009b), probably
refl ecting the relative state of economic development of the survey and regions. This is particularly the case
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
67
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
for NTT, where the truly fi nancially excluded constitute more than 25% of the population (see the second-
right panel of Figure 26).
Not surprisingly, the incidence of true fi nancial exclusion drops off steeply as incomes rise, especially in rural
areas, where the rate of incidence is much higher for respondents around the poverty line (Figure 26). At
upper levels of income, the diff erences are minor. Among other economic indicators, the incidence of
exclusion is high among agricultural workers and those without a non-farm enterprise. In terms of type of
work, unpaid family workers are the most likely to be fi nancially excluded, closely followed by employers, the
self-employed and the unemployed.
In terms of socio-demographic indicators (Figure 26), the truly fi nancially excluded are concentrated among
the extremes of the age distribution (lower than 17 and more than 55) and among the poorly educated
(primary school or less). Also, the fi nancially excluded score slightly lower on fi nancial literacy skills. As
measured here, there is no distinction in terms of gender (see Figure 26).
These observations echo some of the points made in World Bank (2009b). Namely, it emphasizes that the
target for special programs should be the older, uneducated poor who live in rural areas will stop in terms of
readings the primary target should be NTT.
Figure 26: The ‘Truly Financially Excluded’, as Surveyed (in %)
15.5
9.0
25.4
0
10
20
30
East Java West Nusa Tenggara
East Nusa Tenggara
by Province
0.1
.2.3
.4.5
0 5 10 0 5 10
Urban Rural
Wei
ghte
d M
eans
Monthly Per Capita Expenditure DecilesNote: Vertical line corresponds to poverty line.
By Monthly Per Capita ExpenditureThe Truly Financially Excluded
18.3 18.3
0
5
10
15
20
Male Female
by Gender
13.4
19.3
0
5
10
15
20
Urban Rural
by Rural-urban
0 5 10 15 20 25
University
Senior high school
Junior high school
Primary school
Inc. primary school
Never go to school
by Education
0 7 14 21 28 35
<17
17-<25
25-<40
40-<55
>55
by Age
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Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
0 7 14 21 28 35
Unemployed
Government Employee
Private Employee
Self Employee
Employer
Freelance/Casual Worker
Unpaid Family Worker
by Type of Work
0.400.43
0
0.09
0.18
0.27
0.36
0.45
'The Excluded' 'The Included'
by Financial Literacy Score
19.7
11.5
20.9
0
5
10
15
20
25
Agri. sector worker
Salaried Employee Don't have non-farm Ent.
by Selected Categories
4.9 Households of Migrant Workers and InsuranceTake-up rates for conventional insurance are low in Indonesia, the evening mainly a product for higher-
income, urban households (see Word Bank 2009b). However, legal migrant workers, who come predominantly
from poor rural areas, have been required to purchase insurance before they go overseas since mid-2006.
Evidence here suggests that this insurance scheme for migrant workers does not provide is signifi cant level
of benefi ts and protection for migrant workers, as intended.
These Survey results indicate that 62% of Indonesian households with migrant workers have some form
of insurance, which is even higher than the average national rate of 50% indicated in World Bank (2009b).
However, by far the most common type of insurance (56%) is some form of government health insurance
(see Figure 27). 55 Those holding more conventional types of insurance, such as like private health, education
or life insurance, are in a tiny minority (Figure 27). Excluding government health insurance, only 11% of surveyed
households have insurance, which is more in line with previous fi ndings (World Bank (2009b)).
This Survey investigated the reasons for the low rate of usage of insurance products except for government
health insurance. As a preliminary investigative step, all respondents were asked about risks to their fi nancial
condition. They identifi ed the top risks as illness, harvest failure and death (Figure 27). The most signifi cant
proportion of respondents stated that their reasons for not insuring against these risks were that 1) they don’t
understand insurance products; and 2) they feel that they can’t aff ord them. A response to the fi rst of the stated
reasons could involve consumer education; a response to the second could involve the development of
low-cost options insurance products (micro insurance).
55 Almost certainly, this high level of coverage is accounted for by: PT ASKES, which provides compulsory coverage of government workers (about 3% of sampled households); Jamsostek, which covers private formal sector employees and their dependents; and Askeskin, which is social health insurance for the identifi ed poor, based on individual and household targeting. Of these, Askeskin would be the most important in the regions sampled by this Survey. Its coverage in all of Indonesia is some 54 million persons, with spending directed at the poorer regions of the country. The benefi ts include in-patient services; maternity benefi ts; ambula-tory services; and prevention and health promotion. (Source: Annex S of World Bank 2008c).
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
69
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
Looking at the characteristics of the uninsured (Figure 27), there is a clear downward correlation between
lower incomes and lower rates of usage of insurance products, with this relationship being more pronounced
in urban regions than rural regions. Likewise, there is a similar correlation with education levels. Women are
slightly more likely to be uninsured than men (89% compared to 87%), while those in rural areas are more
likely to be uninsured than those in urban areas. In terms of type of work, those most likely to be uninsured
are unpaid family workers; casual workers; and the self-employed. Government employees are the least
likely to be uninsured. There is relatively little variation between the three surveyed provinces.
Figure 27: Insurance on Surveyed Households of Migrant Workers (in %, except as indicated)
Insurance of Any Kind
62.1
37.9
Have Ins. Don't Have Ins.
Types of Insurance Ownership
0.10.70.71.0
5.78.5
55.8
Home owner's ins.rivate medical ins.
Life ins. policyEducation ins.
Asset ins.Travel ins.
Gov't medical ins.
0 15 30 45 60
0.7
2.3
7.4
20.5
54.2
60.8
The term is too long
Other
Premium is too expensive
Don't need it
Don't have money
Unfamiliar with any ins.
Reason for Not Having Insurance
0 15 30 45 60 75
0.5
1
0 5 10 0 5 10
Urban Rural
Wei
ghte
d M
eans
Monthly Per Capita Expenditure DecilesNote: Vertical line corresponds to poverty line.
By Monthly Per Capita ExpenditureUninsured
Uninsured
by Gender
87.3
89.2
0
25
50
75
100
Male
Female
Uninsured
by Urban-Rural
78.7
90.4
0
25
50
75
100
Urban
Rural
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Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
Risk to HHs Fin. Condition
1.2
5.9
7.4
12.2
17.9
30.9
37.0
47.4
52.9
85.6
Other
Loss/dmg. to vehicle
Loss/dmg. to cattle
Natural disaster
Poor business perf.
Loss/dmg. to dwelling
Losing job
Death
Fail harvesting
Illness
0 30 60 90
Uninsured
by Province
87.1 83.492.2
0
25
50
75
100
East Java West Nusa Tenggara
East Nusa Tenggara
Uninsured
by Education
0 25 50 75 100
University
Senior high school
Junior high school
Primary school
Incomplete primary school
Never go to school
Uninsured
by Types of Work
0
25
50
75
100 Unpaid Family Worker
Freelance/Casual Worker
Self Employee
Private Employee
Employer
Government Employee
4.10 Econometric Results Concerning Access to All Types of Insurance
The statistically signifi cant socio-economic determinants of access to insurance are (in rough order of
importance; see Annex E for details):
• The household has a member who is a government employee (+ impact);
• The household is in an urban location (+ impact);
• Respondent is head of household (- impact);
• Owning an enterprise (+);
• Some household amenities (+ and -, depending upon amenity);
• Financial literacy and cognitive skills (+);
• Legal status of the migrant worker, and whether she is a fi rst-time migrant (+); and,
• The size of the household (+).
Curiously, consumption (the income proxy) is not signifi cant and the various household amenities (which
are further proxies for income) tend to off -set each other. Also, being a MW in the Middle East reduces the
likelihood of having insurance. As for other fi nancial products, these results are robust as regards controlling
for provincial and island cluster eff ects.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
71
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
4.11 Migrant Workers and Their InsuranceThe low rate of usage of insurance products (excluding government health insurance) among surveyed
households of migrant workers is surprising, because all legal migrant workers are required to have insurance
before they go abroad (see World Bank 2009b, Section 5.2.2). Looking more closely at this issue, legal migrant
workers are aware that they have insurance.56 However, the households of migrant workers are not aware of
the migrants’ insurance coverage, which calls for closer examination,57 as pursued below and in Box 9.
Table 12: Coverage & Documentation of TKI Insurance58
Type of Protection Coverage Pre-departureDuring
migrationPost migration
Required
Documents58
Accidental death * * * a, b, c, d, e, f
Death resulted from sickness * * * a, b, c, d, f
Cost of funeral * * * g
Accident resulting total or partial
permanent disablement* * * h, i, e
Medical expense for accident treatment * * * b, j, o, e
Medical expense for sickness treatment * * * b, j, o
The risk of trip cancelation aside from
migrant workers fault* k, m
The risk of physical abuse and rape * * * c, j, e
The risk of failure in work placement * y, l, m, n
Medical expense for continuation of
treatment in home country * b, j, o
The risk of contract termination before
completion * l, m, n, x
The risk of entering legal case * p, l, n, q, r, s
The risk of being unpaid * l, m, n, t
The risk of deportation resulted from illegal
conduct * n, u, v
The risk of incurring mental illness * b, c, j, n
The risk of being transferred to other
workplace without migrant workers consent * l, m, n, w
Protection Duration 5 months 24 months 1 month
Premium (IDR ,000) 50 300 50
Notes on Extensions:
Available only to migrant workers receiving working contract extension
Premium: 40% for 1 year extension, 80% for 2 years; apply only during the migration period.
Benefi ts for post-migration insurance still apply
Sources: TKI Insurance of Mitra Consortium and Ministry of Manpower and Transmigration Regulations #23 of 2006 and #20 of 2007.
56 Among respondents who were legal workers, 100% indicated that they have insurance, which is consistent with the compulsory nature of the insurance.
57 Lack of awareness among households would create a problem, for instance, in claiming a death benefi t, if the migrant were to die while overseas.
58 See Annex F.
72
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
Box 9: Diagnostic Review of MWs’ Insurance
This Box summarizes material from a World Bank mission of early 2010 to analyze the system of compulsory insurance for
Indonesian Migrant Workers and to make recommendations for improvement.
• Findings By and large, the report confi rms those fi ndings reported in the main text, and it makes some important additional points as summarized immediately below: The current system of supervision and regulation is not eff ective, resulting in: regulatory duplication in areas like licensing of providers and brokers; contradictory interpretation of the validity of claims; policy exclusions that contradict regulations; the revoking of licenses by diff erent agencies; and gaps in supervision (like reporting requirements, disclosure of exclusions, client communications, the handling of complaints and payment of claims).
• The insurance coverage is comprehensive, but not all the benefi ts can be managed in an eff ective way through
insurance and several of the risks covered are related to poor performance of the PPTKIS.
• The system of a consortium of insurance companies using their appointed broker is expensive; it adds administrative
complexity; and the interests of the insured are not represented free from confl ict of interests.
• Data reporting requirements urgently need improvement. Mandated data requirements are inadequate to determine
the claims’ costs and settlement delays; exclusions and policy wording that might be causing diffi culties; the quality
of underwriting; and claim patterns to prevent possible fraud. Furthermore, the data reported are not easily
accessible to the consortiums nor the public.
Recommendations on Supervision and Reporting
1. Transfer the responsibility for supervision to Bapepam-LK. BNP2TKI could be in charge of the inspection of extraordinary regulatory requirements of the MW insurance companies. The MoMT could continue to evaluate regulatory impact and to suggest regulatory changes. The continued involvement of the three agencies requires on-going coordination and this should accordingly be established.
2. Additional data should be reported, for example: time required for payment; number of complaints; use of host
country representation; cause of claim; and brokerage and other fees collected. This would help MoF, BNP2TKI and
MoMT supervision. The data should be available on the web page of MoMT, providing transparency and guidance
for future regulatory changes.
Recommendations on Product Re-Design
1. Major changes are needed to the structure of insurance coverage. i) Individual protection for life and health of
the MW should be provided by life insurance companies through individual policies at a fi xed premium. ii) Benefi ts
that aff ect the placement of the MW should be covered by non-life insurance companies through a corporate
policy insuring the PPTKIS. (The cost of coverage should depend on the claim experience of each individual PPTKIS).
iii) Non-insurable benefi ts should be provided by the government. The uniqueness of this situation requires an
Indonesian solution and the combination between the three forms of protection providers has strong merits. (For
more specifi c recommendations and the experience of some other countries, see Annex 2 of the source below.)
2. Certain technical changes in coverage and quality could be considered, for example, diff erent classes of insurance
depending upon the destination and type of work. Also, segmentation of the benefi ts into a life policy (protecting
the MW) and a corporate policy (insuring the PPTKIS) would simplify the product and make it more eff ective.
3. Re-consider the consortium model of operation in the light of other reforms. Consortiums work best when risk
is best managed by a pool of insurance companies. However, the administrative cost is higher and settlement times
are longer (because each member of the consortium is required to pay its share of the claim).
4. The role of the broker should be reconsidered and a cap placed on the brokerage fee. The mandatory nature and
full regulation of benefi ts and costs of the insurance product diminishes signifi cantly the value-added of a broker.
This should be refl ected in the cap on the brokerage fee, and a distinction could be drawn between individual
insurance for the MW and corporate insurance for the PPTKIS.
5. Awareness of the insurance product for the MW should be raised by, for instance: mandated communication
between insurer and insured after the pre-placement phase; continuing MW benefi ts like free phone calls or annual
medical check- ups; representation in the host country that facilitates reporting and settlement of claims; training
that includes the MWs’ benefi ciaries; and a standard policy for the mandatory products, written in a way that takes
due account of the literacy levels of the typical MW.
6. Institutional arrangements in the host country for timely claims settlement. This could be achieved through
an immediate claim payment or a preliminary settlement in the form of a low fi x interest loan.
Source: ‘Review of the Existing Migrant Worker Insurance Products’, Word Bank internal report dated February 2010 by Dr. Rodolfo
Wehrhahn (Senior Insurance Specialist), under the direction of Ms. Yoko Doi.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
73
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
At a superfi cial level, the level of coverage provided by the compulsory insurance program for migrant workers is impressive (Table 12) and the cost is quite low (see the ‘Premium’ line in Table 12). Also, general documentation requirements appear reasonable (Table 13), although claims on behalf of the migrant look diffi cult.
Table 13: General Documents Required for Claiming Against TKI Insurance
(i) Claim letter signed by the insured or benefi ciary;
(ii) Insurance card;
(iii) Copy of passport;
(iv) Copy of identifi cation of migrant workers or benefi ciary;
(v) If the claim is by other than the insured or the benefi ciary, the authorized person should bring a
letter from the attorney of either the migrant worker or benefi ciary in a sealed or regular letter, with Rp
6,000 (for a seal stamp).
Source: See Table 12.
However, the details behind the rightmost column of Table 12 tell a diff erent story. Namely, the required
documentation to submit an insurance claim must be daunting for the typical migrant worker with low fi nancial
literacy (see Annex F). For example, to submit a claim for treatment of an accident, the migrant must obtain:
a medical report from the hospital; a list of medical and medicinal costs incurred in the hospital; and a report
of the accident from the police station. Likewise, to submit a claim for unpaid wages, the migrant needs:
copies of his/her working and placement contracts from the PPTKIS; an offi cial letter from the Indonesian
embassy; and a letter from BP3TKI, confi rming the unpaid wages.
All of these processes will be intimidating, time-consuming and costly for the typical, poorly educated
migrant worker. Eff ectively, this represents a barrier for the migrant worker to access benefi ts of the insurance.
At present, the insurance premium is little more than a tax on the migrant worker, with the tax proceeds
accruing to the insurance company.59
Some options for reform of this process are discussed in Chapter 6.
4.12 Strategic Matters Arising in this ChapterStrategic Matters Concerning Financial Products: Surveyed households’ ordering of fi nancial services is
very similar to the general population, but their rate of usage of most services is lower. The most important
single fi nancial service is a bank account, mainly because it facilitates fast, secure a remittance payment. Credit
is important, too, but a range of diff erent service providers currently provide sources of credit, which complicates
policy solutions. Concerning the cost of credit, indicative interest rates range from 15 to 40% per annum,
with banks and shop credit at the lower end of this range. At the strategic level, these suggest that MW
households are best served by expanding their access to the most basic fi nancial services, namely:
• a basic bank account;
• lower-cost sources of credit (i.e., banks rather than MFIs, or MFIs rather than informal providers);
and
• simple insurance products, like micro-insurance.
59 Data are not available on the frequency of submission of claims; on the size and number of claims that have been settled; or on the waiting period before settlement. However, discussions with government offi cials indicate that the claim settlement rate is very low.
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Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 4Surveyed Migrant Worker Households’ Use of Financial Services
It should be emphasized that the use of bank accounts is relatively high among surveyed households, but
the ownership of bank accounts is much more limited. Many migrant workers rely on trusted third parties for
delivery of their remittances. This suggests great potential for increased access to fi nancial services, if migrant
worker households understand the benefi ts of opening their own bank account
Strategic Matters Concerning the Financially Excluded: The Survey indicates that the rate of exclusion from
credit facilities is relatively low amongst those holding savings accounts (27% compared to 32% for the general
population) and use of banks is high (because of remittances). By contrast, exclusion from credit is very high
(57% compared to 40% for the general population) and banks are a very limited source of credit. These
characteristics confi rm the view that banks are currently interested in facilitating the sending of remittances by
migrant workers, although they regard the provision of loans to these workers as too risky.
Among survey respondents stated reasons for nonparticipation, physical accessibility is not perceived to be
a constraint, despite distances and time taken to reach banking facilities. Rather, voluntary exclusion is high.
The great bulk of excluded savers believe that they don’t have the money or the job to justify having a bank
account, or they simply don’t see the advantage. Similarly, the dominant reason for not borrowing is ‘no
perceived need to borrow’. As a strategic matter, these attitudes will be diffi cult to change, but they do
suggest a role for fi nancial literacy training. Also, the current high cost of fi nancial services many obviously
be a strong factor leading to voluntary exclusion. If the cost of holding savings account or accessing credit
reduced, this rate may well change.
Some 18% of surveyed migrant worker households are ‘truly fi nancially excluded’ (i.e., no credit and no
savings account), which is just slightly higher than the national average. The strategic target for special
programs should be households of the older, uneducated poor who live in rural areas.
Strategic Matters Concerning Insurance: Migrant workers are currently required to have insurance before
they go overseas, but existing product is not meeting their needs, essentially because the claims process is
too complicated and required documentation is excessive. Reform of the system would be helpful to migrant
workers (see Chapter 6).
Strategic Matters Concerning Econometric Results: Rigorous multivariate econometric results almost always
confi rm other observations throughout this Chapter concerning access to fi nancial services. There are two
notable exceptions. First, gender is a statistically signifi cant variable in determining access to formal savings
providers (but not informal providers). Overall, there is a 7% greater probability of having a savings account
of any kind if the respondent is male. And second, income does not have the expected, dominant role in
determining rates of usage of insurance services. Other factors are statistically more important, including:
being a government employee; being an urban resident; and having high fi nancial literacy and cognitive
skills.
Another important point concerns the extent to which informal service providers substitute for formal ones.
For both savings and credit, the directional impact (that is, positive or negative) of statistically signifi cant
variables often vary between informal and formal service providers.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 5
Summary of Gender-Based Results
This Chapter briefl y summarizes the report’s results as they relate specifi cally to gender. It is important to bear
in mind that the nationally representative study (World Bank (2009b)) found very few signifi cant diff erences
between the genders. In the current context, the topic of gender is especially important, because the
majority (60% or so) of Indonesian migrant workers are female.
Beginning with points that have been made previously in this report, the general, gender-related characteristics
of migrant workers are:
• Females work primarily in the informal sector as household domestics, with a legal status; 60
• Most females working as household domestics are legally registered workers;
• The majority female workers (56%) are repeat migrants; and
• They tend to be slightly better educated than their male counterparts.
Regarding fi nancing and remittances:
• Females’ average pre-clearance time is longer than men, probably because so many men work as
illegals;
• Women borrow more than men, and they borrow to a signifi cantly greater degree from their
sponsor and their employer. Again, this may refl ect their legal status, because illegal workers do
not have such sponsors and therefore do not have access to this form of credit;
• the average time before women make their fi rst remittance is longer than for men, probably because
women initially take on more debt that has to be re-paid early in the work contract through salary
deductions and other means;
• Women tend to remit less frequently than men, possibly because their jobs (in the informal sector)
are paid somewhat less; and
• The amount of a female migrant’s average remittance is almost twice that of a male counterpart,
which off sets the points noted in the previous two bullet points.
Although not conclusive, these fi nal three bullet points imply that female migrant workers tend to have a
higher saving rate than male migrant workers. This provides indirect support for the view that women are
more responsible with their earnings and probably more reliable potential clients for banks.
Turning to the critical components of fi nancial exclusion:
• A slightly higher proportion of men do not have a savings account than women (28% compared to
26%);
60 By contrast, men tend to work illegally in the construction and plantation sectors. Working in the formal sector, which is common among males, is better paid than informal jobs, which are dominated by females.
76
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 5Summary of Gender-Based Results
• A slightly higher proportion of females have never taken out a loan than men (60% compared to
57%);
• There is little diff erence in the sources of credit access by men and women, although women make
greater use of community welfare schemes.
• Women are uninsured more frequently than men (35% compared to 40%).
• Among the ‘truly fi nancially excluded’ (that is, no bank account and no loan), the incidence among
males and females is identical at 18.3%.
Other gender-related results that were not covered earlier in this report are summarized in Figure 28.
• In terms of destination, females make up a signifi cantly higher proportion of workers the males in
the Middle East. By contrast, males dominate in the Asia-Pacifi c, partly because so many males work
without legal status in Malaysia;
• Looking at the use of remittances, the priorities of men and women are very similar, although there
are some diff erences in emphasis. For example, women emphasize meeting daily needs, school
fees and loan repayments. For their part, men emphasize asset accumulation (including housing)
and business investments;
• Concerning sources of fi nancial information. Males rely to a slightly higher degree on friends and
relatives; radio and television but equally signifi cant for both genders; and all other sources are
relatively insignifi cant;
• in terms of choice of vehicles for saving, women prefer to have their own accounts at banks and
informal institutions; men tend to use others’ accounts;
• The rate of ownership of non-farm business enterprises is very similar for men and women, it 28%
of males and 27% of females;
• In terms of the type of loan they take out, men are more frequent borrowers from both informal and
semi-formal institutions. Neither gender makes any signifi cant use of banks;
• As for types of insurance, men are somewhat more frequent policy holders in most categories.61
As mentioned previously, there is an analytical issue with some of the preceding commentary, because
it is does not adequately consider the multi-dimensional nature of the determinants of access to fi nance.
However, more rigorous multivariate econometric analysis generally confi rms this commentary. Most
notably, related to gender:
• There are no statistically signifi cant gender-related eff ects observed in this extensive data set, except
for access to some forms of savings accounts;
• there is a statistically signifi cant, greater (7%) probability of access of men holding savings accounts
in the formal sector than women;
• This result is true for ‘all types of savings’ but does not apply to informal savings.
To summarize, the evidence from this study indicates that similarities between patterns of accessibility
amongst men and women migrant workers are far more striking than the diff erences. This remains true
when controlled statistically for other factors. As measured in this report’s household survey, the gender gap
in Indonesian migrant workers’ access to fi nancial services appears to be quite narrow, the sole statistically
signifi cant exception being access to some types of savings accounts. Indeed, a gap does not appear to
exist in some critical areas, including access to credit and the rate of incidence of ‘true fi nancial exclusion’.
61 It should be noted that the sample size is extremely small for some of these categories, and cannot be considered statistically reli-able. For example, from a total population of 3368, there are only 2 observations for home ownership insurance. Likewise, only 18 persons have medical insurance and 20 have life insurance.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
77
Chapter 5Summary of Gender-Based Results
Figure 28: More Gender-Related Results (in %)
MWs Destination Country
by Gender
0
20
40
60
80
100
Middle East
Male
Female
Main Usage of Remittance
by Gender
0 10 20 30 40 50
OtherBuying motorbike
Buying assetSpecial occasion
Business investmentPaying heatlh exp.Paying school feeLoan repayment
Built/buy/renovate houseDaily needs
Female Male
Sources of Financial Information
by Gender
0 15 30 45 60 75
Other
Related institution
Advertisement
Other reading
Newspaper
Radio/TV
Friends/relatives
Female Male
Form of Savings
by Gender
0 10 20 30 40 50
Bank
Other Formal
Informal
Using other's
Female Male
Types of Loan
by Gender
0 10 20 30 40 50
Bank
Semi formal
Informal
Female Male
Types of Insurance
by Gender
0 2 4 6 8 10
Medical
Home ownership
Asset
Travel
Life insurance policy
Female Male
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 6
Policy Conclusions
6.1 General
This report raises a number of important policy issues in a number of key areas, with policy changes
having signifi cant potential for improving the material well-being of migrant workers and their households,
with strong fl ow-on eff ects to local villages and surrounding areas.
The root problem is poverty, especially in remote rural locations. Addressing this root problem requires
broader, long-term policies that emphasize issues such as strong sustained economic growth, fi nancial
stability and the provision of better infrastructure and key public services, including basic education.
However, until these broader issues can be addressed more fully, narrower policies designed to meet the
more specifi c needs of this key group can still be very helpful. As detailed below, there is much that can be
done to improve existing access to services through relatively simple, low-cost means.
6.2 Policies on Access to SavingsSurvey respondents indicate that savings accounts are the single, most important fi nancial service they
require. To improve services access to savings facilities, several important steps could be taken, including
the widening the range of service providers; extending bank branching and ATM networks; and fi nancial literacy
training. All of these are discussed in the following sections. In addition, the Government could consider the
following steps.
The Introduction of ‘No Frills’ Savings Accounts: Bank Indonesia is encouraging banks to off er very basic,
low-cost services to all customers, including migrant workers and their households. While this may be
helpful, it will be important to limit the cost of regulatory compliance and to avoid disruption of existing,
comparable services. For example, Bank Indonesia might set minimum acceptable standards and let the
banks decide how to meet them. In addition, Bank Indonesia should also consider explicit exemptions for
banks with limited branching networks.
Review the Currently Compulsory Bank Account: The current requirement that migrant workers hold bank
accounts compulsory system of a bank account for migrant workers has potential as an entry point into the
formal banking system. However, the majority of migrant workers abandon the bank account after opening.
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Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 6Policy Conclusions
There is no obvious reason why opening this bank account should be links to migrant workers exemption
from the airport exit tax, as is currently the case.
To address this issue, there could be better fi nancial literacy training for migrant workers, which would make
them more aware of their options, one of which might be voluntarily opening a bank account before
departure. As a further step, the account could be a joint account with family members living back in the
village, which would facilitate the making and receipt of remittances. (Also see Section 6.4, below.)
6.3 Policies on Related to Access to Credit Policies in this area are complicated by existing, moderately high levels of gross indebtedness of surveyed
households of migrant workers. Consequently, narrowly-defi ned policies to increase credit to migrant
workers and their households have to be approached cautiously. A more appropriate strategy would be to
increase access to lower-cost sources of credit, for example, by enabling the substitution of bank credit for
MFI credit, and MFI credit for private money lenders. Some simple, eff ective means for achieving this as set
out in the following subsection:
More Credit Providers with a Broader Range of Services: Almost any of the policies advocated in World
Bank (2009b) for improved access to fi nancial services would work to the great benefi t of migrant workers
and their households. As emphasized in that report, commercial banks (especially those with a wide
regional reach) have an important role to play in this regard because they are the most likely to introduce
new services and products such as mobile banking and to put competitive pressure on other providers to
improve services and reduce prices.
However, banks are unlikely to be the primary answer to most issues related to better access to fi nance,
because the commercial banks do not reach deeply enough into poorer, more isolated regions of Indonesia.
Improved access by lower-end households would be better served by working on the legal and regulatory
framework for rural banks (BPRs), MFIs, cooperatives and pawnshops.
Chapter 6 of World Bank (2009b) provides a long list of helpful regulatory changes, with diff erent changes
appropriate for varying types of institutions. To cite just a few examples, regulatory changes for banks should
encourage the development of a more extensive network of branches and ATM, with re-structured reporting
requirements.62 For rural banks (BPRs), restrictions on ownership by foreign investors and NGOs could be reduced
or eliminated; there could be a lower tier of minimum capital requirements for small BPRs in remote locations; and
reporting and managerial requirements could be restructured to reduce constraints on the operations of BPRs
in isolated regions.
Pawnshops are an important source of access to credit. Thus, the pawnshop business should be opened-up to
private fi rms to put more competitive pressure on the state-owned pawnbroker.
For micro-fi nance institutions—which are proven to operate very eff ectively at the village level—certain
legal issues need to be resolved to facilitate their role in improving access to fi nancial services63. Momentum
62 As indicated in Chapter 6 of World Bank 2009b, these include: regulations concerning relocations of branches and ATMs; policies to close-out small inactive accounts; combining business plans with annual reports; and requiring business plans only in relatively general terms. Moreover, it would also be useful to ease offi cial regulations on branching, at least to bring them into line with Bank Indonesia’s relatively relaxed approach to implementation. One major option, more new entrants into the industry, is eff ectively closed off by the central bank’s current policy of consolidation of the industry.
63 As indicated in Chapter 6 of World Bank 2009b, this is a complicated, historical issue. In essence, the Banking Act of 1992 required certain microfi nance institutions (then known as LDKPs) to change their legal status. Many never did for their own good reasons, leaving a large—but unknown—number to operate on the fringes of the legal fi nancial system. This limits their operations and the services that they can off er to their clients.
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Chapter 6Policy Conclusions
should be restored to the drafting of a new MFI Law. For cooperatives, there are many issues, with the most
important of these being prudential issues. For almost all types of fi nancial institutions, the capacity of
regulators and supervisors needs to be strengthened.
Cosigners for Migrant Workers’ Credits: Some NGOs and international institutions argue that commercial
banks, which provide relatively low-cost fi nancing in Indonesia, should take a greater role in providing
access to credit for migrant workers. The banks are very reluctant to do this because they believe that
pre-departure fi nancing for migrant workers in an excessively risky business. One simple, eff ective way to
address this problem is for NGOs and development partners with special interests in this area to act as co-signers
for commercial bank loans directly to migrant workers. Eff ectively, this would eliminate the need for high-
cost intermediaries and provide much cheaper fi nancing directly to the migrant workers.
If the migrant workers are low-risk borrowers, then a few million dollars per year of fi nancing from interested
parties would go a long way towards the provision of cheap fi nancing to large numbers of migrants.64 NGOs
and donors might consider this initiative on a pilot basis, to demonstrate to the commercial banks that
lending to migrants is, indeed, a commercially viable business.
Policies to Reduce the Cost of Credit from PPTKIS: As stated earlier, eff ective lending rates from PPTKIS
are very high, at roughly 10-20% per month. Some simple options exist to reduce these costs to the migrant
workers. For example, these could include extending the tenor of the PPTKIS loan to match the contract
of the migrant worker, and spreading the costs over a longer time period by extending migrant workers’
initial contract by one year. However, a more eff ective approach would be reform of the system for licensing and
supervision of PPTKIS (see Section 6.6, below).
6.4 Policies on RemittancesThe evidence of this report indicates that the current system for bank remittances is working reasonably well
and costs are not out of line with international comparators. However, there is still a wide variation in the
cost is involved in using remittance services, and it pays for migrant workers to shop around for services
appropriate to their needs. This suggests a role for fi nancial literacy training. Further effi ciencies could be
achieved through domestic policies that encourage new low-cost technologies for transferring money, such as
mobile banking, and wider bank branching and ATM networks, mentioned above. More extensive branch and
ATM networks would reduce costs related to physical accessibility by the recipient.
Remittances as a Public Service Obligation: Another possibility is for the Government to explicitly subsidize
remittances by requiring Indonesian banks with a physical presence abroad to make these transfers at no
charge to the remitter. The bank would then be reimbursed for its costs and perhaps paid a small fee directly
by the government, fi nanced on-budget. The subsidy could be justifi ed as a poverty alleviation measure, or
on the basis of the large positive externalities that accrue from Indonesians working abroad.
Mobile Banking: As detailed in World Bank (2009b), advances in mobile banking have great potential for
facilitating remittances because of the low unit costs involved and the existing, widespread access to mobile
phones, even among the poor. However, certain Indonesian regulatory hurdles need to be overcome for these
potentials to be achieved.
To repeat the main points made in World Bank (2009b) on this issue, the Indonesian regulatory framework
needs to allow non-bank service providers to use networks of agents to off er and maintain their products; to
64 As one simple example, assume individual loans of US$500 to 200,000 migrants per year at a default rate of 5% (a bit above the current proportion of non-performing loans in the overall banking system). In this case, total cash requirements (excluding man-agement overheads) would be US$5 million per annum.
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Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 6Policy Conclusions
make person-to-person transfers; to off er cash-out facilities; and to sign-up new customers, at least for those
below a relatively low threshold. At the drafting of this report, quick progress looks diffi cult, mainly owing to
Know Your Customer regulations and local concerns over terrorism. To accelerate the process, there may be
a role for a pilot program of some type, possibly in the form of a public-private partnership.
Other Useful Steps: Many of the remaining problems with bank remittances are beyond the reach of
Indonesian policies (e.g., inconvenient hours of bank operations in host countries and cultural norms that
limit women’s movements, for example in the Middle East). However, others are not. For instance, an initiative
to re-negotiate MoU on guest workers with more host countries could contribute signifi cantly to improving the
material well-being of migrant workers and facilitating their remittances. See Section 6.6.
6.5 Policies on InsuranceThe current system of compulsory insurance for migrant workers is not working well. This is demonstrated
in part by the fact that the great majority of migrant worker households don’t even know that it exists,
although the migrant worker herself is aware of that. To improve this situation, the following steps involving
improved supervision and reporting and product re-design could be taken.
Supervision and Reporting: The responsibility for supervision should be transferred to Bapepam-LK, which
currently has broader responsibility for supervision of insurance in Indonesia. BNP2TKI could be in charge
of extraordinary regulatory requirements of the insurance companies off ering services to migrant workers,
while MoMT could continue to evaluate regulatory impact and to suggest regulatory changes. The
continued involvement of the three agencies requires on-going coordination and this should accordingly
be established. As regards reporting, certain additional data are urgently needed. Amongst other matters, this
data relates to time required for payment; number of complaints; use of host country representation; cause
of claim; and brokerage and other fees collected. The availability of this data would help MoF, BNP2TKI and
MoMT to fulfi ll their roles. The data should be available on the web page of MoMT, providing transparency
and guidance for future regulatory changes.
Product Re-Design: The distinction between products intended to provide individual protection for
migrant workers (to be provided by health and life companies) and corporate protection for the PPTKIS
(to be provided by other companies). Also, diff erent classes of insurance could be introduced for diff erent
destinations and diff erent types of work. Moreover, the role of the broker should be re-considered, with
a cap placed on the brokerage fee, taking due account of the mandatory nature and full regulation of
benefi ts and costs of the product. Furthermore, the consortium model could be re-considered, taking into
consideration the costs and benefi ts of the approach.
6.6 Broader Policy IssuesReform of Licensing & Supervision of PPTKIS: The current system for licensing of PPTKIS looks very similar
to a traditional export licensing scheme65 The Ministry of Manpower and Transmigration currently grants
licenses and has the power to revoke them, through an opaque process that appears tilted towards the
commercial interests of the exporting agency and away from the welfare of the individual migrant worker.
This system could be improved—with signifi cant fl ow-on eff ects for poverty alleviation—by the following
actions:
65 The main diff erence is that the current system governs the temporary export of individuals’ services not commodities. Eff ectively, this closes off certain policy options, such as auctioning off export licenses to the highest bidder, because that involves ethical issues concerning the overt exploitation of MWs as a commercial resource.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
83
Chapter 6Policy Conclusions
• The revocation of licenses of known, under-performing PPTKIS;
• Broadening the authority for issuing new licenses by transferring its authority from the Ministry of
Manpower and Transmigration, to a licensing board that includes, for example, the Ministry,
BNP2TKI, and Bapepam-LK. This board could be chaired by the Offi ce of the Economic Coordinating
Minister;
• Increase the number of licensed PPTKIS and associations of PPTKIS, with intentional overlap among
jurisdictions to increase competition;
• Strengthen supervision of PPTKIS, by introducing independent external stakeholders to the supervision
process. This could include, for instance, representatives of local NGOs with special interests in the
area. The fi ndings of the stakeholders could be made public;
• Encourage more industry self-regulation by inviting representatives of the associations of PPTKIS to
participate in the strengthened supervision process;
• Require the publication of audited fi nancial accounts of the PPTKIS;
• Add more windows for migrant workers to go abroad, eff ectively circumventing the current system of
PPTKIS; and
• Consider the possibility of joint-venture PPTKIS, where one role of the foreign partner would be to
protect the interests of the migrant worker while they are abroad.
Renegotiate Memoranda of Understanding with Host Countries: There are good possibilities for resolving
problematic practices in host countries where signifi cant proportions of Indonesian migrants work. The
conditions of migrant workers in host countries is a legitimate issue for Indonesia to raise in negotiations
of bilateral or regional trade agreements, because these constitute a barrier to exports of services. In this
context, Indonesia could ask to re-negotiate the terms of its Memoranda of Understanding (MoU) on migrant
workers with select host countries. In general terms, the objective should be to better balance the protection
of the workers with the commercial interests of employers and recruitment agencies. Details could include
a clause in the MoU that provides for access to foreign fi nancial services once the migrant worker in the
host country, thereby reducing the leverage of sponsors in the provision of fi nancing to migrants. Other
negotiating points could include issues such as: acceptable forms of worker identifi cation for access to
fi nancial services, including for workers without legal status; and exemptions to Know Your Customer
regulations for individuals making small remittances.
Financial Literacy Training: Many of the problems faced by migrant workers and their families stem in
large part from limited formal education and associated low rates of fi nancial literacy. Presently, some pre-
departure training in this area is provided at the PPTKIS training center, but it is relatively limited, being held
for one or two days only and usually delivered just before the trainees departure.
To address this problem, the migrants could be given better training in personal fi nancial management,
with particular areas of focus including: insurance coverage; sources of low-cost fi nancing; exchange rates; and
options for remitting money home. Also, fi nancial literacy training could be provided earlier in the broader
training program to facilitate the absorption of the information and discussion amongst the workers and
their dependents. There are two main problems to be overcome in the provision of fi nancial literacy training.
The fi rst of these is the challenge of scaling up a training program to meet the needs of some 800,000
migrants per year. The second challenge is managing the fact that improved fi nancial literacy on the part
of workers may run contrary to the commercial interests of the PPTKIS, which currently provide the pre-
departure training. The latter looks likely to require unbundling of the fi nancial training from other training
provided by the PPTKIS. Another possibility is to ask Bank Indonesia to off er such training, perhaps on a pilot
basis, as part of its fi nancial inclusion program.
Counseling Services Abroad: Each year, a signifi cant proportion of migrant workers face unexpected
problems in the host country. It would be very helpful if the Government were to improve counseling
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Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Chapter 6Policy Conclusions
services for migrants in host countries, perhaps beginning with the two largest host countries (Saudi Arabia
and Malaysia). The government could also look into other solutions, such as encouraging NGOs in host
countries to act in the same role (for example, bi-national NGOs along Indonesian-Malaysian border areas);
or recruiting expatriate Indonesians to serve on a voluntary basis. As stated earlier, another option would be
to establish joint ventures between PPTKIS and foreign partners, where one responsibility is of the foreign
partner would be to provide such counseling services in major host countries. Even without such joint
ventures, insurers need to have better arrangements to facilitate the needs of workers in host countries.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Annexes
Annex A: Comparison of Results with the Nationally Representative Survey
In comparing the Survey results of this report with those in the nationally representative survey (World
Bank (2009b)), several strategic points stand out. Migrant worker households express the same ordering of
priorities for fi nancial services is nationally representative households, but the proportion of migrant worker
households that use fi nancial services is much lower.
With regard to the most important service, a savings account, there is much greater reliance upon banks
among migrant households and much less reliance on the informal sector. This refl ects the importance
to migrant households of a vehicle for remitting funds and the banks’ dominant role in facilitating that
process. There is also an important distinction to be drawn between use of a bank account and ownership
of a bank account: it is actually more common for migrant households to use someone else’s bank account
for transferring money than to have their own bank account.
Among other notable points, the proportion of migrant worker households that do not have access to savings
accounts is appreciably lower among surveyed migrant households than nationally representative households
(27% compared to 32%), probably owing to their reliance upon bank transfers for remittances. Similar to
the national survey, a disproportionately high percentage of those without access to savings accounts are
the older, uneducated poor in rural areas. Likewise, they state their reasons for not saving as predominantly
economic, although there is no noticeable drop-off as incomes rise. Nonetheless, there is a clear positive
correlation between income levels and the likelihood of holding a savings account, with little distinction in
the relationship between rural and urban areas.
Physical accessibility is not perceived as a problem, but 65% of households are not aware of the requirements
for opening a bank account. This is roughly comparable with the fi gure of 69% for the general population.
In terms of access to credit, there are two important diff erences between surveyed migrant worker households
and nationally representative households. First, the reach of exclusion is much higher among migrant
worker households (60% compared to 40% for a representative household), which is probably indicative
of the higher incidence of poverty in this group. Secondly, among those who do borrow, there is much
less reliance on banks and much more reliance upon the informal sector, with the majority of loans being
provided by friends, neighbors and family.
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Similar to the fi gure for representative households, there is no overall correlation between rates of access to
credit and income levels, although preferred sources of credit change markedly as incomes rise. The rate
of incidence of bank loans increases (and less markedly, from informal sources) as income levels rise, while
the rate of incidence of loans from micro-fi nance institutions declines. Interest rates incurred by surveyed
migrant worker households are very similar to those incurred by the representative household.
Concerning the ‘truly fi nancially excluded’ (those with no bank account and no access to credit), this report
echoes the fi ndings of World Bank (2009b), with one notable diff erence: the proportion of those that
are ‘truly excluded’ is slightly more common among surveyed migrant households than among nationally
representative households (18% compared to 17%). NTT, where the rate of the truly fi nancially excluded is
25%, is the worst off in this regard. Otherwise, the ‘truly excluded’ are older, uneducated poor who live in
rural areas, notwithstanding their reliance upon bank transfers for remittances.
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Annex B: Comparison with Bank Indonesia’s Survey Results
As mentioned earlier, Bank Indonesia (BI) conducts a biannual survey of migrant workers. The World Bank is
in discussions with BI as to whether the Bank’s experience with its Survey can contribute to strengthening
BI’s survey program. The two Surveys are compared in this Section.66
The respective structures of the two Surveys are presented in Table 14.67 Each of the Surveys covers
important ground not included in the other (see the items with a star [*] in Table 14). The World Bank’s
Household Survey, which is more wide-ranging than Bank Indonesia’s, provides additional input on items
such by examining a wider range of fi nancial services; time and money spent to get to a bank; household
expenditure and fi nancial management; associated non-farm enterprise establishments; fi nancial literacy
and math skills; and decision-making on the channel for remittances. By contrast, BI provides additional
detail on important items such as: motivation for migration; pre-migration jobs and salaries; wages during
migration; cost of remitting; bad experiences; and the impact of migration on the Indonesian household.
Regional coverage of the two Surveys overlaps, with BI providing broader coverage of Java and the World
Bank emphasizing certain eastern islands; BI adds Riau and East Kalimantan.
A comparison of key results is presented in Table 15. Concerning the characteristics of migrants, the broad
pictures are very similar. For instance, most are females (64% for BI and 58% for the Bank); most are legal
(89% for BI and 67% for the Bank); virtually identical percentages (just over a third) are educated only at the
primary level; and the main destinations for migrant workers are Malaysia and Saudi Arabia, with the Bank’s
Survey showing a slightly higher proportion in Malaysia than the BI Survey.
Table 14: Comparison of Survey Structures (* Indicates important information not covered by other
survey)
Bank Indonesia World Bank (HH Survey)
A. Respondents’ profi le A. Survey information
B. Pre-departure information B. Demographic information
* Pre-TKI jobs C. Socio-economic characteristics
* Wage of pre-TKI jobs D. Financial services (bank & savings accounts)
* Motivation for becoming TKI * Method of saving (formal, informal, non-savings)
* Source of info for working abroad * Reason not to save
* Reason for working illegally * Distribution of bank savings
C. Information related to migrant * Time spent to go to the bank
working period * Money spent to go to the bank
* Bad experiences during migration & E. Financial services (loans)
upon return * Source of credit (formal, semi-formal, informal)
* Monthly wage of TKI * Distribution of bank loans
* Method of saving during migration F. Other fi nancial services (insurance)
* Cost of transfer during migration * Insurance ownership distribution
66 There is a third survey, conducted by the International Organization for Migration. However, at drafting of this report, the IOM’s results were not at a suffi ciently advanced stage to be quoted.
67 The World Bank’s sample is about 1/3rd larger than BI’s (2724 households versus 2082).
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Bank Indonesia World Bank (HH Survey)
D. Social-economic impact of migrant * Reason not to have insurance
working decision * Most important person to insured
* The impact of migration on HHs G. Household fi nancial management
* Factor that hinders savings habit
H. Non-farm enterprise establishment
* Non-farm enterprise ownership
* Types of enterprise
* Average revenue
* Source of fi nancing
I. Migrant worker remittances
* Remittance channel decision making
J. Financial literacy
* Interest in fi nancial matters
* Source of fi nancial info
* Financial literacy level
* Basic math skill level
K. Household expenditure
* Detailed items on expenditure
Table 15: Comparison of Survey Results
Bank Indonesia World Bank
General Profi le # #
Respondents
Households
ex-migrant workers
migrant workers
migrant workers Family
2082
61.4%
25.8%
12.8%
Households
migrant workers
Head of Village
2724
3368
50
Survey Areas
Java (West, Central, East)
Mataram
Kupang
Pekanbaru
Nunukan
Kab. Malang, Gresik
Sumbawa, East Lombok
Kupang, East Flores
Sumba
Proportion:
Gender
Legal Status
Education Level
Destination countries
Female
Legal worker
Primary School
Malaysia
Saudi Arabia
64%
89%
34%
47%
23%
Female
Legal worker
Primary School
Malaysia
Saudi Arabia
58%
67%
35%
73%
20%
Financial Issues # #
Source of funding to
cover departure cost
Initially covered by PPTKIS
Personal savings
20%
5%
Personal savings
Sponsor
39%
21%
Average remittance IDR 5-8 million IDR 2-4 million
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Bank Indonesia World Bank
Frequency of remittance
Occasionally
Routine
Yearly routines
55.4%
37.7%
5-6
On special occasions
Every quarter
53%
16%
Remittance channel
Formal
Informal
Sending: bank
Receiving: bank
Sending: relatives/friends
Receiving: relatives/friends
82%
90%
8.4%
20%
Receiving: bank transfer
Receiving: relatives/friends
69%
20%
Usage of remittance
Daily expense
Build/repair house
School payment
57%
30%
25%
Daily expense
Loan payment
House repairs
School fee
53%
15%
12%
10%
Diff erences between the Surveys are slightly more pronounced in the fi nancial area (see the lower half of
Table 15). Most notably, the World Bank’s survey shows that average remittances are only barely half of BI’s
estimate, for reasons that are unclear. Concerning pre-departure fi nancing, use of personal savings is shown
to be more important in the World Bank Survey, than in the BI Survey. Rather, the BI Survey shows salary
advances from PPTKIS as being more important, although at comparable levels shown by the World Bank’s
Survey regarding borrowing from sponsors (which migrant workers may perceive as the same source).
Other results, in areas such as frequency and use of remittances and preferred remittance channels, are very
similar (Table 15).
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Annex C: Analytical Results Concerning SavingsTable 16: Linear Probability Regressions for Savings of Any Kind
Basic Result Province Fixed Eff ects Cluster Fixed Eff ects
Urban household 0.016
(0.021)
0.009
(0.022)
-0.005
(0.023)
Household size
-0.008
(0.004)**
-0.009
(0.004)**
-0.006
(0.004)
Respondent is head of household 0.019
(0.042)
-0.028
(0.043)
-0.034
(0.043)
Gender (M)
0.076
(0.023)***
0.072
(0.023)***
0.071
(0.023)***
Legal MW 0.024
(0.018)
0.005
(0.019)
0.039
(0.022)*
Working in Middle East 0.062
(0.020)***
-0.009
(0.023)
-0.014
(0.025)
First time MW
-0.059
(0.015)***
-0.062
(0.015)***
-0.059
(0.015)***
MW works in informal sector -0.012
(0.024)
0.013
(0.025)
0.027
(0.025)
Higher than primary school ed.
0.045
(0.015)***
0.045
(0.015)***
0.044
(0.015)***
Log of consumption expenditure
0.067
(0.014)***
0.073
(0.014)***
0.093
(0.015)***
HH with gov’t emp. member 0.024
(0.041)
0.009
(0.041)
-0.002
(0.041)
Own house
0.056
(0.024)**
0.043
(0.024)*
0.039
(0.024)
Number of rooms -0.002
(0.005)
0.008
(0.005)
0.004
(0.005)
Have electricity
0.147
(0.022)***
0.118
(0.022)***
0.064
(0.026)**
Have phone
0.090
(0.016)***
0.109
(0.017)***
0.095
(0.017)***
Have tap water
0.046
(0.017)**
0.039
(0.017)**
0.039
(0.017)**
Own enterprise 0.017
(0.016)
0.014
(0.016)
0.005
(0.016)
Financial literacy score
0.042
(0.028)
0.087
(0.029)***
0.066
(0.029)**
Cognitive/Math skills score
0.148
(0.042)
0.122
0.041
0.157
0.042
Constant
-0.686
(0.215)***
-0.791
(0.215)***
-1.099
(0.230)***
Observation 3364 3364 3364
R-squared 0.1357 0.1509 0.1595
Standard errors in parentheses: * signifi cant at 10%; **signifi cant at 5%; *** signifi cant at 1%
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Table 17: Linear Probability Regressions for Formal Savings
Basic Result
Province Fixed
Eff ectsCluster Fixed Eff ects
Urban household
0.053
(0.021)**
0.048
(0.023)**
0.032
(0.024)
Household size
-0.011
(0.004)**
-0.011
(0.004)**
-0.009
(0.004)**
Respondent is head of household 0.004
(0.047)
-0.057
(0.046)
-0.064
(0.046)
Gender (M)
0.059
(0.025)**
0.053
(0.025)**
0.055
(0.025)**
Legal MW 0.040
(0.019)**
0.013
(0.020)
0.037
(0.023)
Working in Middle East 0.090
(0.022)***
-0.004
(0.025)
0.001
(0.028)
First time MW
-0.080
(0.016)***
-0.081
(0.016)***
-0.079
(0.016)***
MW works in informal sector -0.060
(0.026)**
-0.027
(0.027)
-0.013
(0.027)
Higher than primary school ed.
0.055
(0.016)***
0.056
(0.016)***
0.054
(0.016)***
Log of consumption expenditure
0.082
(0.015)***
0.090
(0.015)***
0.109
(0.016)***
HH with gov’t emp. member 0.034
(0.046)
0.018
(0.046)
0.007
(0.046)
Own house
0.085
(0.025)***
0.069
(0.026)**
0.066
(0.026)**
Number of rooms -0.002
(0.005)
0.009
(0.005)
0.006
(0.005)
Have electricity
0.134
(0.022)***
0.095
(0.024)***
0.043
(0.027)
Have phone
0.077
(0.018)***
0.100
(0.018)***
0.088
(0.018)***
Have tap water 0.007
(0.020)
-0.002
(0.019)
0.000
(0.020)
Own enterprise -0.010
(0.017)
-0.014
(0.017)
-0.023
(0.017)
Financial literacy score
0.012
(0.029)
0.070
(0.03)**
0.051
(0.03)*
Cognitive/Math skills score
0.171
(0.043)***
0.139
(0.043)***
0.176
(0.044)***
Constant
-0.951
(0.232)***
-1.076
(0.230)***
-1.380
(0.247)***
Number of Observations 3364 3364 3364
R-squared 0.1320 0.1538 0.1549
Standard errors in parentheses: * signifi cant at 10%; **signifi cant at 5%; *** signifi cant at 1%
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Table 18: Linear Probability Regressions for Informal Savings
Basic Result Province Fixed Eff ects Cluster Fixed Eff ects
Urban household
-0.037
(0.009)***
-0.038
(0.010)***
-0.037
(0.012)***
Household size 0.002
(0.002)
0.002
(0.002)
0.003
(0.002)
Respondent is head of household 0.016
(0.026)
0.029
(0.026)
0.030
(0.026)
Gender (M) 0.017
(0.014)
0.019
(0.014)
0.017
(0.014)
Legal MW -0.016
(0.009)*
-0.008
(0.010)
0.001
(0.010)
Working in Middle East -0.027
(0.010)**
-0.005
(0.013)
-0.015
(0.015)
First timer MW
0.020
(0.008)**
0.020
(0.007)**
0.020
(0.007)**
MW works in informal sector
0.048
(0.014)***
0.040
(0.014)***
0.040
(0.014)**
Higher than primary school ed. -0.011
(0.007)
-0.011
(0.007)
-0.011
(0.007)
Log of consumption expenditure
-0.015
(0.006)**
-0.017
(0.006)**
-0.016
(0.007)**
HH with gov’t emp. member -0.010
(0.026)
-0.008
(0.026)
-0.010
(0.026)
Own house
-0.029
(0.015)**
-0.027
(0.015)*
-0.027
(0.015)*
Number of rooms 0.001
(0.002)
-0.001
(0.002)
-0.002
(0.002)
Have electricity 0.012
(0.010)
0.023
(0.012)**
0.022
(0.013)
Have phone 0.013
(0.009)
0.009
(0.009)
0.008
(0.009)
Have tap water
0.038
(0.013)***
0.041
(0.013)***
0.039
(0.013)***
Own enterprise
0.027
(0.010)***
0.028
(0.010)***
0.027
(0.010)***
Financial literacy score 0.030
(0.016)*
0.016
(0.016)
0.016
(0.016)
Cognitive/Math skills score -0.024
(0.020)
-0.017
(0.020)
-0.019
(0.021)
Constant
0.265
(0.100)***
0.285
(0.099)***
0.281
(0.104)***
Number of Observations 3364 3364 3364
R-squared 0.0262 0.0309 0.0320
Standard errors in parentheses: * signifi cant at 10%; **signifi cant at 5%; *** signifi cant at 1%
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Annex D: Analytical Results Concerning CreditTable 19: Linear Probability Regressions for Credit from Any Source
Basic Result Province Fixed Eff ects Cluster Fixed Eff ects
Urban household -0.028
(0.024)
-0.029
(0.026)
0.030
(0.028)
Household size
0.019
(0.004)***
0.019
(0.004)***
0.018
(0.005)***
Respondent is head of household -0.002
(0.060)
-0.028
(0.061)
-0.048
(0.060)
Gender (M) -0.031
(0.028)
-0.034
(0.028)
-0.031
(0.028)
Legal MW 0.023
(0.020)
0.010
(0.021)
0.032
(0.025)
Working in Middle East -0.010
(0.025)
-0.051
(0.029)*
0.006
(0.032)
First timer MW -0.007
(0.018)
-0.007
(0.018)
-0.009
(0.018)
MW works in informal sector -0.032
(0.028)
-0.017
(0.029)
-0.018
(0.029)
Higher than primary school education -0.018
(0.018)
-0.017
(0.018)
0.002
(0.018)
Log of consumption expenditure
0.052
(0.014)***
0.055
(0.015)***
0.057
(0.015)***
HH with gov’t emp. member
0.217
(0.057)***
0.211
(0.058)***
0.196
(0.058)***
Own house -0.015
(0.027)
-0.021
(0.027)
-0.017
(0.027)
Number of rooms -0.001
(0.005)
0.004
(0.005)
0.005
(0.005)
Have electricity 0.034
(0.022)
0.016
(0.024)
0.050
(0.027)*
Have phone 0.023
(0.019)
0.032
(0.020)
0.032
(0.020)
Have tap water
-0.041
(0.024)*
-0.046
(0.024)*
-0.030
(0.024)
Own enterprise
0.171
(0.020)***
0.170
(0.020)***
0.169
(0.020)***
Financial literacy score 0.023
(0.032)
0.049
(0.033)
0.051
(0.034)
Cognitive/Math skills score -0.041
(0.045)
-0.054
(0.045)
-0.064
(0.046)
Constant
-0.537
(0.225)**
-0.586
(0.227)**
-0.683
(0.239)***
Number of Observations 3364 3364 3364
R-squared 0.0589 0.0624 0.0718
Standard errors in parentheses: * signifi cant at 10%; **signifi cant at 5%; *** signifi cant at 1%
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Table 20: Linear Probability Regressions for Formal Credit
Basic Result Province Fixed Eff ects Cluster Fixed Eff ects
Urban household 0.016
(0.011)
0.007
(0.011)
0.003
(0.012)
Household size 0.002
(0.002)
0.001
(0.002)
0.001
(0.002)
Respondent is head of household 0.003
(0.020)
-0.001
(0.020)
-0.002
(0.020)
Gender (M) 0.000
(0.013)
0.000
(0.012)
0.001
(0.012)
Legal MW 0.000
(0.006)
0.003
(0.007)
-0.004
(0.009)
Working in Middle East -0.009
(0.009)
-0.010
(0.010)
-0.003
(0.011)
First timer MW 0.000
(0.007)
-0.003
(0.007)
-0.004
(0.007)
MW works in informal sector 0.011
(0.013)
0.012
(0.013)
0.013
(0.013)
Higher than primary school ed. -0.002
(0.006)
-0.002
(0.006)
-0.003
(0.007)
Log of consumption expenditure
0.020
(0.005)***
0.022
(0.006)***
0.023
(0.006)***
HH with gov’t emp. member
0.287
(0.055)***
0.280
(0.055)***
0.281
(0.055)***
Own house -0.005
(0.011)
-0.008
(0.011)
-0.008
(0.011)
Number of rooms
0.003
(0.002)
0.005
(0.002)**
0.005
(0.002)**
Have electricity
0.015
(0.006)**
0.020
(0.008)**
0.016
(0.009)*
Have phone 0.009
(0.007)
0.013
(0.007)*
0.013
(0.007)*
Have tap water
0.021
(0.012)*
0.023
(0.012)*
0.024
(0.012)**
Own enterprise
0.035
(0.009)***
0.034
(0.009)***
0.034
(0.009)***
Financial literacy score
0.044
(0.012)***
0.045
(0.012)***
0.044
(0.012)***
Cognitive/Math skills score -0.017
(0.015)
-0.021
(0.015)
-0.016
(0.015)
Constant
-0.357
(0.087)***
-0.385
(0.088)***
-0.402
(0.093)***
Number of Observations 3364 3364 3364
R-squared 0.1004 0.1036 0.1045
Standard errors in parentheses: * signifi cant at 10%; **signifi cant at 5%; *** signifi cant at 1%
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Table 21: Linear Probability Regressions for Semi-formal Credit
Basic Result Province Fixed Eff ects Cluster Fixed Eff ects
Urban household 0.068 0.038 0.042
(0.017)*** (0.019)** (0.021)**
Household size 0.012 0.008 0.008
(0.003)*** (0.003)*** (0.003)***
Respondent is head of household -0.050 -0.041 -0.045
(0.020)** (0.020)** (0.021)**
Gender (M) -0.022 -0.020 -0.019
(0.017) (0.016) (0.016)
Legal MW -0.040 -0.018 -0.012
(0.012)*** (0.013) (0.014)
Working in Middle East 0.014 0.048 0.058
(0.014) (0.015)*** (0.016)***
First timer MW 0.005 -0.006 -0.006
(0.011) (0.011) (0.011)
MW works in informal sector -0.020 -0.031 -0.028
(0.018) (0.019) (0.019)
Higher than primary school ed. 0.018 0.017 0.019
(0.011) (0.011) (0.011)*
Log of consumption expenditure 0.011 0.014 0.018
(0.009) (0.009) (0.009)**
HH with gov’t emp. member -0.032 -0.048 -0.052
(0.038) (0.040) (0.040)
Own house 0.007 0.001 0.001
(0.016) (0.016) (0.016)
Number of rooms 0.000 0.003 0.003
(0.003) (0.003) (0.003)
Have electricity -0.032 0.001 -0.006
(0.015)** (0.017) (0.019)
Have phone 0.011 0.018 0.015
(0.011) (0.012) (0.012)
Have tap water -0.009 0.000 0.003
(0.014) (0.014) (0.015)
Own enterprise 0.039 0.038 0.036
(0.013)*** (0.013)*** (0.013)***
Financial literacy score 0.017 -0.005 -0.009
(0.020) (0.021) (0.021)
Cognitive/Math skills score 0.074 0.073 0.080
(0.027)*** (0.028)*** (0.028)***
Constant -0.167 -0.223 -0.300
(0.129) (0.131)* (0.139)**
Number of Observations 3364 3364 3364
R-squared 0.1004 0.1036 0.1045
Standard errors in parentheses: * signifi cant at 10%; **signifi cant at 5%; *** signifi cant at 1%
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Table 22: Linear Probability Regressions for Informal Credit
Basic Result Province Fixed Eff ects Cluster Fixed Eff ects
Urban household -0.113 -0.074 -0.015
(0.021)*** (0.023)*** (0.024)
Household size 0.004 0.010 0.009
(0.004) (0.004)** (0.004)**
Respondent is head of household 0.044 0.014 -0.001
(0.057) (0.058) (0.057)
Gender (M) -0.009 -0.014 -0.014
(0.025) (0.026) (0.025)
Legal MW 0.063 0.025 0.047
(0.019)*** (0.020) (0.023)**
Working in Middle East -0.015 -0.090 -0.049
(0.024) (0.027)*** (0.031)
First timer MW -0.012 0.003 0.001
(0.016) (0.017) (0.017)
MW works in informal sector -0.023 0.003 -0.003
(0.026) (0.026) (0.026)
Higher than primary school ed. -0.034 -0.032 -0.014
(0.017)** (0.016)** (0.017)
Log of consumption expenditure 0.021 0.020 0.016
(0.013) (0.013) (0.013)
HH with gov’t emp. member -0.038 -0.021 -0.033
(0.055) (0.056) (0.055)
Own house -0.017 -0.014 -0.010
(0.025) (0.025) (0.025)
Number of rooms -0.003 -0.004 -0.002
(0.005) (0.005) (0.005)
Have electricity 0.051 -0.005 0.039
(0.021)** (0.022) (0.024)
Have phone 0.003 0.001 0.003
(0.018) (0.018) (0.018)
Have tap water -0.053 -0.069 -0.057
(0.022)** (0.022)*** (0.022)***
Own enterprise 0.097 0.097 0.099
(0.019)*** (0.019)*** (0.019)***
Financial literacy score -0.038 0.010 0.016
(0.030) (0.031) (0.031)
Cognitive/Math skills score -0.097 -0.106 -0.128
(0.043)** (0.043)** (0.044)***
Constant -0.013 0.022 0.019
(0.205) (0.206) (0.214)
Number of Observations 3364 3364 3364
R-squared 0.0299 0.0415 0.0515
Standard errors in parentheses: * signifi cant at 10%; **signifi cant at 5%; *** signifi cant at 1%
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
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Annexes
Annex E: Analytical Results Concerning InsuranceTable 23: Linear Probability Regressions for All Types of Insurance
Basic Result Province Fixed Eff ects Cluster Fixed Eff ects
Urban household 0.175 0.079 0.019
(0.022)*** (0.023)*** (0.025)
Household size 0.024 0.011 0.008
(0.004)*** (0.004)*** (0.004)**
Respondent is head of household -0.145 -0.183 -0.187
(0.057)** (0.056)*** (0.054)***
Gender (M) -0.017 -0.017 0.001
(0.027) (0.026) (0.026)
Legal MW 0.046 0.083 -0.010
(0.020)** (0.020)*** (0.023)
Working in Middle East -0.061 -0.060 0.004
(0.025)** (0.028)** (0.031)
First time MW 0.039 0.004 -0.001
(0.017)** (0.017) (0.017)
MW works in informal sector 0.016 0.017 0.026
(0.028) (0.027) (0.026)
Higher than primary school ed. 0.005 0.004 -0.012
(0.017) (0.016) (0.016)
Log of consumption expenditure 0.006 0.023 0.031
(0.013) (0.013)* (0.013)**
HH with gov’t emp. member 0.253 0.186 0.205
(0.048)*** (0.047)*** (0.047)***
Own house 0.100 0.065 0.066
(0.027)*** (0.027)** (0.027)**
Number of rooms -0.036 -0.014 -0.014
(0.005)*** (0.005)*** (0.005)***
Have electricity -0.152 -0.095 -0.129
(0.021)*** (0.022)*** (0.026)***
Have phone -0.027 0.017 0.021
(0.019) (0.018) (0.018)
Have tap water -0.044 -0.027 -0.020
(0.023)* (0.022) (0.022)
Own enterprise 0.059 0.051 0.048
(0.019)*** (0.018)*** (0.018)***
Financial literacy score 0.060 0.056 0.052
(0.030)** (0.030)* (0.030)*
Cognitive/Math skills score 0.099 0.063 0.108
(0.044)** (0.043) (0.043)**
Constant 0.406 0.106 0.027
(0.211)* (0.206) (0.213)
Number of Observations 3364 3364 3364
R-squared 0.1331 0.1839 0.2036
Standard errors in parentheses: * signifi cant at 10%; **signifi cant at 5%; *** signifi cant at 1%
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Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
Annexes
Annex F: Special Documents Required for TKI Insurance Claims
Source Documentation for Insurance Claims in Table 5
Hospital: (a) death certifi cate,
(b) medical report,
(c) forensic/medical report by doctor upon request by police,
(h) medical report stating permanent or partial disablement (in %),
(i) X-ray,
(j) list of medical expense,
(o) list of medicine used for treatment in hospital
BP3TKI: (k) legal letter,
(s) confi rmation letter regarding the legal case,
(t) confi rmation letter regarding unpaid wage case,
(v) letter informing migrant workers deportation for making illegal conduct,
(w) letter informing work placement transfer,
(x) contract termination notice,
(y) contract cancelation notice
Legal Aid: (q) letter of attorney to appoint legal aid institution,
(r) proof of legal aid expenses
Village Head: (d) offi cial letter,
(f) legal letter of benefi ciary
Police: (e) police report
Embassy: (n) offi cial letter
Employer: (x) contract termination notice,
(y) contract cancelation notice
Foreign Court: (p) Offi cial letter stating the existence of legal case
PPTKIS: (l) working contract,
(m) placement contract
Travel agent: (u) return ticket under migrant workers name
Other: (g) receipt for all funeral expenses
Sources: TKI Insurance of Mitra Consortium and Ministry of Manpower and Transmigration Regulations #23 of 2006 and #20 of 2007.
Indonesia Enhancing Access to Finance for Indonesian Overseas migrant workers:Evidence from a Survey of Three Provinces
List of References
Bank Indonesia. 2008. “Remittance Survey of migrant workers.” Jakarta, Indonesia.
International Monetary Fund. 2008. Balance of Payments Yearbook. Washington, DC.
Microfi nance Innovation Center for Resources and Alternatives (MICRA). 2008. “Promoting Female migrant workers’ Access to Finance through the National Community Empowerment Program or Program Nasional Pemberdayaan Masyarakat (PNPM)”, Jakarta, Indonesia.
United Nations 2005. “United Nations’ Trends in Total Migrant Stock: The 2005 Revision2”, New York.
World Bank. 2006. “Global Economic Prospects; Economic Implications of Remittances and Migration”, Washington. D.C.
. 2008a. “Migration and Remittances Factbook 2008”, Washington, D.C.
. 2008b. “The Malaysia-Indonesia Remittance Corridor: Making Formal Transfers the Best Option for Women and Undocumented Migrants”. World Bank Working Paper 149, Washington, D.C.
. 2008c. “Investing in Indonesia’s Health: Challenges and Opportunities for Future Public Spending.” Health Public Expenditure Review. The World Bank Offi ce, Jakarta.
. 2009a. “Bringing Finance to Pakistan’s Poor: A Study on Access to Finance for the Underserved and Small Enterprises”, May, 2009. Washington, D.C.
. 2009b. “Indonesia, Access to Financial Services”, draft of June 2009. The World Bank Offi ce, Jakarta.
Zabin, Carol. 1996. “Bridging the NGO-Grassroots Gap”. Borderlines 22 (4).
Evidence from a Survey of Three Provinces
Enhancing Access to Finance for Indonesian Overseas Migrant
Workers:
Australia - Nusa Tenggara Assistance for Regional Autonomy(ANTARA)