Bank Indonesia policy on Financial Inclusion The 1 st International Islamic Financial Inclusion Summit 2012 Dr. Muliaman D Hadad

Outline Facts and Figures BI Household Survey National Strategy on Financial Inclusion Bank Indonesia Initiatives on Financial Inclusion Challanges Ahead

Fact and Figures Some key facts of Indonesia: – Population of Indonesia: 237 million – GDP per capita: USD 3,508 – Banking industry holds more than 80% of financial sector assets – 97.4% of banks accounts are less than Rp100 million (less than USD10,000) – Number of commercial banks: 120 – Number of rural banks: – Number of cooperatives: – Number of microfinance institutions: CategoryQuantity Percentage on Total Population Population Number of Loan Account ,96% Number of Insured life Insurance ,54% Number of pension fund participant ,19% Public access on financial services is relatively low that is reflected by (a) the number of loan accounts which reach only 15.96% of the population, (b) the number of insured life insurance which reach only 14.54% and (c) the number of pension fund participants which is only 1.19 %

NoIndikatorIndonesiaMalaysiaThaiPhilBrazil 1Financial Services Utilization*) (Percentage of Total Population) Account at Formal Financial Institution20%66%73%27%56% Adults saving in the past year (using Formal Account)15%35%43%15%10% Adults Originating a new loan in the past year (Formal Financial Institution) 9%11%19%11%6% Adults With Mortgage1%13%5%4%1% Adults paying personally for health insurance1%16%24%5%8% 2Banking Services Access**) Number of Bank Branch per km27,716,1811,5915,692,33 Number of Bank’s Branch per adult population8,3210,4811,167,6913,76 Number of ATM per km212,3933,1280,6830,3520,46 Number of ATM’s per adult population13,3756,1877,6914,88120,62 Source : *) WorldBank Policy Research Working Paper, April 2012 **)IMF & WorldBank, 2010 Financial Services : Comparison

ACCESS TO FINANCE IN INDONESIA Below Poverty Line Living in Rural Area 13.33%64.25% Without access to bank 60% % MSME compare to total business unit 99.91% MSMEs that have not been linked to bank 60-70% 5

Outline Facts and Figures BI Household Survey National Strategy on Financial Inclusion Bank Indonesia Initiatives on Financial Inclusion Challanges Ahead

BI HOUSEHOLD SURVEY : Saving

9 BI HOUSEHOLD SURVEY : Credit

10

Outline Facts and Figures BI Household Survey National Strategy on Financial Inclusion Bank Indonesia Initiatives on Financial Inclusion Challanges Ahead

National Strategy on Financial Inclusion 12 Mission Vision

13 Financial Inclusion Framework :On going Programn by BI :Program will be conducted by BI :Paralel program with other institutions outside of BI Remarks

Strategic Target 14 Financial Education The Improvement of financial literacy on: a.Banking products ; b.Consumer Protection; c.Financial management Financial Eligibility Increasing the number of eligible/bankable person or SME’s Policy and Regulation Preparing the regulation that support financial access and eliminating the various types of barriers Intermediation Increasing the range of formal financial system especially to remote areas community Distribution Channel Increasing the financial distribution channel in terms of number and quality

Outline Facts and Figures BI Household Survey National Strategy on Financial Inclusion Bank Indonesia Initiatives on Financial Inclusion Challanges Ahead

16 Financial Education and Customer Protection Programme Financial Education for Student & Migrant Workers Financial Education for Student & Migrant Workers Financial Planning Financial Literacy Survey School curricula Pilot Project in 6 provinces for elementary & junior high school Joint workshop & expanding outreach Financial education for migrant workers in 5 provinces Establish local financial education team Basic Saving Account with no administrative charges TabunganKu, targetted to achieve 5 million account and Rp5 trillion by end of 2012 Campaign of TabunganKu Joint effort, Bank Indonesia and banking industry Policy recommendation on financial education Fine tune financial education programme Pillar 1 - Education Financial Education and Customer Protection Programme

17 Financial Mapping & Intermediation Facilitation Programme Financial Identity Number Financial Identity Number Baseline and comprehensive surveys Database of individuals’ financial track record Integrated with national identity database Pillar 2 - Eligibility Pillar 3 - Intermediation Financial Mapping & Intermediation Facilitation Programme Start-up Credit Affordable credit scheme for new entrepreneur and productive poor Cooperation with related governmental institutions

18 Distribution Channel and Supporting Regulation Programme National Strategy for Financial Inclusion National Strategy for Financial Inclusion Guidance for implementing financial inclusion initiatives In the process of endorsement from the President of the Republic of Indonesia Pillar 4 - Distribution Pillar 5 - Regulation Distribution Channel and Supporting Regulation Programme Branchless Banking Expanding access into remote area Agent banking, mobile banking, electronic banking IT Based infrastructure

Outline Facts and Figures BI Household Survey National Strategy on Financial Inclusion Bank Indonesia Initiatives on Financial Inclusion Challenges Ahead

Regulation to protect the rights of MFI consumer Supporting Regulation Revisit regulation related to the opening of bank account for lower income people Regulation to promote start up credit : should deal with bank prudential regulation. Financial Eligibility Problems Identified PillarsProposed Program Lack of Customer Protection Framework for MFI Customer Lower income people is categorized as unbankable since they can not fulfill bank requirement

Challenges Ahead Problems Identified PillarsProposed Program Coordination and cooperation with the educational authorities The promotion of saving habbit to the school students Education Policy to promote linkage program which satisfy the banks and MFIs Intermediation Facility Regulation on Branchless banking : to support and to protect customer and banking industry. Distribution Channel Accelerating Financial education Program Banks and MFI compete in the same segment Financial services for people in remote are

Thank You